Make sure employees qualify for administrative exemption from overtime

Even employers with good intentions can misunderstand what it takes to legally classify employees as exempt. Unfortunately, when it comes to wage and hour violations, ignorance isn’t bliss, especially in Massachusetts. Unlike many other areas of the law, intent is irrelevant. Employers that make errors, regardless of the reason, open themselves up to costly litigation and the payment of back wages, their own and their employees’ attorneys’ fees, and costs. The most common misclassification error employers seem to make is classifying a nonexempt employee under the administrative exemption. A recent case reminds employers of those dangers.

Facts

Under federal law, when an employer willfully misclassifies an employee as exempt, often to avoid paying overtime, employees can recover damages for a longer period (three years) than if the employer were merely negligent (two years). If an employer violates Massachusetts state law, any amount owed to the employee who is misclassified is automatically tripled.

The Department of Labor (DOL)—led by Secretary of Labor and former Boston Mayor Martin Walsh—alleged that Unitil Service Corp. misclassified two categories of workers as exempt, and the agency sought overtime compensation for them. The employer argued the workers were administrative employees exempt from overtime and, therefore, not entitled to overtime payments.

The federal district court agreed and granted judgement for the employer. The DOL appealed to the U.S. 1st Circuit Court of Appeals, whose rulings apply to all Massachusetts employers.