When a new position is created, HR typically makes a snap decision on a vital issue: whether or not the new employee is eligible for time-and-a-half overtime pay.
In many cases, that’s the last time the exempt-versus-nonexempt decision is ever reviewed for that employee.
Employee responsibilities can change over time. An exempt “assistant manager” can find himself doing the same duties as nonexempt rank-and-file workers. He’ll ask himself (and his lawyer) why he can’t earn overtime, too.
Get control of the FLSA with Exempt or Nonexempt? How to Make the Call and Avoid FLSA Overtime Lawsuits!If you haven’t done so already, audit your employee classification by following these four steps:
1. Collect job descriptions. Begin by looking at how you’ve classified each employee. Pull job descriptions (you do have them, right?) and review them for accuracy.
Do the descriptions match reality? That is, do they detail not just the job duties the employee is supposed to perform, but the ones he or she actually performs? Your best bet is to have each employee acknowledge that the job description accurately represents the actual job he or she is performing.
2. List exempt and hourly positions. Now that you have accurate job descriptions, make a list of those you currently list as exempt. Those are the most important, since there are no negative legal consequences to wrongly classifying someone as an hourly, nonexempt worker.
Does your list specify which exemption your organization believes the position fits into (see list in step 4)? Now it’s time to double-check that the exemption is the correct one.
Exempt or Nonexempt? How to Make the Call outlines ... the 5 exemption categories ... 10 common employer mistakes ... 6 compliance tips ... plus a self-audit for your company. Get your copy now...
3. Consider the salary test. Most exemptions require that the employee be paid on a salary basis. That salary must be at least $455 per week ($23,660 a year) and—with some exceptions—must be paid whether the employee works the entire week or only part of the week. (Outside-sales employees and highly compensated employees—those earning $100,000 plus—operate under slightly different rules.)
4. Consider the duties test. Once you have met the salary test, look at the duties test and make sure exempt employees fit clearly into one (or more) of the following classifications:
- Executive: Primary duty is to manage the enterprise or a subdivision and direct the work of two or more employees. Has the authority to hire or fire, or has great influence in those types of decisions.
- Administrative: Primary duty is to perform office or nonmanual work relating to the management or general business operations of the employer or its customers and exercises discretion and independent judgment.
- Learned professional: The employee performs work with advanced knowledge, usually of an intellectual nature, exercises discretion and judgment, and has advanced knowledge in science or learning customarily acquired by a prolonged course of specialized instruction.
- Creative professional: Primary duty requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor and works in a field such as music, writing, acting or the graphic arts.
As you can see, the definitions are complex. To make a more complete analysis of each worker, order our best-selling report on the subject — Exempt or Nonexempt? How to Make the Call and Avoid FLSA Overtime Lawsuits!