Manager Misclassification: A Pervasive Wage and Hour Legal Issue

Misclassification can be a costly mistake because the Fair Labor Standards Act (“FLSA”) — the federal wage and hour law — provides that employees misclassified as exempt are entitled to back overtime wages and an amount equal to the unpaid back wages in “liquidated damages,” which is the interest component for the time the employee’s wages were improperly withheld, for a two or three year period depending on whether the back violation is found to be “willful,” meaning that the employer knew or should have known that its wage and hour practices violated the FLSA. To make matters worse, if there is a judgment for back wages, meaning that a judge or jury found that the owner/operator is responsible for paying back wages to its misclassified managers, the FLSA states that the owner/operator is also responsible for paying the employee’s attorney’s fees, which (when added to an owner/operator’s own legal fees) can be exorbitant.

To avoid misclassification, owner/operators should routinely audit their exempt employee workforce, specifically focusing on the job functions being performed by its managers. If a manager is not regularly supervising at least two full-time employees or their equivalent, and does not have the ability to hire, fire, promote, discipline, or appraise performance, that manager is likely misclassified. Manager misclassification can be found, but is by no means limited to the following positions: assistant managers, floor managers, housekeeping leads, bell captains, and sous chefs.