November 23rd, 2015

An employer’s decision as to how employees are classified for purposes of minimum wage and overtime pay is one that can be costly if the proper factors are not considered.  Take for example, Halliburton.  Recently, the Department of Labor concluded an investigation of oil and gas provider Halliburton in which it found Halliburton had incorrectly categorized 1,016 employees in 28 job positions as exempt from overtime, which ended up costing Halliburton over $1.8 million in back wages.

According to the Department of Labor investigation, Halliburton did not pay overtime to salaried employees working as field service representatives, pipe recovery specialists, drilling tech advisors, perforating specialists, and reliability tech specialists when they worked more than 40 hours in a workweek because they were classified as “exempt” by the company; the company also failed to keep accurate records of hours worked by those employees.  The Department of Labor concluded that although the employees were salaried employees, they did not qualify for exempt status based on their specific job duties, stating job titles do not determine exempt status.  As a result, Halliburton has agreed to pay over $1.8 million in back wages to the 1,016 employees nationwide.

The Fair Labor Standards Act requires that most employees be paid at least the federal minimum wage for all hours worked, plus overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in one workweek.  There are exemptions to the minimum wage and overtime pay requirements for those employees employed as bona fide executive, administrative, professional, and outside sales employees, as well as certain information technology employees.  To qualify for exemption, an employee must meet certain tests regarding job duties and be paid on a salary basis at not less than $455 per week.

It is also important to remember that the exemptions provided by the FLSA apply only to “white collar” employees who meet the salary and duties tests.  The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skills, and energy.

What does this mean for an employer?  Well, as Halliburton found out, it means that job titles do not determine exempt status, so it is important that an employer look at the actual job duties of the employee to determine qualification for an exemption.  Additionally, even if an employee otherwise meets the job duties test to qualify for an exemption, the employee must be paid on a salary basis at not less than $455 per week in order to be exempt.  It is imperative that employers carefully assess how they have classified employees to ensure that overtime exemptions are warranted so as to avoid a costly mistake.