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Greater Sumter Chamber of Commerce FLSA: Exempt or Not Exempt, That is the Question. May 23, 2012 David Dubberly Certified Specialist in Employment and Labor Law. A Dramatic Question. “To be or not to be [exempt], that is the question [for HR Managers].”

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Greater Sumter Chamber of Commerce FLSA: Exempt or Not Exempt, That is the Question

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Greater Sumter Chamber of CommerceFLSA: Exempt or Not Exempt, That is the Question

May 23, 2012

David Dubberly

Certified Specialist in Employment and Labor Law

A Dramatic Question

“To be or not to be [exempt], that is the question [for HR Managers].”

[With apologies to] William Shakespeare


  • FLSA review and enforcement trends

  • “White collar” exemptions

    • Executive employees

    • Administrative employees

    • Professional employees

    • Computer employees

    • Outside sales employees

  • Salary basis rule and safe harbor

    • Business owners

    • Highly compensated employees

FLSA History

  • Enacted in 1938

  • Can be tough to apply to modern work practices

    • Telecommuting

    • Flexible hours

    • Use of smartphones outside work

Main Provisions

  • Minimum wage

  • Overtime pay

    • Exemptions—mostly for “white collar” employees

      • Focus of most FLSA litigation

      • Regulations updated 2004

  • Youth employment

  • Recordkeeping


  • WHD

    • Investigations

    • Lawsuits

      • Injunctive relief

      • Back wages and liquidated damages

  • Private Lawsuits

    • Back wages, liquidated damages, attorney’s fees, and costs

    • Collective actions

  • DOJ

    • Criminal prosecution and civil money penalties

WHD Getting More Aggressive

  • 350 more investigators since 2009

  • 13,500 more investigations since 2009

WHD Getting More Aggressive

  • DOL-ABA “Bridge to Justice” referral program

  • DOL “apps” for smart phones

    • Timesheet app

      • Can provide evidence for FLSA lawsuit

      • But time recorded on app may be inaccurate

    • Eat Shop Sleep app

      • DOL: “Access hotel/motel, restaurant and retail industry enforcement data and easily identify violators”

    • iCitizen Labor Report app

      • Adds OSHA data

WHD Getting More Agressive

  • Investigation information on internet at


    • On WHD:

      • Employer names and addresses

      • Back wage amount

      • Employees due back wages

      • Penalties

Private Lawsuits Continue to Increase

  • 2011 FLSA suits in federal court = 7,000

  • Approx. 200 class actions

  • In 10 years, 300% increase in FLSA suits v. 1% increase in all suits

  • Frequent complaints:

    • Misclassifying employees as exempt

    • Improper deductions from exempt employees’ salaries

Executive Employees

  • Pay: salary basis at least $455/week ($23,600/year)

  • Management: primary duty is management of business or customarily recognized department or subdivision

    • Setting and adjusting employee pay and hours

    • Maintaining production or sales records

    • Evaluating employee performance

    • Handling employee complaints and grievances

Executive Employees

  • Supervision: customarily and regularly supervises work of two or more other employees in department

  • Authority: hires or fires other employees

    • Or recommendations as to hiring, firing, or other status changes given particular weight

Jobs that May Qualify*

  • Plant manager

  • Department supervisor

  • Store manager

  • Construction project superintendent

    *Depending on facts—job title alone insufficient to establish status

Jobs that Typically Don’t Qualify*

  • Working foreman

  • Relief supervisor

  • Store “manager” who spends only small part of time on exempt work

Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc.

  • Decided Apr. 3, 2012 by federal court in SC

  • Two DG store managers covered by executive exemption

  • Primary duties were managerial

    • Hiring, supervising, and disciplining employees

    • Promoting, demoting, and firing employees

    • Providing training and setting and adjusting work schedules

    • Delegating and prioritizing tasks and assignments

Case Study: Gooden v. Dolgencorp Inc. and Thomas v. Dolgencorp Inc.

  • Spent over 50% of time on these managerial duties

  • These duties important to ensure success of stores

  • Mostly exercised discretion in performing these duties

    • Not overly limited by district managers or SOP

  • Paid more than nonexempt employees

    • And could earn bonuses based on store profitability

Salary Basis

  • No reduction in pay for variations in quality or quantity of work

    • Can reduce paid sick or personal leave time

  • Pay of full salary for any week in which any work performed, regardless of number of days or hours worked

    • Don’t have to pay for any week in which no work performed

Permitted Deductions

  • Absence for one or more full day for personal reasons other than sickness or disability

  • Absence for one or more full days for sickness or disability if employee is covered under sick leave policy

  • Offset equal to amount received for jury fees, witness fees, or military pay

Permitted Deductions

  • Penalties imposed in good faith for violating safety rules of major significance

  • Unpaid disciplinary suspension of one or more full days imposed in good faith for violation of written workplace conduct rules

  • Partial workweek during first or last week of work

  • Unpaid FMLA leave

Safe Harbor Policy

  • Exemption not lost over salary basis if:

    • Clearly communicated policy prohibiting improper deductions with complaint mechanism

