One of the most important issues in the relationship of employers and their employees is the mandatory requirement that the employer compensate each employee who works more than 40 hours in a standard week. The issue becomes more complex when the employer is faced with both the New York state statute and the federal statute, both of which contain the same general requirement: if an employee is required to work more than 40 hours in a standard work week, the employer must pay that employee one-and-one-half times the employee’s standard hourly wage for each hour of overtime.
The federal requirement for mandatory overtime payments is the Fair Labor Standards Act, a law that was passed in 1938 as part of President Roosevelt’s New Deal legislation. Many states, including New York, have adopted similar laws, and most are patterned on the federal statute. The federal law applies to all businesses engaged in interstate commerce or in making, transporting or selling goods destined for interstate commerce. In addition, the business must have annual gross sales of $500,000. The requirement for paid overtime is fairly straightforward, and most disputes arise when employers attempt to evade the statute by classifying employees as “executive, administrative, and professional.” These classes of employees are exempt from the mandatory overtime requirements of the Fair Labor Standards Act and most state acts, but employers often assume that their classification of their employees is a final and binding determination of the employee’s status. It is not. The classification must be made in good faith, that is, the employee in question must in fact hold a position that involves the management decisions of the company. The federal regulations contain numerous examples of improper classification of employees as managerial employees.
Employees’ remedies for improper classification
If an employee believes that the employer improperly classified the employee in order to escape the mandatory overtime requirement of the FLSA, the employee can sue the employer in federal court for an order correcting the situation. If the employee prevails, the employer must pay accumulated overtime plus the plaintiff’s attorney’s fees.
The penalties faced by an employer who is found to have violated the Labor Department regulations on classification of employees are harsh, especially the requirement for payment of the employee’s attorney’s fees. An employer who is wondering about how to classify various employees for purposes of the mandatory overtime requirements may wish to consult an experienced employment or labor attorney for advice.