When an employer realizes that a certain classification or number of employees has been misclassified as exempt, the employer may do the right thing and, henceforth, treat those people as non-exempt and pay overtime accordingly.  That corrective measure, however, leaves a gap because the workers can sue for overtime for the period preceding the change.  That is just what happened in a case where the employer agreed to pay $2.75 million to settle a class action involving inside sales representatives claims for overtime.  The case is entitled Bisaccia v. Revel Systems Inc. and was filed in federal court in the Northern District of California.

There were 264 employees who would be part of the settlement.  The attorney fees and costs would be around $750,000.  The lawyer for the plaintiffs asserted that “this settlement avoids expenditures of resources for all parties and the court, and provides ‘significant benefit that [plaintiffs] would not receive if the case proceeded — certain and prompt relief.”  The settlement is also reasonable because the proposed release only requires plaintiffs to release claims they might bring against Revel relating to their classification as exempt ISRs.”  To date, 151 people have opted in.

The plaintiffs claimed they should have been overtime prior to when they were changed over to non-exempt employees and overtime eligible.  These kinds of positions used to be (routinely) deemed exempt but now they are viewed as white-collar production jobs and simply a glorified form of “production,” i.e. non-exempt work.

The papers filed by the plaintiffs stated that “this settlement provides favorable resolution for all plaintiffs, without the need for litigating decertification or motions to compel arbitration.” Their attorney said that he was “pleased with the outcome, which we believe provides very good value to the inside sales representatives in this case.”

The Takeaway

When an employer converts people from exempt to non-exempt, he must always determine what to do with the years in the past.  One tactic is just ignore it and hope for the best, knowing that the statute of limitations gets eroded away week by week.  Another is to do a calculation of what people are owed for the two years prior to the change and make “restitution” on those hours.  I think the proactive way is the better way.

It will no doubt be cheaper than another litigation.

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