Salaried Non-Exempt

Christine M · February 2002

In a conversation with a friend who is a director at her company, several formerly exempt jobs have been reclassified as salaried non-exempt. She stated that according to their wage lawyer, salaried non-exempt status is used for jobs which are subject to the FLSA, i.e., non-exempt positions. Under this classification, you must pay the employee their salary (ostensibly for 40 hours, regardless of the number of hours worked less than 40), and in return for the guaranteed salary, they are only entitled to half-time (not time and one-half) for hours over 40 (overtime level designated by Massachusetts and federal law).

I am extremely skeptical of this information as it flies in the face of my understanding of the FLSA. When I indicated this to my friend, she asked if I would check into it further. Has anyone else ever heard of this?

Gillian · February 2002

No, doesn't make sense to me either. Unless there is something out there about which that we are both brain dead, salaried non-exempt is nothing more than a payroll practice which changes nothing other than to require that if an employee works over 40 hours per week that the equivalent hourly rate is calculated for purposes of overtime.

Susan Fentin MA · February 2002

Christine, your friend is right. Salaried, non-exempt employees are entitled to overtime for every hour worked over 40 in a given work week. They are entitled to time and a half, calculated according to their "regular rate", unless the employer has made a separate agreement. However, since they are already receiving a fixed salary rate for the number of hours that they work (salary) they are considered to already be receiving the "time" part of the time and a half. So they receive only half of their regular rate for each hour worked over 40 in a given workweek, added to their regular salary. In addition, to calculate their "regular rate" you divide the salary by the number of hours actually worked. So if the employee earned $200.00 per week, and worked an extra 5 hours, you would divide 200 by 5 and get $4.44, which would then be her regular rate of pay for that week. Half of $4.44 is $2.22 (this is higher mathematics!) She then gets her regular salary of $200.00 per week plus 5 hours of overtime pay at $2.22 equalling $11.10 for a total of $211.00. I know this is confusing and that it doesn't sound logical, but it is the way this is calculated. Indeed, I think this was confirmed in a recent decision of the Massachusetts Supreme Judicial Court. You can, of course, compensate her differently, by giving her the standard calculation of "time and a half" for her five hours which would be $7.50 an hour for 5 hours, but that's more than the law requires. Remember too that you cannot dock her pay for hours less than 40 except under certain limited circumstances. Good luck and give me a call if I can be of further assistance!

Susan Fentin, Skoler Abbott & Presser, (413) 737-4753 [email]sfentin@skoler-abbott.com[/email]

TheCol · February 2002

[font size="1" color="#FF0000"]LAST EDITED ON 02-10-02 AT 02:57PM (CST)[/font][p]See Above. I'm sure she meant that the hours were divided by 45, not ""5" for the effective hourly rate. Now. FLSA at the graduate level!: Is the contract for "$400 a week?(Case #1)". Or, "$400 for a 40-hour week? (Case #2)" Not the same. Absent a specific agreement, it is assumed the it is "a week (Case #1)". Therefore, salaried, non-exempt get $400 for showing up one day that week and are entitled to overtime calculated as above for more than 40 hours. However, if the contract is for $400 salary for a 40-hour week (still Non-Exempt, of course) then they have an effective hourly rate of $10.00 per hour for less than 40 hours, and straight time and a half for hours over 40 the multliplier being the effective hourly rate for that week times 1.5. Sooo, John works 50 hours a given week. Case #1, Pay = $400 + (10x$8x0.5)= $440.00. Case #2; Pay = $400 + 10($8. x 1.5) = $520.00
Uh-oh. Afterthought. The math previous is correct but watch out for any resultant which produces less than $5.15 per hour minimum wage. Adjust accordingly.

Rockie · February 2002

Is this state specific or is this a FLSA reg?

TheCol · February 2002

good morning.

FLSA rule, Florida hasn't altered it to my knowledge.

Dottie · February 2002

This is the first I have heard of this application. We currently operate in four Midwest states -- Kentucky, Ohio, Indiana and Illinois. Is anyone aware of any state laws that would preclude this?

Marie · February 2002

In my dealings with DOL over this issue, it was explained to me that if the salary is intended to cover all hours worked, you have to show that the employee clearly understood the arrangement. We put it in writing. Then you only pay half time for the hours in excess of 40. If the salary is intended to cover up to 40 hours of work, then you pay the full amount regardless of actual hours worked. If the salary is intended to cover 40 hours and they work less than the 40 hours, you can deduct the hours not worked from their pay. (This is just another way of saying they are hourly employees. I worked for a bank that paid everyone a salary and the non-exempt employees had their pay adjusted in the following pay period of any deductions or OT due.)

TheCol · February 2002

Marie has it right on the money. Salary for "a week's work" involves full weekly payment for even one hour in that week. What caught my eye was her former bank that paid overtime from this calculation "in the following pay period." Can maybe get away with this but technically OT must be paid in the week it was earned or that same pay period. What gets the trouble here is someone who works 32 hours one week and 48 hours for the second week of the pay period. Overtime is owed in this instance.

Did you hear the story about the retail inside sales clerk whose effective hourly rate is more than $7.73 per hour in a work week and whose gross pay is more than 50% from sales commissions? No overtime is owed.

wire manufacturer · February 2002

So according to this the overtime must be paid in the time period worked. I worked for a CPA firm (should know the law) that also took deductions or added OT to the next pay check. Now I think I am really confused.

Margaret Morford · February 2002

Remember, nothing is illegal until it's reported to the government.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Marie · February 2002

At the bank, each week stood alone. If overtime was due, they got it. I remember reading (just can't put my hands on it right now) that this is acceptable under FLSA.

Don D · March 2002

Years ago, my former employer discovered the loophole that allowed payment of only half time for the additional hours worked over 40, with the salaried non-exempt people. Not only was it confusing to the payroll department, but the real downside of it was the ill will it created and the morale factor when the workers realized they were getting what they considered to be a 'screwing'. The guaranteed salary is inexorably connected to the rest of the FLSA paragraph that says, "....the same guaranteed rate for hours worked, WHETHER MANY OR FEW."

paulap · March 2002

I too have my head swimming every time I try to decipher the Salary Exempt vs. salary non-exempt status. I do believe the statement that if you have an employee classified as SNE, you are only obligated to pay them 1/2 time for hours worked over 40. (Just need to address the issue as positive as possible so they don't feel that moving them from hourly to SNE is a punishment).

My issue comes in to play when SNE employees have exhausted their PTO. I placed a call to the local DOL Director and was told that we can change our practice of allowing SNE's to go in the hole and docking them for time off by putting together a memo notifying them of the change. We are an Arizona based firm. Has anyone else made changes to their SNE and PTO.

Salaried Non-Exempt

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