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Misclassification of Employees Results in Million Dollar Payments by United Health Care, the Nation’s Largest Health Insurance Carrier Employer

Thumbnail image for Thumbnail image for Thumbnail image for top.lawyers.arrive.mag.2011.jpgOur Misclassification of Employees Attorneys have been following a recent case wherein United Health Care agreed to pay over one million dollars in back wages and penalties for misclassifying employees as exempt instead of non-exempt and overtime eligible under the Fair Labor Standards Act (FLSA). Almost 500 employees will receive $934,000 in back wages and United Health Care will pay an additional $104,280 in civil monetary penalties. United Health Care did something many employers mistakenly do – it incorrectly classified employees so they were ineligible to receive overtime. Proper classification of employees under the FLSA is critical because improper classifications can raise class action implications. Importantly, generally an employer’s intent is not a factor in a misclassification lawsuit when considering exempt versus non-exempt status. Accordingly, an employer may have very good intentions but its error in classifying employees regarding exempt status under the arcane language of FLSA can raise potential six figure liability. It is of paramount importance for employers to seek the guidance of a qualified Employment Attorney before classifying employees.

Below are two common mistakes made by employers under the FLSA:

1. Calling an employee a “manager” and automatically determining the employee is an “executive” and thus ineligible for overtime payment for hours worked in excess of forty in a work week. In order for the executive exemption to apply, the employee must be paid on a salary basis at a rate of at least $455 per week and meet each of the following tests: i) the employee’s primary duty is managing the business or a customarily recognized department or subdivision; ii) customarily and regularly direct the work of two or more other full-time employees or the equivalent; and iii) have the power to hire or fire, or make decisions regarding hiring, firing, promotions or other employment decisions. This is not a simple standard to meet. Most often, “managers” will not meet this heavy burden.

2. Refusing to pay an employee for overtime for hours worked that were not approved in advance. If an employee works in excess of forty hours in a work week and qualifies for overtime payment, employers are required to pay time and one-half the regular rate for the weekly hours that exceed forty. Many employers may complain about paying unapproved overtime. In such cases, it may be prudent for the employer to pay the employee and then consider reviewing its employment practices to make sure it is a violation to work overtime without prior approval. If the employee violates the company policy, the employee may then be subject to discipline. Employers have to careful when disciplining an employee in these circumstances to avoid a potential retaliation claim under the FLSA.

If you have any questions about your rights or obligations under the FLSA or a misclassification issue, contact our New York Misclassification of Employees Lawyers at (800) 893-9645.


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Thank you for visiting our Blog. This blog provides general information and thoughts about various employment law issues primarily in the New York Tri-State area and occasionally in other areas. You are welcome to read the posts. However, do not construe any content on this blog as legal advice or the creation of an attorney-client relationship. Again, we provide the content only for informational purposes. You should not make decisions based information on our blog since the application of the law depends on the facts and each situation may be different. In addition, the law in most jurisdictions is different and changes constantly and we make no representations that any information on our blog has been updated. The Blog should not be used as a substitute for competent legal advice from an experienced employment law attorney in your state or jurisdiction.