Creative "Duties Test"

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Creative Duties Test

Repercussions for failing to abide by the FLSA law when classifying employees as exempt include lawsuits, having to compensate the worker for unpaid hours, liquidated damages, fines, and payments of required amounts that should have been withheld or paid on the employees’ behalf, among others. Complete details about the findings are presented below.

Creative Duties Overview

  • To qualify as exempt under creative professional exemptions, an employee must earn more than $455 per week or $23,660 annually and perform work that requires “invention, imagination, originality or talent” in a recognized field of artistic or creative endeavor.
  • Under the rules of this exemption, a professional should have to incorporate some element of individuality and originality to their work. For instance, if the job has enough preexisting limitations placed by the employer that two professionals would end up with a very similar final result, these employees may not qualify for the exemption.
  • As one example, in 2015, a Georgia court determined that male exotic dancers could not be classified as exempt since their primary duties did not require sufficient creativity, as the club manager testified that the dancers did not need original dance moves.
  • Journalists may or may not qualify for exemption, depending on their primary duties as the creative professional exemption depends on “how much invention, imagination, originality or talent is actually exercised by the employee”, meaning that a reporter whose work is subjected to substantial control by the employer or who is writing standard recounts by gathering facts, without contributing with a unique interpretation or analysis, is not exempt as a creative professional.
  • Meanwhile, a journalist that writes an editorial, opinion columns, acts as a narrator or commentator, or performs on-air in radio, television, etc., may qualify as a creative professional. As the DOL explains, “The less creativity and originality involved in their efforts and the more control exercised by the employer, the less likely journalists are to be considered exempt.”

Repercussions of Misclassifying Employees

  • When a worker believes they’ve been misclassified, they can file a complaint with their employers, file a complaint in their state's Department of Labor (DOL), the federal DOL, or sue the employer. Employers are forbidden, by law, to fire employees for contesting their classification.
  • If sued, penalties are usually compensation for the unpaid hours (one and one-half hourly pay) going as back as three years of the date of the claim and, if found to be acting in bad faith, liquidated damages. (S1, corroborated by S13) Liquidated damages may vary according to the State, but under the FLSA it is calculated at double the back pay owed to the employee.
  • Employees who willfully and/or repeatedly misclassify employees are subject to up to $1,000 in civil penalties for each violation and may be criminally prosecuted as well.
  • Non-complying employers may also be required to pay amounts that should have been withheld or paid on the employees’ behalf, such as taxes, FICA, FUTA, benefit contributions or the value of lost benefits, plus penalties, interests and other damages. Other penalties may vary according to State laws. For instance, in California, the criteria for exempt employees are similar to those in the FLSA, but the punishments for non-compliance are more onerous than the federal law, like back-wages recoverable for violations under state law can go back a full four years and employers can lose the exemption for improperly making deductions from an exempt employee’s salary.
  • Employers who misclassified their employees in California may also have to pay damages for unpaid time, rest and meal breaks never provided, liquidated damages, interests, attorney’s fees, and court costs.
  • A misclassification claim can easily turn into a class action. In July 2017 alone, there were more than 200 class action complaints alleging overtime violations in federal courts across the country.
  • Staples was one company hit with class actions for misclassifying their employees as exempts under the title of General and Assistant Manager and in 2007, the company agreed to pay $38 million as a part of a settlement over the allegations in California and in 2015 the company was sued again.
  • In 2019, a class of current and former managers of Steak ‘n Shake were awarded 2.9 million in lost wages in Missouri in the Clendenen v. Steak N Shake Operations case for being wrongfully misclassified as administrative or executive employees, when their job duties were not administrative or managerial.
  • There is a new proposed rule to increase the salary from $455 per week to $679 per week, among other changes, relating to compensation and bonuses, that is anticipated to take effect on January 2020.

Example: Kadden v. VisuaLex, LLC

  • A New York court found that a graphic consultant could not be exempt from overtime, even though the DOL regulation cites “the graphic arts” as a recognized field of artistic or creative endeavor.
  • The court concluded that the professional duties were to convey “information about a case in an informative, easily understandable way, to triers of fact” and not to "originate stories from scratch, or produce complex analyses of or transform the facts she was given;" therefore the primary duties of the consultant were not creative, even if the professional had the job title and the salary requirements.

