Following an investigation by the U.S. Department of Labor's ("DOL") Houston office, a restaurant paid $125,763 to 61 current and former kitchen and wait staff, cashiers, hostesses, runners, cart pushers and dishwashers for violations of the Fair Labor Standard Act ("FLSA"). The investigation found that the employer improperly classified some employees as exempt from overtime by paying them a flat wage regardless of the number of hours worked, resulting in both minimum wage and overtime violations. Employee misclassification remains a very common issue.

Recognizing the potential liability, several clients have requested assistance with a very common employee classification issue: "May an employer pay non-exempt employees a salary without violating the FLSA?" Although an employer may pay non-exempt employees a salary, many employers fail to recognize that most non-exempt employees are still entitled to overtime if they work more than 40 hours in a given work week. All too often, non-exempt personnel, such as accounts payable/receivable employees, secretaries, receptionists, maintenance, security, field service engineers, warehouse and other employees are being paid a salary, but no overtime pay when they work more than 40 hours in a given work week. With limited exceptions, this action is a clear violation of the FLSA that creates significant exposure for employers for unpaid wages, liquidated damages, attorney fees for the employee's lawyer and the possibility of class or collective actions filed on behalf of all similarly-situated employees.

To qualify for a FLSA exemption from the overtime pay requirements, employees generally must meet both a "salary test" and a "duties test." Most office employees as well as maintenance, security and warehouse meet the "salary test" for an exemption, because they are paid more than $455.00 each week. However, they will almost always fail the "duties test." For example, an accounts payable clerk usually does not exercise a sufficient amount of discretionary authority and control over matters of significance for his or her employer. As a result, the employee does not meet the "duties test" and must be paid overtime pay when working more than 40 hours in a work week. Therefore, the company must examine the weekly salary and calculate the appropriate overtime rate.