In order to be exempt from having to pay overtime, the employee needs to be “exempt.”

To qualify for an exemption from overtime, employees need to perform certain job duties.

However, just because you pay an employee on a salary basis does not mean that the employee is not entitled to overtime.

If they do not, then it does not matter how much you pay them or whether they are paid a salary; they will still be entitled to overtime.

A Fair Labor Standards Act RefresherBruce E. Loren, Esq. and Cristina E. Groschel, Esq. | Mar 15 2018

While this is a topic that we have discussed in the past, it bears repeating. Just because you pay your employee a salary does not mean the employee is “exempt,” and a mistake in classification could prove costly.

Whenever clients call us with wage questions, one of the first questions we usually ask is: “Is the employee exempt or non-exempt?” “Salaried” is not an answer to that question. Most of the cases we have defended relating to wage and hour claims are not cases where everyone agrees that the employee is entitled to overtime but the employer inadvertently (or intentionally) does not to pay it. Rather, they tend to be cases where the employee is paid on a salary and, therefore, the employer believes that it does not have to pay overtime. However, just because you pay an employee on a salary basis does not mean that the employee is not entitled to overtime.

In order to be exempt from having to pay overtime, the employee needs to be “exempt.” When trying to figure out if an employee is exempt, paying him/her on a salary is often just one part of the analysis. The other part of the analysis—which is usually the central issue involved in this type of litigation—is the job duties of the employee. To qualify for an exemption from overtime, employees need to perform certain job duties. If they do not, then it does not matter how much you pay them or whether they are paid a salary; they will still be entitled to overtime.

This area of the law can be very strict and the financial penalties can be severe. Even more, however, the financial penalties can extend to individuals, not just the company.

Many business owners are familiar with the concept of the corporate structure. Some may have even painstakingly analyzed how they should structure their company (whether as a corporation, limited liability company, etc.). Most are aware that the corporate structure often serves as a shield from individual liability. Overtime cases are different in this respect too.

Under the FLSA, an individual can be personally liable for damages. This is true even though the employee was hired and paid by the company, and even though the violation was not committed in bad faith. While overtime cases are brought against the employer, the FLSA defines “employer” broadly and “includes any person acting directly or indirectly in the interest of an employer in relation to an employee . . . .” This means that an “employer” can be any individual who is involved with day-to-day operations or who has direct responsibility for the supervision of the employee. That person will not always be the highest ranking individual within the organization, nor will it always be just one person. We have defended cases that have been brought against companies and several individuals, all of whom were individually alleged to be “employers” under the FLSA.

Under the FLSA, employees can recover unpaid overtime wages, “liquidated damages” equal to the amount of unpaid overtime wages, and attorneys’ fees and costs. Other employees will likely also find out about the lawsuit and, if they are in a similar situation, may decide that they also have a claim against you.

Litigation involving the FLSA undoubtedly favors the employee. The risk of double damages, attorneys’ fees, and individual liability is often enough to encourage most employers to unwillingly settle the cases—even when they do not believe they owe any wages. The best defense against these claims is to prevent them from ever occurring. At the very least, your human resource and payroll professionals should be trained in understanding and applying exemptions, and you should evaluate seeking legal advice for the positions that you have classified as exempt to ensure that they meet the requirements for an exemption. An FLSA lawsuit could be financially devastating for both you and your company, and the up-front investment in avoiding one is surely worth it.


Cristina E. Groschel and Bruce E. Loren of Loren & Kean Law are based in Palm Beach Gardens and Ft. Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law and employment law. Ms. Groschel focuses her practice on labor and employment law, representing the interests of employers and business owners, and is certified as a Professional in Human Resources (PHR). She has represented businesses in a wide range of disputes, including DOL investigations, discrimination claims, and state and federal wage litigation. Ms. Groschel and Mr. Loren can be reached at cgroschel@lorenkeanlaw.com or bloren@lorenkeanlaw.com or 561-615-5701.