Just what makes an employee exempt from overtime pay? That's at the heart of the lawsuit filed by Micheal Ortiz, a former Amazon warehouse shift manager in California. Ortiz claims that most of his job was manual labor and not managerial tasks, which are necessary for an employee to be exempt from overtime pay.

The New York Times quotes attorney Jahan Sagafi, a lawyer at Outten & Golden, who is not involved in this case, but does practice employment law. He said:

Amazon faces a heavy burden to show that the workers truly fit within the narrow exemption to overtime pay that the California Legislature established. Just assigning them managerial-sounding work may not be enough, depending on how much they do and what it entails, exactly."

This is not only a concern in California but in all 50 states. California has stricter standards than the federal law (called the Fair Labor Standards Act or FLSA), but every business needs to be concerned about overtime.

1. Receive a minimum salary of $455 per week or $23,660 per year (federal law). In California, this is a much higher wage of $840 per week or $43,680 per year. The Department of Labor introduced a regulatory change to bring that amount to $913 per week, or $47,476 per year, but that is currently on hold while it winds its ways through the courts. The Trump administration has not been enthusiastic about this Obama era change, so it's possible it will never resurface.

2. Have higher responsibilities. Many companies make mistakes here--they think it is title based, so someone with a "manager" or "supervisor" title is exempt from overtime, but title is actually irrelevant. What matters are the actual tasks the employee performs. This is the issue in the Amazon lawsuit. Manual labor is always eligible for overtime, while managing people is exempt from overtime. So, the question is, did Mr. Ortiz spend more time doing manual labor than he did carrying out managerial duties?

There are three categories that can qualify you for exemption: Executive, Professional, and Administrative. For example, you need to be managing people, or be part of a learned profession (doctors, lawyers, teachers, registered nurses, etc), or be involved in a creative endeavor (actors, writers, musicians, artists) or have a high degree of independence in a job which is related to the management of the business (human resources, finance, IT, etc). Don't just assign someone to this category based on what you feel--double check with your HR department and if there is any doubt, call an employment lawyer. It's always legal to give someone overtime, so when in doubt, provide overtime pay.

3. Be a salaried employee. In order for someone to meet the salaried test, they have to receive the same salary every pay period, as long as they worked at all. There are a few exceptions where a person can be docked if they do not work at all on a given day, but generally, if the person works 15 minutes on Monday, then she's owed a full week's salary. Sure, you can fire the person for being a slacker, but you can't dock pay.

This means that if Bob works 40 hours one week, 80 hours the next, and 35 the third week, his paycheck each week is identical. You can't dock him 5 hours pay for the week where he didn't put in his whole 40 hours. You can dock vacation time, but if he's out of vacation time, he still gets his full paycheck.

If all three of these conditions are not met, the employee is owed overtime pay if he works more than 40 hours in a week (or 8 hours in a day in California).

Right now the Amazon lawsuit has just been filed, and of course, Ortiz claims he didn't meet these three qualifications and Amazon claims he did. It will be interesting to see how it turns out.

Regardless, if you haven't double checked your employees, it's time to do so now. Better to find out and properly classify people now than to get hit with a lawsuit later.

Published on: Jun 13, 2017