Misclassification of Managers and Assistant Managers

If you were given a “promotion” to an “assistant manager” or “manager” position, but have also lost your access to overtime despite increased hours, it is important to have a clear understanding of your rights and potential losses. The practice of misclassification of exempt employees has been widespread in the retail, service, hospitality, and restaurant industries. Under the Fair Labor Standards Act, all employees are entitled to minimum wage plus one and one-half times regular pay rate for any hours over 40 in a given work week.

For many employees, a promotion to “manager” or “assistant manager,” means more responsibility, increased earnings, and an improved position in the company. Unfortunately, employees turned manager will find that the new status amounts to lost overtime and loss of legal rights. In a recent case, bank workers in Illinois have alleged that TCF Financial Corp. misclassified their jobs, forcing them to sign agreements that limited their rights and allowed the company to avoid paying overtime. This is one lawsuit among many in recent years that involves employees who have lost rights or benefits as a result of “manager” or “assistant manager” misclassification.

Have you been misclassified?
If you were given a “promotion” to an “assistant manager” or “manager” position, but have also lost your access to overtime despite increased hours, it is important to have a clear understanding of your rights and potential losses. The practice of misclassification of exempt employees has been widespread in the retail, service, hospitality, and restaurant industries. Under the Fair Labor Standards Act, all employees are entitled to minimum wage plus one and one-half times regular pay rate for any hours over 40 in a given work week. Some employees are exempt from this rule, hence the classification, “exempt,” including assistant or general managers. To qualify for exemption under federal law, the following requirements must be met:

• Managers must be paid a guaranteed weekly salary, in excess of $455 per week
• Salary must not be subject to deductions based on quantity or quality of work
• No deductions may be taken for cash register shortages, broken equipment, rule violations, or other matter-of-course losses

Failure to meet these standards, or making any deduction from a salary base could convert an exempt employee to non-exempt status. Managers must also be performing specific duties to remain exempt:

• Employee must regularly and customarily direct the work of two or more employees
• Employee must have hiring or firing authority and be able to offer suggestions and recommendations related to hiring, firing, promotions, or advancements

Restaurant, hospitality, and retail managers and assistant managers often do not meet the “duties test.” Rather than actually manage employees, they are charged with other tasks, including cooking, cleaning, shelving, stocking, refilling waters, or other labor-related tasks.

Potential for lawsuit and damages
Widespread misclassification has led to lawsuits in Minnesota and nationwide, with significant compensation returned to employee-plaintiffs. In 2001, a federal court required a Waffle House franchisee to pay over $2.8 million plus interest and attorneys’ fees for misclassifying managers as exempt in violation of the Fair Labor Standards Act (“FLSA”). Since this lawsuit, a host of other cases followed, resulting in significant damage awards and settlements for plaintiffs.

The Obama Administration has also issued a directive to crack down on employers, especially in the restaurant or hospitality industry, that misclassify employees as exempt from overtime provisions. For employers who failure to follow federal mandates, FLSA violations and employee misclassifications could result in significant damages.

If you believe that you have been misclassified and you have lost your rights to overtime, our lawyers want to hear from you. We are experienced in investigating wage and hour violations and other employment legal issues on behalf of employees in Minneapolis, St. Paul and throughout Minnesota. To speak with our employment attorneys regarding misclassification and your rights, please call 612-252-3570.