Too many employers make one key common mistake when deciding which employee to classify as exempt: They think calling a worker a “manager” or “executive” in the title is all it takes. Not true.
What matters is the actual day-to-day duties the worker performs. Classify an employee incorrectly, and you could face tens of thousands of dollars in unpaid overtime and penalties. Make the same mistake for a whole group and the cost explodes.
The better approach is to create and regularly update accurate job descriptions, using the Fair Labor Standards Act () rules.
For example, make sure that anyone you classify under the exempt executive category actually meets the requirement that she is paid at least $455 a week, has the primary duty of, regularly directed the work of two or more employees and has the authority to hire or fire other employees (or whose suggestions on hirings, firings and promotions are given particular weight). Then list examples of each task that the employee is expected to perform.
Recent case: Ruth was listed as a sales manager and a “key management employee.” After she quit, she sued for overtime, arguing she should have been classified as nonexempt. At trial, she testified about her day-to-day activities, which consisted of answering calls, filing, handling customer complaints and making limited sales calls. She denied supervising anyone or having input to hiring or firing.
The court sided with Ruth, concluding she was owed overtime for any hours worked over 40 per week. It then calculated those extra hours based on Ruth’s calendar notes. (Ramin Corporation v. Wills, et al., No. 09-14-00168, Court of Appeals of Texas, 2015)
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Does your organization use volunteers or interns? Know the employment law implications
- No excuse for tardiness? No unemployment, either
- Levies and garnishments: Tough questions
- One way to avoid unemployment liability: Offer time off for medical problems