Job Reclassification

Reclassifying employees from salary to hourly is generally a good indicator that the employer was previously breaking the law. An employer is required to pay an hourly worker the minimum wage and overtime when working over forty hours in one week. There are exceptions to this requirement if a worker is considered to be excluded from receiving overtime by meeting certain qualifications. This is where the term “exempt” and “non-exempt” come in. If an employee is not entitled to receive overtime under the Fair Labor Standards Act (FLSA) they are considered exempt and if they are entitled to receive it, they are considered non-exempt.

Every so often an employer may decide to reclassify certain job positions to either switch them from exempt to non-exempt or vice versa.

Why Does Job Reclassification Happen?

There are a variety of reasons why a reclassification may occur but one reason is an employee’s job duties have changed or their responsibilities were based on an outdated job description and no longer comprise the employee’s actual job duties. Additionally, if it comes to an employer’s attention that their employee’s job titles have been misclassified as an exempt or non-exempt, they will reclassify the position.

What Must an Employer do After a Misclassification?

If an employer intends to rectify a misclassification that will have an employee to go from exempt from receiving overtime pay to non-exempt, they cannot simply retroactively pay the employee for what they assume is owed to them. The affected employees must be notified about the reclassification and cannot be forced to accept the retroactive pay to have it be considered as full compensation for the misclassification period.

It is also possible for the Department of Labor (DOL), a federally funded agency which enforces the FLSA, to require that the employer pay fines and damages for misclassifying the employees.

Misclassified Workers Make Headlines:

Several cases for misclassification and reclassification of job titles have made the news recently. Some of their results can be found below:

• An Arizona judge granted summary judgment to truck drivers for Swift Transportation Co., finding that the drivers were employees, not independent contractors, thus exempting their contracts from federal and state arbitration acts, which specifically exempt “contracts of employment” of transportation workers.
• The Bob Evans restaurant chain settled an unpaid overtime class action for misclassified assistant managers for $16.5 million. The assistant managers claimed they performed mostly non-exempt duties such as operating the cash register, cooking, and cleaning.
• FedEx drivers in California alleged that FedEx misclassified them as independent contractors which kept them from earning minimum wage and overtime pay. The drivers received a $228,000 settlement from FedEx.
• A North Carolina court conditionally certified a nationwide action brought by Uber drivers alleging they are misclassified as independent contractors and wrongfully exempt from receiving overtime pay.