Companies continue to face costly lawsuits from employees challenging their failure to receive overtime pay based on the so-called "white-collar" exemptions to overtime under the Fair Labor Standards Act ("FLSA") and under parallel legislation at the state level, in particular the Wage Orders in California where the requirements exceed those under the FLSA. Elaine Chao, the U.S. Secretary of Labor responsible for issuing regulations and guidelines to ensure compliance with the FLSA, reports that in 2004 the Wage and Hour Division collected over $196 million in back wages, including overtime pay, for workers incorrectly classified.¹ Class action overtime lawsuits are very costly; costs include attorney and expert fees, and expenses related to administrative time and lost productivity of company personnel in addition to overtime wages paid to prevailing plaintiffs.
The revised "exemption" regulations issued by the U.S. Department of Labor effective on August 23, 2004 (called by the U.S. Department of Labor the "FairPay Regulations") are intended to reduce the number of misclassifications in the future and significantly raise the salary level required to qualify for exempt status. Companies should now seriously consider examining jobs they have classified as exempt against these new regulations and limit potential liability by determining which jobs should be reclassified as nonexempt.
