Courts addressing FLSA misclassification claims brought by employees classified as salaried exempt workers must determine damages. In a new decision from the United States District Court for the Eastern District of Louisiana, Judge Jane Triche Milazzo ruled that successful Plaintiffs in one such misclassification case are only entitled to “half-time” damages. Further, the Court ruled that any such liability would be offset by discretionary bonuses previously paid to such employees based on their classification of salaried exempt by the employer.  Allen, et al. v. Entergy Operations, Inc., Civil Action No. 11-1571, 2016 U.S. Dist. LEXIS 18958 (E.D. La. Feb. 17, 2016).

Plaintiffs, current and former “Security Shift Supervisors” employed by Defendant Entergy Operations, Inc. at the Waterford 3 nuclear plant in Killona, Louisiana, filed suit claiming Entergy misclassified them as exempt under the FLSA. Entergy contended that it properly classified the Plaintiffs under the administrative exemption. The court denied both parties’ cross-motions for summary judgment on the question of whether the Plaintiffs were properly classified as exempt from the FLSA’s overtime requirements, holding that material issues of fact remained regarding the primary duties of the SSS position and the level of discretion Plaintiffs utilized in performing those duties. The court did, however, grant summary judgment in Entergy’s favor on two other significant issues related to the calculation of potential overtime damages.

The court first held that, if the Plaintiffs were able to prove their FLSA misclassification claims, overtime damages should be calculated on a half-time basis rather than a time and one-half basis for sixteen of the nineteen Plaintiffs. The court found the undisputed evidence showed that these Plaintiffs understood they would be paid a fixed weekly salary to work a fluctuating number of hours each week. Under those circumstances, the court held, the Plaintiffs’ weekly salary paid them for all straight time hours worked, including those hours over 40. As to the remaining three Plaintiffs, the court denied summary judgment on the fluctuating workweek, but questioned whether the three Plaintiffs would be able to meet their burden at trial.

The court also granted summary judgment in Entergy’s favor on the question of whether discretionary bonuses received by Plaintiffs while classified as exempt could be used to offset any overtime damages owed, should Plaintiffs’ succeed on their overtime claims. The court determined that the Plaintiffs would not have received the bonuses in question if they had been classified as non-exempt, as only certain exempt managers were entitled to receive the bonuses, and, further, that Louisiana state law would require Plaintiffs to return any bonus payments to which they were not entitled. Under those circumstances, the court held, permitting Plaintiffs to recover overtime damages and to retain the bonuses “would be inequitable at best” and would result in a “windfall” to the Plaintiffs.

Misclassification litigation continues to be a source of exposure for employers of all sizes, a reality unlikely to change as the Department of Labor gears up to issue its new rules regarding exempt status. Employers must analyze this source of risk, including not only their designation of employees as exempt but the facts applicable to potential remedies as discussed in Allen. Further, employers should take all practical measures to communicate to all employees classified as salaried exempt that their salary is intended to cover all hours worked.