Misapplying the exemptions can cost companies a lot of money.

TAC Worldwide, a Massachusetts-based staffing firm, has just agreed to pay $1.8 million in back wages to 973 employees who sued for being mistakenly classified as exempt from OT.

Most of the affected employees held IT-related positions. Job titles of those who sued include: network engineer, help desk representative, technical writer, software tester and network administrator.

A common classification mistake is focusing on title rather than actual job duties. Employees may have titles that sound exempt — but employers still need to look at what those employees do on a daily basis and make sure the duties match up with at least one of the Fair Labor Standards Act’s OT exemptions.

For more information on the exemptions, click here.

Cite: Chao v. 888 Consulting Group, Inc.

The computer professional exemption.

It’s a common misconception that all jobs involving computers are exempt. But in fact, the FLSA’s computer employee exemption is very narrow, covering only employees who earn more than $27.63 per hour or $455 per week and:

• apply “systems analysis techniques and procedures,” such as consulting with users to determine hardware or software needs
• design, develop, create, test or modify computer programs based on user design specifications
• design, develop, create, test or modify programs related to operating systems, or
• perform a combination of those duties that requires the same level of skill.

Some examples of employees who don’t qualify for the exemption: employees who repair hardware and help desk professionals whose only job is to fix users’ problems.

Note: IT employees who don’t meet the requirements for the computer professional exemption may still be exempt, based on the FLSA’s administrative, executive or professional exemptions.

In the latest dispute, former Apple employee David Walsh is suing the company for unpaid overtime. He claims Apple misclassified him as exempt and failed to pay him for compensable on-call time.

According to Walsh, the company inflated job titles to make them sound exempt. For example, he says some workers were known as “Senior Network Engineers” — even though they did the same work as regular Network Engineers.

He’s currently seeking class action status to let other employees join the suit.

Who’s exempt from OT?

Whether IT employees are exempt depends on a lot of factors. Many likely fall under the administrative exemption, which requires that employees exercise “discretion and independent judgment” in their work.

There’s also the “computer employee” exemption, which covers mostly programmers and software developers (read more from the Department of Labor here).

Rules and regs abound about what documents HR needs to keep, and for how long. To meet the requirements, more companies are storing records electronically — but are they applying the proper safeguards?

It’s easy to get tripped up. A myriad of federal and state laws have their own record retention rules, which creates a lot of confusion and causes many mistakes by employers. Here’s a quick rundown of the five biggest areas to watch for:

1. Personnel files

Keeping an adequate personnel folder for each employee is key to defending against lawsuits and comply with various employment laws. Make sure you include:

• a resume
• an application for employment
• interview notes
• references and background check records, and
• attendance records, documentation of disciplinary actions, etc.

How long should you hang on to those documents? The rule of thumb is one year after the employee leaves the company. That way they’ll be available in the event of a lawsuit.

2. Hiring records

The following hiring-related data must be retained:

• Equal Employment Opportunity Form (EEO-1) — Employers with at least 100 workers (or 50 workers and more than $50,000 in government contracts) must fill out this form every year. (The next deadline is September 30, 2008). The preferred filing method is the EEOC’s Web-based system, which will retain the data for 10 years.
• I-9s — Many companies keep the I-9 forms separate from the general personnel file so they be accessed quickly — during an audit, companies usually need to give the feds every employee’s I-9 within three days of the request. The forms must be kept for either three years after the employee is hired or one year after termination, whichever is later.

3. Payroll data

The Fair Labor Standards Act (FLSA) requires employers to hang on to:

• basic payroll records for each pay period (for three years), and
• the information on which the pay is based — i.e., work schedules, time sheets, wage rates, and records of any paycheck deductions (for two years).

4. Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA)

Under the FMLA, employers need to keep for three years:

• dates leave was taken (including hours for intermittent leave)
• employees’ notices and requests for leave, and the employer’s response (including e-mails from employees and managers discussing the need for leave), and
• the employer’s leave policy.

Also, employers must keep records of disability accommodation requests for one year.

Note: Privacy laws require that doctor certifications and other medical records be kept in a separate file. If stored electronically, medical info must be held in its own, password-protected database.

5. State regs

Many states have laws requiring longer retention periods than the feds. In those cases, employers must follow the state regs.

Make sure you check with your state to be positive you’re meeting the right requirements.

For more information on HR record retention, check out the report “Record Retention Dos and Don’ts: What to Keep, What to Dump” at www.pbpexecutivereports.com.

Companies across the country are looking for ways to help workers cope with rising gas costs. But many might be offering flexible arrangements too quickly without considering the legal consequences.

One way more and more employers are trying to lower costs and raise flexibility is letting some employees telecommute at least one day a week. That can be a big boost to recruitment, retention and employee satisfaction, but it also comes with a fair share of legal challenges.

Here some things to keep in mind if your company’s thinking about allowing any telecommuting:

Security — In some cases, employers can be held liable when personal information about employees or customers is stolen. Since employees working from home are more prone to security problems than others, special care is needed when telecommuters work with sensitive information. Managers need to work closely with IT to make sure employees have a secure set-up before they do any work from home.

Also, clear ground rules need to be established, such as:

• no working on public wireless networks
• family members or other people shouldn’t use the company’s equipment, and
• any data in physical form (CDs, paper documents, etc.) must be kept in a secure place.

Safety — The Occupational Safety and Health Administration (OSHA) has made it clear it won’t inspect home offices — or require employers to inspect them. Nonetheless, employers should be ready to handle claims of injuries from people working at home, since they might be entitled to worker’s comp.

Guidelines and rulings are unclear about when telecommuters get comp — it depends on the state and the specific situation surrounding the injury. It’s something employers with work-from-home programs must be ready for, since teleworkers are often eligible.

Time-tracking – As telecommuting gains popularity, it’s not just exempt employees who get the benefit. Nonexempt employees are taking advantage, too, which creates some new legal issues.

For example, keeping track of the time a nonexempt employee works can be tough without a clock to punch as soon as someone walks in the door.

What’s a good solution? Some companies install timeclock software that lets telecommuters clock in over the phone or by logging in to their computers.

Overtime — Also, it’s sometimes hard enough to keep nonexempt employees from working unauthorized overtime hours — and the problem multiplies with people away from the workplace.

To limit problems, companies need a clear policy regarding when and how much employees are allowed to work. Or, managers can consider only letting exempt employees telecommute.

Discrimination — As with any benefit, if it’s given to some employees and not others, there’s always a chance someone might claim discrimination. Before rolling out a telecommuting program, employers should have rules on who’s eligible based on objective criteria — for example, position type, department, seniority, performance, attendance records, etc.

We’ve written about the legal issues caused when nonexempt employees carry technical devices and work at home. But there’s also a wage and hour problem technology can cause with exempt employees.

The image of a high-powered exec checking his BlackBerry on the beach is a common stereotype. And it’s perfectly legal, as long he’s taking paid vacation time.

It’s another story when exempts take unpaid leave.

When someone’s on paid leave, you aren’t deducting from a salary. You’re deducting from a leave bank, which isn’t governed by the same strict laws.

But unpaid leave is different. Say that same exec takes a day of without pay. While he’s home, he spends a half hour checking and responding to his e-mail. It’s likely he’s owed a full day’s salary.

Why? The Fair Labor Standards Act (FLSA) lets you deduct from that salary in full day increments only. That means if an employee does any work during the day, they get paid for the whole day.

Preventing problems

The best way to prevent a problem is to educate employees, since most of them probably aren’t aware of the rules about salary deductions.

A simple reminder before someone takes unpaid time off would likely go a long way.