Entry-Level Manager Sues Amazon for Misclassification

Oakland, CAArguments in Michael Ortiz v. Amazon.com LLC opened in the Northern District of California on June 21, nearly five years after the California wage and hour lawsuit was initially filed. Much has already happened; the court has stripped out claims under the federal Fair Labor Standards Act (FLSA) and denied the plaintiffs’ request to proceed as a class action lawsuit.

Nonetheless, the central contention of the lawsuit remains – that Amazon misclassified lower-level managers as exempt from the protections of the California Labor Code, thus depriving them of overtime, and meal and rest breaks and other legal safeguards to which they were entitled.

Ultimately, the question of whether Mr. Ortiz was improperly classified as an exempt employer is extremely fact-specific. In the meantime, however, entry-level managers, who not paid overtime should be aware of the criteria for exemption from the law.

Manager in name only?

Michael Ortiz had a Bachelor’s degree from Berkeley and had taken his CPA exam when he went to work for Amazon. He anticipated that he would have the opportunity to use his skills and training in a supervisory role, which was how the Level 4 Manager position, into which he was hired, was described. Instead, he found himself spending the bulk of his time doing heavy manual labor, just as hourly associates did.

He alleges that his work included:

• loading and offloading trucks;
• staging and moving pallets;
• cutting open boxes;
• staging conveyance systems and computers;
• unloading, receiving, sorting and scanning packages including hazardous packages; and
• various cleaning tasks.

He supervised a staff on the night shift of 80 to 100 workers, but was not allowed to discipline or coach associates unless it was over a safety issue. Associates were hired by a staffing agency and trained by others. He was not able to call in additional workers during shifts that were short-staffed.

He alleges that he frequently worked more than 8 hours per day and 40 hours per week, but did not receive overtime pay. He was not offered rest breaks, or paid the statutory penalty due to non-exempt workers who have no opportunity for meal and rest breaks.

Who is entitled to overtime and meal and rest breaks in California?

The California Labor Code, like the FLSA, draws a distinction between non-exempt workers who are entitled to these protections, and exempt workers who are not. In California, employees are presumed to be non-exempt, unless an employer can show otherwise.

Exempt workers, who may be better paid, are not entitled to overtime or meal and rest breaks under California law. In theory, at least, they are able to negotiate about their conditions of employment or look for other employment. There is scant evidence to support this theory, however, for those who are not exceptionally well-paid executives in a position to negotiate their own contracts.
Non-exempt workers are guaranteed these protections to prevent workplace exploitation.

Who is an exempt employee in California?

Under the California Labor Code, certain groups of workers are classified as exempt. The largest category includes executive, administrative, and professional employees. Level 4 Managers at Amazon would, at least on the basis of job title, appear to qualify as exempt employees. The critical issue is not title, however, but actual job duties.

In California, to be exempt, employees must:

• earn a salary equivalent to at least twice the state minimum wage for full-time work (based on a 40-hour workweek);
• dedicate more than half of their work time to managerial duties; and
• regularly and customarily exercise discretion and independent judgment on the job.

To qualify specifically as an executive, employees must also manage a team or department, supervise two or more employees, and have the authority to hire, fire and discipline. So-called “managers” who do not have this type of authority are non-exempt, even if they are paid on a salaried basis.

Whether Mr. Ortiz was properly classified as an executive, outside the safety net of California Labor law, seems to depend on the latter two factors. The facts introduced at trial will be critical.

A cautionary note for lower-level managers in California

In some circumstances, employers may arguably have a financial incentive to misclassify employees as exempt in order to avoid their overtime and other wage and hour obligations under California law. The burden of policing compliance with the law falls first on employees. As an aid to employees, some experts have suggested that workers, especially entry-level managers, watch for certain “red flags”:

• Some employers think that as long as the employee is paid a salary that meets the minimum requirement, the employee can be classified as exempt. Being paid on a salaried basis is not enough. To be classified as exempt, the employee must satisfy both the salary and duties tests.
• It does not matter what the job title is. Job title is irrelevant.
• None of the exemptions apply to manual laborers or employees who primarily perform work involving repetitive operations with their hands, physical skill, and energy.
• Deductions from an exempt employee's salary are permitted only in a few limited circumstances. If the cost of your uniform or safety gear is deducted from your paycheck, you should inquire further.

Employees should be alert for these and other indicators that they may be misclassified.