FARGO — A recent lawsuit against a newly opened restaurant is shedding light on a pervasive and costly issue in the local workforce: the misclassification of employees and the denial of overtime pay.
A former worker at Taste of Philly, a cheesesteak restaurant located on 13th Avenue, has taken legal action against his former employer. The employee alleges he was wrongly classified as a salaried, overtime-exempt worker, resulting in more than 1,000 hours of unpaid overtime. Despite his salaried classification, the lawsuit claims the employee’s actual daily responsibilities consisted of non-exempt, hourly tasks, including food preparation, operating the cash register, cleaning, and managing inventory.
While the Taste of Philly case is currently making headlines, labor law experts warn that the underlying issue is incredibly common.
Michelle Komer, from High Road Partners, discussed the frequency of these labor violations with Steve Hallstrom on Tuesday. According to Komer, a staggering 85% of employers have at least one misclassified employee within their ranks.
The Fair Labor Standards Act and Common Misconceptions
The regulations governing overtime pay are rooted in the Fair Labor Standards Act (FLSA), which was passed in 1938. The foundational rule of the FLSA is straightforward: employees who work more than 40 hours in a single workweek must be paid overtime.
However, Komer noted that widespread misconceptions frequently lead to unintentional violations.
“A common misconception is that if you have a salaried employee, they are automatically ineligible for overtime,” Komer explained, emphasizing that earning a salary is only one part of the legal equation.
Another common error is assuming that high earners are automatically exempt from overtime. While a minimum salary threshold is required—the Trump administration recently updated this baseline to $35,568 per year, following a previous Obama-era proposal that was blocked in district court—salary alone does not dictate exemption status.
The “White-Collar” Exemptions
To legally deny an employee overtime pay, the specific, day-to-day duties of the worker must be analyzed. The FLSA outlines specific “white-collar” exemptions, which generally fall into four categories: executive, administrative, professional, and computer employees.
According to Komer, the “administrative” exemption is the most misunderstood and misapplied category. Employers frequently misclassify administrative assistants or office workers under this label, but the law requires that the employee exercise independent judgment and make decisions on significant business matters to truly qualify as exempt.
Protecting Workers and Businesses
To avoid being caught in an overtime dispute, Komer offers straightforward advice to both sides of the employment table.
Workers should be proactive and ask about their classification—specifically whether a role is exempt or non-exempt—from the moment they say yes to a job during the hiring process. Employees who are currently working and unsure of their status should ask their employers for clarification.
For business owners, the directive is equally clear: companies must conduct a rigorous, position-by-position analysis to determine if the actual duties of a job meet the strict federal and state guidelines for an exemption. Failing to do so could result in costly lawsuits, just like the one currently facing Taste of Philly.