Are You Underpaying Your Tellers?
That is the question that popped into my mind this morning after spotting an article reporting that TD Bank was slapped with a lawsuit yesterday alleging that it violated the Fair Labor Standards Act (FLSA) by misclassifying a “teller services manager” as an exempt employee. The lawsuit is by no means unique, but the simple fact that employees continue to bring these claims indicates that financial institutions are continuing to ignore the impact that the FLSA is having on their operations. In addition, with major regulations on employee classifications to be released within weeks by the Department of Labor, this and similar cases demonstrates why I feel that the Department of Labor will introduce the most potentially impactful regulations for credit unions this summer.
Remember that under the FLSA, employees are presumptively entitled to overtime if they work more than 40 hours a week. Very generally speaking, the law creates an exemption for employees who exercise managerial control. As I have previously explained, fueled by the Department of Labor, suits alleging the misclassification of non-exempt and exempt employees have become more common and more expensive. This trend was highlighted earlier this year when the Supreme Court upheld the right of the Department of Labor to classify mortgage originators as non-exempt employees.
The TD Bank case (Reinaldo Kuri v. TD Bank N.A ) is fairly typical. The employee in question alleges that even though he was given the title of manager, his duties included “spending the overwhelming majority of his time” engaged in the duties of non-exempt bank tellers and customer service representatives. In addition, he alleges that he “did not exercise any meaningful degree of independent judgment,” but instead had to rely on the policies, practices and procedures set by the Bank.
This argument shows why employers increasingly find themselves in a Catch-22 when it comes to classifying their employees. A typical credit union is too small to cleanly delineate exempt and non-exempt duties. Your typical manager chips in by helping out with teller duties and anything else that needs to be done around the credit union. In addition, any credit union that doesn’t have policies and procedures in place detailing how it expects its employees to carry out their duties is committing operational negligence.
Under existing regulations (29 CFR 541.700), you judge whether an employee is classified as exempt or non-exempt based on her primary duties. The good news is that under existing regulations, the amount of time an employee spends performing exempt work is not the sole criterion used to determine whether or not an employee is exempt. This means, for example, that the branch manager, whose primary duty is managing the branch but on any given week may spent the majority of his or her time performing non-exempt duties, can still be classified as an exempt employee. The bad news is that the Department of Labor is expected to propose narrowing this exception so that any employee who spends the majority of her time doing non-exempt work will be considered a non-exempt employee. Think of how much this could cost you in overtime.
But even without these proposed changes, financial institutions continue to ignore the changing employment landscape at their own risk. For instance, if TD Bank loses this lawsuit, it could be required to pay cumulative damages and reimburse employees for their unpaid overtime.