Do You Have a Claim for Unpaid Overtime or other Wage Theft?
Here’s What You Need to Know about Making Unpaid Wage Claims
Enacted shortly after the Great Depression, the Fair Labor Standards Act (FLSA) is the most important employment law on the books today. The law does four important things:
- Sets the federal minimum wage
- Requires workers be paid for all time actually worked
- Requires time and one-half be paid for hours in excess of 40 hour work week
- Restricts child labor
Like most federal laws, the FLSA has many exceptions. Many of those exceptions and exemptions are highlighted below.
Immediately after the Depression and years of unemployment, many workers were happy to take any job they could find. Employers knew this and some exploited workers simply to increase their profits. Working conditions were often deplorable, young children were sent off to work and often businesses didn’t even pay livable wages. Congress realized this and in 1938 passed the Fair Labor Standards Act as a way of providing a safety net to workers.
Since that date, the law has been amended many times and special interest groups have succeeded in making some categories of workers exempt from portions of the law.
Unfortunately, the same shameless greed from the 1930’s is still around today. Studies show that “wage theft” complaints are at an all-time high and the numbers are growing.
Covered Employers – Employers Subject to FLSA Labor Rules
The U.S. Constitution limits Congress’ ability to pass laws regarding workplace issues. Congress’ authority is limited to workers who are engaged in interstate commerce. Under the Act, employers are covered if their annual sales are $500,000 or more per year or if they are engaged in interstate commerce. Over the years, courts have interpreted the law broadly in the hopes of including more workers within the coverage of the Act. Because we are such a mobile society, today almost all businesses are subject to the FLSA.
If a business uses the mails, ships orders, uses the telephone or computers, it is probably engaged in interstate commerce and thus subject to Fair Labor Standards Act rules.
Farm Exemption – Many Small Farms are Exempt from FLSA
One big exemption is for small farms. A farmer’s immediate family and farms that use less than 500 “man days” of hired labor are exempt from both the overtime and minimum wage provisions of the law.
Employee Exemptions – Some Employees are Not Covered
A business can be covered by the FLSA yet certain employees be exempt. For example, certain firefighters, agricultural workers, companions for the elderly, commissioned sales people, seamen on foreign vessels, seasonal recreational workers, casual babysitters and airline workers are exempt.
The biggest categories of employee exemptions are for administrative, executive (management) and professional workers. Some employers intentionally misclassify workers simply to avoid paying overtime. For that reason, courts look to the actual duties performed by workers and not their titles. This is where misclassification becomes an important part of an FLSA claim.
FLSA Administrative Exemption
Administrative employees are considered exempt from overtime if they meet all of the following criteria:
- Earn a salary of $455 or more per week,
- The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
- The employee’s primary duty includes the exercise of discretion and independent judgement with respect to matters of significance.
The Department of Labor and courts have ruled that production workers and most retail workers are not exempt under the administrative exemption.
Employees doing IT work, marketing, compliance, purchasing, finance, and safety have been found to be exempt. Obviously every case is different and must be examined carefully.
Highly compensated employees that perform office and receive more than $100,000 are almost always exempt.
FLSA Executive Exemption – When Managers are Exempt
To qualify for the executive employee (management) exemption, all of the following tests must be met:
- The employee receives a salary of at least $455 per week;
- The employee’s primary duty must be management;
- The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
- The employee must have the authority to hire or fire other employees, or have significant input on hiring and firing decisions.
The executive exemption is often abused by businesses. If you are a “working supervisor” with only occasional supervisory responsibilities, chances are that you are eligible for overtime protections.
FLSA Professional Exemption – Which Professionals are Exempt
To qualify for the professional employee exemption, all of the following tests must be met:
- The employee must receive salary of at least $455 per week;
- The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
- The advanced knowledge must be in a field of science or learning; and
- The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
Despite the advance skill level required by many trades, occupations that are considered “trades” such as electricians, plumbers and machinists are not considered professional employees for the purpose of overtime. That means they are generally entitled to time and one half for hours worked in excess of 40 hours.
On the flip side, courts have said that accountants, lawyers, physicians, biologists, ordained ministers and pharmacists are often exempt.
Separate language in the law and rules exempts creative professionals such as graphic artists, musicians and actors. Writers and journalists may or may not fall within the exemption depending on how much creativity or originality is used. Teachers are also generally exempt.
Like the administrative and executive exemptions, the Fair Labor Standards Act also has a special exemption for highly compensated workers making more than $100,000 per year.
Common FLSA Violations – Unpaid Overtime and Wage Theft
Because there is lack of bright lines and one size fits all definitions and so many exemptions, employers frequently play games in the hopes of avoiding paying overtime or paying for all hours worked. Frequent abuses include:
- Bestowing management titles on employees with little supervisory duties
- Saying workers are salaried and making $455+ per week but actually paying less
- Paying supposedly exempt workers hourly instead of by salary
- Declaring all workers with degrees as exempt professional workers without regard to their duties
- Misclassification of sales people
- Misclassification of workers as independent contractors
Independent Contractors vs. Employees – Misclassification
The Fair Labor Standards Act only covers employees. Many business attempt to skirt the FLSA and a host of other employment and tax obligations by claiming that workers are independent contractors.
Courts understand that the genesis of the FLSA was a desire to protect workers from being exploited. Eight decades later, courts continue to interpret the law broadly to cover as many workers as possible. While there are many legitimate independent contractors, many more are simply employees that are misclassified.
One of the prime tests for determining whether a worker is an employee or contractor is how many people he or she does work for. If all or nearly all your work comes from one company, you may well be an employee. It doesn’t matter whether or not that company had you sign an independent contractor agreement. We see these arrangements often with cable and telephone installers who work for just one company.
In passing the FLSA, Congress defined the term “employ” as “to suffer or permit to work.” That may sound like legalese but courts consistently acknowledge that Congress intentionally drafted the law quite broadly.
Today courts use an economic realities test to help decide whether a person is an independent contractor or employee. (Employers want as many people as possible to be independent contractors so as to avoid minimum wage and overtime.)
The economic realities test looks at the following factors:
- The extent to which the work performed is an integral part of the employer’s business;
- The worker’s opportunity for profit or loss depending on his or her managerial skill;
- The extent of the relative investments of the employer and the worker;
- Whether the work performed requires special skills and initiative;
- The permanency of the relationship; and
- The degree of control exercised or retained by the employer.
As noted above, how dependent the worker is on one particular vendor is one of the factors.
In summary, the Fair Labor Standards Act is quite complex. Always remember that simply because an employer says that you are exempt or an independent contractor is meaningless. Courts look at each case on its own merits. What you do on a daily basis is far more important than titles or labels.
Mahany Law – FLSA, Overtime, Wage & Hour, Wage Theft Lawyers
If you aren’t sure if you should be getting paid more for the hours you work or feel that you have been denied overtime, call us. Our services are generally offered on a contingent fee basis meaning if we don’t get you more money, you owe us nothing.
There is also never a charge for initial consultations. If you have simply have questions, call us too. The only silly question in the world of overtime laws and wage theft is the question that isn’t asked.
For more information, call one of our experienced wage and hour lawyers today. 202.800.9791 or Report Online. Not yet ready or comfortable to call? You can email us too. . In just a few minutes we can help you find the answers you need.