Exempt vs. Nonexempt.

Line managers need to understand wage and hour regulations to protect your company.

Many line managers mistakenly believe that wage and hour regulations are solely an HR issue. Think again: It is a manager's decision that affects whether his employees should be classified as exempt or nonexempt and whether or not they qualify for overtime pay. Managers decide their employees' work loads and duties--both of which determine exempt status. Too often, department heads promote a nonexempt secretary to an exempt-level coordinator to justify a higher salary, for instance, even though the employee may be handling the same nonexempt duties as before. And many times, HR is not aware of this.

In addition, managers' budgets are on the line any time a wage and hour audit challenges the way they have classified employees in their departments. Imagine being audited by the U.S. Department of Labor (DOL) and getting penalized for misclassifying one of your employees, resulting in years of back over- time pay. That unexpected charge could put a serious dent in your budget.

What's more, many employers believe that random wage and hour audits by the DOL create the only exposure to potential penalties. However, more audits come as a result of a disgruntled employee, something the manager is responsible for.

Here's how it works: When plaintiff attorneys interview a potential client--an ex-employee of yours who may be looking to sue for wrongful termination, for example--they may ask, "Have you ever worked through your lunches or breaks? Have you ever worked overtime without getting paid time-and-a-half? Have you ever taken lunch at your desk and answered the phone? Have your co-workers ever done the same things, and how many of them are there?" Potential clients often respond, "Sure. That kind of stuff happened all the time." All of a sudden, you have the making of a class action wage and hour suit.

If plaintiff attorneys prove successful in establishing that an employer has violated the wage and hour provisions of the Fair Labor Standards Act (FLSA), then they will have the right, in tandem with the DOL, to audit two years of payroll records--three if the employer acted willfully, which is an easy threshold to meet. Although punitive damages are not involved, civil penalties could be assessed for repeated or willful overtime violations to the tune of $1,000 per transgression plus liquidated damages for unpaid wages.