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Case Study 1: An Ethical Dilemma

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Case Study 1: An Ethical Dilemma

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

  1. Review the background leading up to the passage of the new overtime rule, as well as the FLSA guidelines for exempt and nonexempt employees.
  2. What criteria should Samantha use in making her decision?
  3. Make a proposal to Samantha about how to handle this situation.
  4. Since the new rule requires that the threshold be increased every three years, what advice would you give Samantha to help her plan for these changes?

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