Legal Analysis for Engineering Company

Legal Analysis for Engineering Company

Confidential

Employees at an engineering company were required to work eight hour days. If they did not, either pay or leave was deducted from their paychecks. Eventually, the company refunded these deductions to the affected employees. But now the employees who did work the full eight hours are suing for unpaid 'overtime.' This made sense because for over a year and a half, 24 of the employees pay was taken out of their pay check was taken.

The concern was that some of the employees are being cheated out of their checks, and also that Employees within certain categories are required to be paid for overtime as well as a certain minimum wage according to the Fair Labor Standards Act (FLSA). The investigation does show that some of the employees were doing a lot of overtime work but were not getting paid for it in return.

RULE

Employees within certain protected categories such as executives and administrative professionals paid a salary are exempt from the FLSA overtime provisions.

Application (see paragraphs below for additional explanation), One case dealing with this aspect of the FLSA was 949 F. 2d 611 - Martin v. Malcolm Pirnie Inc. In the case, the issue at hand was Malcolm Pirnie was allegedly in violation of the FLSA because of the fact it failed to grant overtime pay to its employees. The rule of the FLSA at the heart of the case was what constituted an exempt employee: certain employees are exempt from having to be compensated with overtime pay, including executive positions.

However, "in the case of Martin vs. Malcolm Pirnie Inc., an appeals court ruled that language contained in the employee handbook effectively denied exempt status to a group of highly compensated engineers. The employer insisted that it did not have a policy that mandated partial-day deductions, and although the handbook applied to both exempt and nonexempt employees, the employer said that the particular language only related to nonexempt employees. However, the court held that the employee handbook irrefutably established a lack of salaried status for all employees, and all employees receive a right to overtime premiums when the loss of exempt status occurs" (Dorf 1994). In conclusion, employee status as exempt must be clearly established to justify nonpayment of overtime.

Even more significantly for the engineering company, however, is that "the courts have ruled companies trigger an unintended aspect of law when they dock the pay or debit the accrued leave of an exempt employee for partial day absences. The exemption status of the employee's position thus changes when the docking occurs, making them non-exempt, and thereby eligible for overtime for all extra hours worked" (Dorf 1994). By docking the pay of salaried workers, the company was effectively treating them as salaried employees (hence the restitution of their pay).

The employees who did work the full forty hours, however, are claiming that in doing so the company revoked their exempt status as well and because they worked more than their colleagues, they effectively worked 'overtime.' However, there are significant differences between the case of the engineering firm and that of Martin vs. Malcolm Pirnie Inc. The engineering company did act fairly in retroactively restoring pay, in an effort to comply with the FLSA by treating the workers as salaried, rather than unsalaried employees. The status can be revoked when the company treats exempt employees like nonexempt employees, but in this case the employer's actions seem to reaffirm the employees' treatment as salaried workers.

CONCLUSION

The employees who worked forty hours per week are not entitled to overtime 'back' pay because they remain exempt employees, based on the treatment of the firm.

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