HR Management & Compliance

Overtime Claims: Overtime Misclassification Class-Action Suits Not Letting Up–Who’s The Latest Target; Plus A 6-Point Compliance Checklist

The nation’s largest privately held car rental company is the newest casualty in a growing list of high pro- file employers sued for misclassifying workers as managers. Management assistants for Enterprise Rent-A-Car recently filed a class-action lawsuit claiming they’re owed unpaid overtime because they were improperly treated as managerial employees exempt from the overtime laws.Claims about misclassification of managers as exempt from overtime are becoming a big problem for employers. These lawsuits have plagued Agency Rent-A-Car and Pacific Bell, which shelled out $8 million and $27.8 million respectively to settle with their employees. Other employers that have been hit include Wells Fargo Bank, Robinsons-May, Frito-Lay, Mervyn’s, Burlington Coat Factory, Farmers Insurance, Taco Bell and U-Haul.

Employees Worked Long Hours, No Overtime Pay

The new lawsuit charges that Enterprise required employees in the management assistant job classification to work 11- to 12-hour days and 50- to 60-hour weeks without overtime pay although they spent their time primarily performing routine, nonmanagerial tasks. Their duties included customer pickup and drop-off, handling customer inquiries and complaints, checking in cars, performing basic auto maintenance, and simple administrative activities. The managerial and supervisory responsibilities at each Enterprise location were handled not by the management assistants, but by a branch manager and assistant manager.Also, the tasks performed by the management assistants were allegedly identical to those of lower-level management trainees who did receive overtime pay. And according to the lawsuit, in some cases employees promoted to management assistant actually earned less than they did as management trainees.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

Plan To Correct Problem Backfires?

The employees’ attorney, David Borgen, told CEA that last year, before the company was sued, Enterprise reclassified management assistants as nonexempt and began paying overtime. This action may have contributed to Enterprise’s woes because the abrupt change in status could have alerted employees to question the company’s past practices.If the employees ultimately prove Enterprise improperly classified them as exempt managers, the auto rental firm could have to pay out millions in back overtime and attorneys’ fees. Enterprise spokesperson Christy Conrad, however, told CEA the company followed the law in compensating its employees.

6-Point Checklist

To avoid getting snared in a similar situation, here is a six-step test for determining whether an employee is a manager exempt from overtime. To qualify as an exempt manager under both state and federal law, an employee must meet all these criteria:

  1. Manage all or part of a business or a permanent department or sub-division;


  2. Direct the work of at least two employees;


  3. Devote more than 50% of their time to performing managerial duties;


  4. Have authority to hire and fire or make such recommendations;


  5. Exercise discretion and independent judgment and make decisions on a regular basis about matters significant to the business; and


  6. Earn a fixed salary of at least $1,150 per month. (Note that if an employee is paid less, special rules apply.)

Solving Problems Can Be Tough

Dealing with classification problems can be a Catch-22. If you correct a potential classification mistake by suddenly beginning to pay overtime, this may spur employees to look into whether they’re owed back overtime. But it’s also risky to do nothing because the problem usually won’t go away. It’s best to consult an employment law expert who can help you develop a strategy to resolve classification errors. 


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