HR 4.docx - Case Study 1 Case Study 1 An Ethical Dilemma Her Majesty is a five-year-old up-and-coming designer clothing chain in the Midwest catering to

HR 4.docx - Case Study 1 Case Study 1 An Ethical Dilemma...

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Case Study 1 Case Study 1: An Ethical Dilemma? Her Majesty is a five-year-old, up-and-coming designer clothing chain in the Midwest catering to professional women. Samantha Santorina owns the chain and has five stores in three major metropolitan areas. Samantha takes pride in treating her employees well. She provides above minimum wage salary for all of her nonexempt employees, provides health insurance at low cost, and provides tuition reimbursement for all of her employees who pass classes they take toward a degree at their local community college. Samantha has one manager and two associate managers in each store. She has paid her managers more than the market rate in the areas where her stores are located since opening. Even so, the new FLSA rule for classifying employees who make below the $47,476 threshold as nonexempt rather than exempt is causing her some distress. Her managers currently make between $40,000 and $45,000 per year, depending on time in the job and performance. After meeting with her accountant, Samantha has to make a tough decision. She has to decide between two choices: (1) hire another associate manager for each store to avoid having to pay overtime to her current managers, or (2) pay overtime to her current managers who each regularly work 50 hours a week and reduce some of the other benefits she provides to all employees. Questions Review the background leading up to the passage of the new overtime rule, as well as the FLSA guidelines for exempt and nonexempt employees.
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The FLSA, which stands for the Fair Labor Standards Act was created to govern what companies can and cannot do when it comes to an employee’s compensation. Under the FLSA guidelines an exempt employee does not receive overtime pay even if the employee works over 40 hours per week and a nonexempt employee is someone who will receive overtime pay when the employee works over 40 hours per week. Now, in May of 2016, the Department of Labor made updates, which includes workers that earn less than $47, 476 annually will not be classified as exempt employees. Many employers, such as Samantha, need to reclassify the positions and make financial decisions. Those employees that were working over 40 hours per week and not receiving over time will now be entitled to receive overtime with “the rate of 1.5 times their regular pay for that additional time (Lepak D., & Gowan M. 2016, page 399).” This update did include an option with using incentives “to cover up to 10% of the new standard salary level (Lepak D., & Gowan M. 2016, page 399).” What criteria should Samantha use in making her decision?
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  • Spring '11
  • KennethBernies
  • Chief Executive Officer, Samantha Santorina

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