Chase $8.3M Misclassification Settlement
Recently, JPMorgan Chase was sued by roughly 2,000 assistant branch managers in a class action who alleged they were misclassified as exempt from the overtime protections of the Fair Labor Standards Act (“FLSA”). Last month, the parties reached a settlement and as a result, the bank must pay $8.3 million. This lawsuit highlights the importance of proper classification of assistant managers.
The FLSA requires that all non-exempt employees be paid an overtime premium of one and one-half times their regular hourly rate for all hours worked over 40 in a single workweek. Failure to comply with the FLSA carries penalties for back wages, costs and attorney fees, and potentially liquidated damages.
In Vargese v. JPMorgan Chase & Co., the employees claimed that the Bank required them to perform work similar to bank tellers, but denied them overtime. JP Morgan Chase argued that branches are rarely open for more than 40 hours in one week and that the number is offset by meal periods and breaks. However, Judge Gardephe of the U.S. District Court for the Southern District of New York found that the workers’ experiences of working over 40 hours per week without compensation for overtime was widely occurring throughout the company.
Challenge for Employers
Misclassification of assistant managers is a major problem for employers. Many employers incorrectly assume that because an employee’s job title has the word “manager” in it, he/she may be classified as exempt from federal and state overtime rules and regulations. However, assistant managers may only be exempt from overtime requirements under the executive exemption if:
- They are compensated on a salary basis over $455.00 per week. Note, some states, like New York, have higher salary thresholds.
- Their primary duty is management of the enterprise.
- They routinely direct the work of two or more full-time employees (or four part-time employees).
- They have authority to hire or fire employees, or their suggestions and recommendations on such decisions are considered.
Determining whether an assistant manager is properly classified as exempt under the executive exemption can be challenging for employers since assistant managers typically perform both exempt and non-exempt duties. For example, assistant store managers may be involved in overseeing and disciplining employers. However, they may also perform tasks such as assisting customers, performing bank teller duties, conducting price checks, operating cash registers, stocking shelves, and cleaning displays, all of which are non-exempt tasks.
Audits to Ensure Compliance
When determining how as assistant manager should be classified, the primary question is whether the employee is performing managerial functions as his/her primary duty, which is typically interpreted to mean the majority of the employee’s time at work. To avoid any potential liability, employers are encouraged to conduct self-audits or legal audits of their employee classifications. If a misclassification is discovered, the employer should immediately address the issue and reclassify the employee as non-exempt. If reclassification is necessary, employers should ensure that the employee’s records reflect the hours worked and that he/she is paid for all hours.