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WAKE UP! and Smell the Overtime

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Although federal overtime laws are more than eighty years old, we frequently encounter situations where employees are deprived of the pay to which they are entitled.

Worse yet, the violations go back many years.

Employers get away with these violations for long periods of time, in part because both the employer and the employees wrongly assume that being paid a salary renders them ineligible for overtime.

The Employer's Designation of a Position as "Exempt" Has No Impact on Overtime Entitlement

When determining how to pay employees, an employer makes a very important decision: whether the employee is "exempt" or "non-exempt" from overtime protections.

These words relate to the Fair Labor Standards Act (FLSA), a law that's been in place since 1938 and requires the payment of overtime.

Simply put, "exempt" employees do not get overtime; "non-exempt" employees do.

This "exempt" versus "non-exempt" designation is the employer's opinion about whether employees are exempt from the FLSA's overtime requirements.

Importantly, the employer's opinion has no impact on whether an employee is entitled to overtime.

We regularly represent employees who are labeled "exempt" in the employer's eyes but are in reality "non-exempt" and entitled to years of unpaid overtime.

Employers and Employees Incorrectly Assume that Salaried Workers are Not Owed Overtime

Employees might more frequently challenge an employer's "exempt" designation, except for the assumption that receiving a salary prevents them from doing so.

The fact is that both employers and employees commonly believe that if the employee is paid a salary, the employee is ineligible for overtime.

This is wrong and is a significant reason that FLSA violations continue uncorrected today. 

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Being Paid a Salary Does Not Automatically Exempt Employees from Overtime

Whether an employee is paid a salary or not has very little to do with whether they are entitled to overtime pay.

We commonly see employees who are paid a salary, work more than forty hours per week, and are also owed an overtime premium for the hours they work over forty.

Much more important than salary in determining overtime eligibility are the employee's job duties. For example:

  1. Do they supervise more than one full time employee?
  2. Do they have hiring/firing authority?
  3. Do they have the sole discretion to bind the company on significant items (for example. pricing, contract terms, company policies, resolving complaints)?

Improper "Exempt" Designations Often Affect an Entire Classification of Employees

One might assume that an employee is being paid correctly under the FLSA if the employer pays the employee in the same manner as their peers, for example on a salary.

But this is not the case.

Employees file lawsuits every day on behalf of an entire class of employees misclassified as "exempt" and not paid overtime.

These cases can involve hundreds or thousands of employees, and they represent those employees' attempts to recover millions of dollars owed to them.

In these cases, the employees seek (and often obtain) payment of an overtime premium in addition to the salary they have already been paid by their employer.

The courts are not persuaded that the employer's pay scheme is legal by the fact that the employer paid the entire group of employees a salary.

Rather, that fact simply increases the potential damages the employer owes. 

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The statute of limitations for FLSA claims is two years (sometimes three). Employees who prevail on their FLSA claims could recover all their back pay during that time, double back pay, and attorneys' fees.

If you'd like to discuss a pay practice that may violate the FLSA, contact us at (512) 782-2293 for a free consultation. 

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The Commissioners House at Heritage Square
2901 Bee Cave Road, Box L
Austin, TX 78746

Phone: 512-782-2293
Fax: 512-782-0605
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700 West Summit Drive
Wimberley, TX 78676

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