    • Reimburse employees for improper deductions

    • Good faith commitment to comply

  • Not available if employer willfully violates policy by continuing to make improper deductions after complaints

Business Owners

  • Own at least a “bona fide” 20% equity interest in business where works

  • Actively engaged in management of business

  • Salary level and salary basis requirements don’t apply

  • No duties test

Highly Compensated Employees

  • Pay: total annual compensation of at least $100,000/year 

    • At least $455/week paid on salary basis

    • Including commissions, non-discretionary bonuses, and other non-discretionary compensation

    • Excluding cost of benefits

Highly Compensated Employees

  • Duties: customarily and regularly performs at least one exempt duty of an EAP employee

    • Primary duty includes performing office or non-manual work

Administrative Employees

  • Pay: salary or fee basis at least $455/week ($23,600/year)

  • Duties: primary duty is

    • Performance of office or non-manual work

    • Directly related to management or general operations of employer or employer’s customers

Administrative Employees

  • Discretion: primary duty includes exercise of discretion and independent judgment with respect to matters of significance

    • Exercise of discretion and independent judgment = comparing and evaluating possible courses of conduct, and acting or making decision after various possibilities considered

Jobs that May Qualify*

  • Insurance claims adjuster

  • Certain financial industry employees

  • Team leader for major projects

  • Administrative assistant to senior executive

  • HR manager

  • Purchasing agent

Jobs that Typically Don’t Qualify*

  • Inspector

  • Examiner/grader

  • Comparison shopper

  • Personnel clerk

  • Mortgage loan officers

Case Study: Foster v. Nationwide Mutual Insurance Co.

  • Decided Jan. 5, 2012 by federal court in OH

  • 91 “special investigators” administratively exempt

  • Primary duty was conducting investigations to resolve indicators of fraud in suspicious claims

    • Interviewed witnesses

    • Gathered information

    • Recommended and sometimes supervised vendors

Case Study: Foster v. Nationwide Mutual Insurance Co.

  • Involved exercise of discretion and independent judgment

    • Used “experience and knowledge … to distinguish relevant from irrelevant, fact from untruth, to resolve competing versions of events”

    • Had “nearly unilateral discretion” in referring cases with unresolved fraud indicators to law enforcement

  • Related to matters of significance

    • Helped determine if claims paid or not

Learned Professional Employees

  • Pay: salary or fee basis (some professionals exempt from this) at least $455/week ($23,600/year)

  • Duties: primary duty is performance of work requiring advanced knowledge

    • Work must be predominantly intellectual and require consistent exercise of discretion and judgment

    • Advanced knowledge must be in field of science or learning customarily acquired by prolonged course of specialized intellectual instruction

Jobs that Typically Qualify*

  • Medical doctor, osteopathic physician, podiatrist, dentist, optometrist

  • Registered nurse

  • Certified medical technologist

  • Dental hygienist

  • Certified physician assistant

  • Pharmacist

  • Lawyer

  • Engineer

  • Teacher

  • Accountant

  • Executive chef, sous chef

  • Certified athletic trainer

Jobs that Typically Don’t Qualify*

  • Licensed practical nurse

  • Nurse aide

  • Paramedic

  • Paralegal, legal assistant

  • Engineering technician

  • Accounting clerk, bookkeeper

  • Cook

Creative Professional Employees

  • Pay: salary or fee basis (film industry employees exempt from this) at least $455/week ($23,600/year)

  • Duties: primary duty is performance of work requiring invention, imagination, originality, or talent in recognized field of artistic or creative endeavor

  • Jobs

    Typically Qualify*

    • Musician, composer, conductor, soloist

    • Novelist, play writer

    • Writer for ad agency

    • Actor

    • Painter, photographer

    • Investigative news reporter

    Typically Don’t*

    • Beat reporter

    Computer Employees

    (Other than those qualifying for EAP exemptions)

    • Pay

      • At least $27.63/hour for every hour worked, including overtime, or

      • Salary or fee basis at least $455/week ($23,600/year)

    • Duties

      • Apply systems analysis techniques

      • Design, document, analyze, create, or modify computer systems or programs

      • Modify computer programs


    Typically Qualify*

    • Computer systems analyst

    • Most computer programmers

    Typically Don’t*

    • Entry level programmers

    • Computer manufacture and repair

    • CAD operators

    • Help desk workers

    Outside Sales Employees

    • Pay: no requirement on basis or amount

    • Duties: primary duty must be making sales or obtaining orders or contracts for services or use of facilities

    • Location: customarily and regularly engaged away from employer’s place of business

    Jobs that Typically Qualify*

    • Most sales reps

      • Pharma sales rep case heard by U.S. Supreme Court on Apr. 16, 2012 (Christopher v. SmithKlineBeecham Corp. d/b/a GlaxoSmithKline)

    • Some real estate agents

    Common Errors to Avoid

    • Assuming all employees paid salary are exempt

    • Improperly applying exemption

    • Making improper deductions from salary

    • Job descriptions and employee handbook not up to date


    David Dubberly


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