  • Kadden was employed by VisuaLex as a Litigation Graphic Consultant; she had a Bachelor of Science and a Juris Doctor. VisuaLex provides graphics and trial support services to law firms in large litigation.
  • VisuaLex’s job description for graphic consultants listed primary responsibilities: “read case materials and identify key case concepts”, “collaborated with our team of designers and animators to execute high quality, error-free graphics”, “schedule trial technicians and courtroom equipment” and "project management and client interaction."
  • VisuaLex usually worked with two consultants, a lead and a backup. The lead was responsible for dealing with clients. Kadden was the lead on a few cases, however, when that happened, every email was copied to a senior employee. Meanwhile, whenever she was the backup consultant, she was generally not included in the emails. Kadden also pointed out that she was usually not the person in charge of the strategy for the cases.
  • When VisuaLex got a case, the consultants would read the background materials (pleadings, depositions, etc.), identity the information that needed visual aid and come up with creative and strategic ways to depict the information, creating the visual framework to help the trial team. The consultant would then meet with the client and the art director to explain the concept.
  • Kadden testified that, even though she created new graphics for the cases, they were not necessarily her concept and she was generally not involved in meetings with clients or the briefing with the art director. She also said that the backup consultant would receive the exhibit after it went through the art director (that reviewed the aesthetic standpoint) and the production coordinator (that ensure that there were no mistakes). At this point, the consultant would review and write in any changes and send it to the lead, who would then decide if the changes would be made.
  • Kadden also testified that her principal job was to proofread revisions, write up small revisions based on phone calls or emails and explain revisions to the designers. Her contact with the client was only in connection with revisions.
  • The judge made it clear in their statement that the employer bears the burden of proving that employees are exempt and that a job title alone is insufficient to establish the exempt status of and employee. In this case, Kadden met the requirements for the salary (she made $75,000/year). The judge also mentioned that ordinarily, damages for unpaid overtime are calculated at the same rate of the hours paid to non-exempt employees or one and one-half times their hourly pay for all hours worked over forty in any given week; however, in some cases, courts have awarded only one-half times the regular rate in damages under the fluctuating workweek doctrine.
  • Under the FLSA, an employer who violates the overtime requirements is required to pay, besides the overtime compensation, an additional equal amount as liquidated damages, which are considered as compensation for the delay. If the employer establishes that the mistake was made in good faith and that they had reasonable grounds to believe the employee was exempt, the court may, in its discretion, award no liquidated damages or award any amount. However, double damages are the norm and single damages the exception.
  • Since this case was in New York, under the New York Labor Laws, employees denied overtime compensation may receive liquidated damages of 25% of the total amount of wages due.

  • Although the Supreme Court once stated that individuals earning “more than $70,000 per year are hardly the kind of employee that the FLSA was intended to protect”, the judge concluded that binding regulations made it clear that neither title nor a high salary is "dispositive of the exemption determination."
  • The judge noted that most of Kadden’s time was spent proofing and revising graphics that other people created, and in instances where she was creating, her job was dependent on intelligence, diligence, and accuracy rather than imagination or originality.
  • Furthermore, the judge used the journalists that were non-exempt since the “focus of their writing was to tell someone who wanted to know what happened in a quick and informative way” as an example of why Kadden’s work did not classify as exempt.
  • Finally, the court found that Kadden was not exempt, and VisuaLex was sentenced to compensate her at a rate of one and one-half times her hourly rate for all overtime hours. Interestingly, due to testimonies of VisuaLex employees stating that they believed that graphic consultants should be exempt, as it happens in other firms, no liquidated damages were warranted, as the judge considered the error to be made in good faith.

Research Strategy

To answer what are the repercussions for companies that fail to abide by the creative “duties test” for employee exemption, the research team scoured through several news articles, opinion pieces, legislation and court cases hoping to provide a robust and broad answer. We normally only use the most recent sources; however, in this case, with this law being in place without a lot of changes regarding what is classified as an exempt employee, when it comes to their primary duties for many years, we expanded our date scope to incorporate sources that provided more detailed examples but still corroborated it with more recent sources. Some examples included are for administrative exemptions because they all fall under the same rules as primary duties exemptions, and therefore have the same repercussion (there are differences between exempt and independent contractor though).

Another obstacle we encountered was the lack of state information. The consequences for employers are largely influenced by state laws, and with no particular state indicated, we provided a few state insights that should be a good start to understanding the concept generally. We also added a detailed case of an actual lawsuit of a company mistakenly classifying an employee in the creative exemption to illustrate the New York court’s view on the matter in a more practical way, since the judge goes into great lengths to explain the thought and grounds for which the decision was made, and showcases an actual repercussion of a failure to abide by the law.