This post was written by  Michael D. Yim and originally posted on Kelley Drye’s Labor Days Blog.

Employers, even with the most robust and well-intentioned human resources departments, can still face the dreaded misclassification lawsuit for their salaried employers. In many cases, exempt employees are properly classified as executive or administrative employees. A misclassification lawsuit, however, is difficult to dismiss early because plaintiffs are afforded great latitude in crafting factual disputes that can only be resolved at trial. On top of that, plaintiffs generally bring such claims as class or collective actions – making litigation costly as well. Further compounding the problem, settlement of wage and hour misclassification cases is the preferred mode of resolution – but only after a range of damages can be made with some degree of certainty.

What if I told you that if you included one simple sentence in your employment contracts, handbooks and policies for salaried employees, it would likely reduce your exposure by approximately two-thirds in FLSA cases? For starters, it would make it easier to settle at the right amount by avoiding unnecessarily inflated ceiling for damage calculations by plaintiffs. So what are the “magic words” in this simple sentence?

For exempt employees, your salary is intended to pay for all hours worked during each pay period, regardless of your scheduled or tracked hours.

An employer’s first response is: well, isn’t that assumed for salaried employees since common sense dictates that a salaried employee means that an employee is not paid on a time basis and would be paid for all hours worked? No. This isn’t the case as more courts have presumed that, absent an express understanding, an employee’s salary only applies to the first 40 hours of a workweek as a default. This is because U.S. Department of Labor regulations are vague on how to calculate damages for misclassification cases, and courts have growingly interpreted guidance on what is called the Fluctuating Workweek (“FWW”) method of calculation for non-exempt employees – that is, counting a weekly salary to count as pay for all hours worked at a regular rate, even “overtime.”

Wait, what? In short, many courts would treat any overtime hours as unpaid as a default for calculations. Damages, therefore, would be 1.5 times the regular rate based on 40 hours (salary divided by 40 hours) for the overtime hours. See Ramos v. Telgian Corp., 176 F. Supp. 3d 181, 193, 2016 U.S. Dist. LEXIS 44321 (E.D.N.Y. 2016) (explaining that “[i]n the case of salaried, rather than hourly, employees, … the FLSA … ‘presum[es] that [] a weekly salary covers only the first forty hours, unless the parties intend and understand the weekly salary to include overtime hours at the premium rate’”).


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This post was written by Barbara E. Hoey, Mark A. Konkel, Steven R. Nevolis and Diana R. Hamar and originally posted on Kelley Drye’s Labor Days Blog.

As January draws to a close, New York employers are confronting the reality of many new laws and regulations that govern the employment relationship – from the new Paid Family Leave law, to the new federal tax law. We are also tracking several newly-signed and proposed pieces of legislation, which could further complicate the employment relationship in New York.

Here is what there is so far:

New York Paid Family Leave

As we previously reported, effective January 1, most employers in New York State will be covered by the new Paid Family Leave law (“PFL”). Under the PFL, employers will need to provide eligible employees with 8 weeks of family leave with salary reimbursement capped at 50% of the state’s average weekly wage. This will increase on an annual sliding schedule until 2021 when employees will be entitled to 12 weeks of family leave with salary reimbursement capped at 67% of the state’s average weekly wage.

Eligible employees will be permitted to take leave to care for a qualified family member’s serious medical condition, to care for the birth or placement of a child, or for a qualified military exigency. Leave under the PFL will overlap with an employee’s leave under the Family and Medical Leave Act under certain circumstances.

For a more extensive analysis of the PFL, its requirements (including employer notice requirements), and suggested steps for compliance, we encourage you to read our previous blog post on this law: “A New Headache – New York’s Paid Family Leave
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