Case Study #1

Employee Classifications and Overtime Pay


Case Study:

Specialized manufacturing and distribution company in business for 47 years (21 employees)

A client with no policy or method for capturing employee time faced a lawsuit from a loyal staff member who had kept 20 years of timesheets. She was threatening a lawsuit for decades of lost overtime wages. Other issues facing the business: Department of Labor fines and federal and state audits. Hundreds of thousands of dollars were on the line.

The employee sought out NEMR’s Director of HR, saying that she had discussed overtime pay with management and had an appointment with an attorney the following week. NEMR asked the employee to let us resolve the issue. We reviewed the employee’s duties and responsibilities, wrote a job description and classified the position as non-exempt in accordance with the Fair Labor Standards Act. She was entitled to overtime pay. The business owners claimed that they had compensated her in other ways, including extensive paid time off to care for her aging parent, but they had no substantiating documentation.

The employee wanted to be paid retroactively for the 20 years, yet overtime laws generally permit recovery for work performed up to two to three years from the date of a lawsuit. NEMR provided an impartial, fair and compliant resource for the employee and the owners, acting as an arbitrator and negotiating a settlement. The employee still works there and is happily productive.


  • Legal action is avoided. The average employee lawsuit award is $160,000, not including legal fees. The average time it takes to settle an employee claim is 318 days.
  • The company is not facing federal and/or state Department of Labor audits and associated fines.
  • A long-tenured employee is retained.
  • The business is protected for the future as it has a process and policies for capturing time and is compliant with current HR practices.

About FLSA
The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage overtime pay eligibility, record-keeping and child labor standards. The regulations are enforced and governed by the Department of Labor. Non-exempt workers are entitled to a minimum hourly wage and after working 40 hours in a week, overtime pay of at least 1½ times the regular rate. Employers and employees are continuously confused about this exempt and non-exempt classifications.