“Family Offices,” which provide a wide range of support and services tailored to meet the needs of high net-worth individuals and families, are increasing in popularity. To support growing operations, Family Offices are hiring more workers, including executive and personal assistants, office administrative staff, personal drivers, and the like. Regardless of the position, Family Office workers face certain challenges, including:
- Long work hours
- Unpredictable scheduling
- Being on call 24/7
- Ever-changing job responsibilities
- Challenging office personalities and work policies
Based on the increasing demands made on Family Office workers, it is important that these workers understand their employment rights, especially when it comes to overtime wage issues.
This blog post will discuss some major issues faced by Family Office workers, including:
- Worker misclassification
- Unpaid overtime wages
- Unpaid wages for off-the-clock and on-call time
Misclassification: Employee v. Independent Contractor
At the outset, employers will “classify” new workers as employees or independent contractors. Under the Fair Labor Standards Act (“FLSA”), employees and independent contractors have different rights. For example, under the FLSA, an employee is generally entitled to at least the minimum wage for all time worked and overtime pay for time worked in excess of 40 hours per week unless the employee qualifies as an “exempt” employee. Conversely, an independent contractor has no right to minimum wage or to receive overtime pay under the FLSA. An employer’s misclassification of an employee as an independent contractor is a serious issue, as it often deprives an employee from receiving all wages owed for hours worked, among other issues. But Family Office employees face another, increasingly common issue – being classified as an “exempt” employee.
Misclassification: Exempt v. Nonexempt and Unpaid Overtime Wages
Under the FLSA, employers classify employees as “exempt” or “nonexempt.” Nonexempt employees are entitled to overtime wages, where exempt employees are not. Whether an employee is “exempt” or “nonexempt” depends on:
- How much they are paid
- How they are paid (salary or hourly)
- What kind of work they do
While there are specific exemptions for certain kinds of work (e.g., executive and professional exemptions), most employees covered by the FLSA are nonexempt employees and thus entitled to overtime pay regardless of how their employer has classified them. For Family Office employees, an employer may classify the employee as an exempt employee and pay the employee a generous salary, as opposed to an hourly wage. However, this does not mean the employee is “exempt” under the FLSA.
Family Offices often misclassify office employees, such as personal or executive assistants, as exempt employees and therefore do not pay overtime that is owed. However, most office employees do not perform “exempt” work, regardless of how and how much they are paid. Further, job titles or position descriptions do not determine whether an employee is exempt or nonexempt under the FLSA. It is the employee’s actual job tasks that must be evaluated, along with how those tasks fit into an employer’s overall operations.
For example, a Family Office classifies a salaried “executive assistant” as an exempt employee. However, the executive assistant performs only clerical office work, such as filing, filling out forms, preparing routine office reports, answering telephones, ordering supplies, and making travel arrangements. The executive assistant is not performing exempt tasks under the FLSA and, thus, is a nonexempt employee entitled to overtime wages for hours worked in excess of 40 hours per week.
Another related issue facing Family Office employees is working “off-the-clock” hours. Under the FLSA, employers must maintain time and pay records for nonexempt employees, including hours worked each day and total hours worked each week. However, employers are not required to maintain daily and weekly work hour records for exempt employees.
In a Family Office, the issue often arises when a salaried nonexempt employee is misclassified as an exempt employee, and the employer does not keep the employee’s daily or weekly hours worked records. The employee may work more than 40 hours per week by coming into work early or staying late, or even waiting for work if the boss requires the employee to wait. But there is no record of the actual time the employee worked. This often results in Family Office employees not being paid the wages they are owed, including overtime hours beyond the 40-hour workweek.
Family Office employees also find that they are often “on call” or on “standby” when it comes to their job. While exempt employees are not entitled to additional pay for being on-call, nonexempt employees may be entitled to additional wages. Under the FLSA, whether a nonexempt employee must be paid for on-call time depends on whether they are “waiting to be engaged” or are “engaged to wait.” “Waiting to be engaged” means that the employee is not on duty, may use their time freely, and is not performing a specific work task. However, “engaged to wait” means that the employee is required to stay at the workplace or is so near to the workplace that they cannot use their time freely. In the “engaged to wait” case, the employee is entitled to be paid for this time, including overtime pay.
Determining whether a Family Office employee’s on-call time is compensable can be tricky and must be analyzed based on the employee’s specific circumstances.
Family Offices are not immune to harassment, including sexual harassment, in the workplace. In any workplace, all employees are entitled to perform their jobs free from unwanted harassment, sexual advances, and offensive and unwelcome conduct. Unfortunately, sexual harassment is becoming increasingly common in Family Offices. Sexual harassment may occur in a variety of circumstances, including harassment from an employee’s supervisor or outside vendor based on the employee’s sex. In cases of unlawful sexual harassment, or any unlawful harassment, the victim employee has the right to assert a claim against their employer for the unlawful conduct and may be entitled to damages for the unlawful conduct.