A recent $6 million wage and hour settlement serves as a reminder that it’s always important to pay attention to your employees’ duties. And the stakes may be even higher in the future, according to one expert.
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A federal district court judge approved the multimillion-dollar settlement between PNC and its assistant branch managers November 29. The managers had alleged in a lawsuit that their primary duties rendered them ineligible for any of the Fair Labor Standards Act’s (FLSA) white-collar exemptions. They spent the vast majority of their time working as tellers and performing customer service tasks, according to the complaint.
PNC, however, classified them as exempt and did not pay them overtime for hours worked beyond 40 in a workweek. The employer maintained that the classification was correct but, a few months after the court conditionally certified a nationwide class of managers, it settled the case.
PNC agreed to pay $6 million to more than 600 managers to resolve the claim (Briggs v. PNC Financial Services Group, Inc., No. 1:15-cv-10447 (N.D. Ill, Nov. 29, 2016)).
Duties Tests
The FLSA requires that employees be paid overtime unless they meet one of the law’s exemptions. The exemptions require that employers consider a worker’s actual duties—not his or her title.
For example, to meet the law’s administrative exemption, an employee’s primary duty generally must be office or nonmanual work that is directly related to management or general business operations of the employer or of the employer’s customers. The primary duty also must include the exercise of discretion and independent judgment with respect to matters of significance. Finally, the employee must be paid at least $455 per week.
According to the U.S. Department of Labor’s (DOL) FLSA Overtime Security Advisor, “primary duty” means the principal, main, major or most important duty that the employee performs. Determining an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining the primary duty of an employee include, but are not limited to:
- The relative importance of the major or most important duty as compared with other types of duties;
- The amount of time spent performing this major or most important duty;
- The employee’s relative freedom from direct supervision; and
- The relationship between the employee’s salary and the wages paid to other employees for performing similar work.
The amount of time an employee spends performing a particular duty also can be relevant. For example, says DOL, if an employee spends more than 50 percent of his or her time performing a specific duty, it will generally satisfy the primary duty requirement. “Time alone, however, is not the sole test, and nothing requires that exempt employees spend more than 50 percent of their time performing a specific duty,” according to the guidance. “Employees who do not spend more than 50 percent of their time performing their major or most important duty may nonetheless meet the primary duty requirement if the other factors (listed above) support such a conclusion.”
Changes Afoot?
New DOL regulations that would have more than doubled that $455 threshold were temporarily halted last month by a federal district court. In the order granting the injunction, the judge called into question the lawfulness of DOL’s salary-basis test. DOL has appealed the order.
“A significant portion of the court’s ruling on the temporary injunction relies on the idea that the tripartite test of base wage rate, duties, and salary basis of payment is flawed,” said Jo Ellen Whitney, a senior shareholder at Davis Brown and editor of the Iowa Employment Law Letter. “That is very sweeping language for a temporary injunction.”
This means that the duties test could receive greater weight in the future, Whitney told BLR®. “That makes it even more critical that employers continue to take this opportunity to review and correct classifications where the duties test component was at issue,” she said.
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Kate McGovern Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics and currently writes for