Failing to pay overtime to an employee because he or she was incorrectly classified as exempt under the Fair Labor Standards Act can be an expensive mistake. Not surprisingly, failing to pay overtime to employees holding a group of jobs improperly classified as exempt can have serious financial consequences for an employer.

Last week, in Wiegele v. Fedex Ground Package System Inc., 3:06-cv-01330-JLS-POR (S.D. California 2008) et al., a federal judge certified a class of former managers who claim to have been improperly denied overtime pay. The managers argued that they spent most of their time performing manual labor instead of managerial tasks and, accordingly, that they should have been classified as non-exempt workers, eligible for overtime. Considering the bid for class certification, the court found that the common issue of whether the employees were exempt predominated over individualized issues and that it would be more efficient to certify the class than allow the claims to proceed as individual actions.

It remains to be seen whether the plaintiffs’ claims have merit – i.e., whether they were, in fact, misclassified as exempt employees. Nonetheless, the cost of defending claims on a class basis coupled with the possibility of up to three years of backpay for classes containing more than 550 members illustrate the magnitude of the potential risk for employers that incorrectly classify entire job groups as exempt. To help avoid such risks, employers should periodically review their exempt job classifications to ensure that incremental changes to jobs that occur over time do not destroy the exempt status of employees in those positions.