Going from Exempt to NonExempt

carolynm_burgess · February 2004

I have an employee that we are about to change from exempt to nonexempt. As our company has changed so has her position to a point where she does not make any independent decisions. Can anyone give me guidance as to what I need to watch out for in this change (she is very sensitive about her position - I don't want to end up in court). I would appreciate knowing how anyone else has handled this situation. Thanks.

Hatchetman · February 2004

Under FLSA, the a position is to be non-exmept, unless the employer can justify the exmeption and wants to have the position exempt. Consequently, even if the position could be exempted, the3re is nothing "illegal" about the employer deeming the position as non-exempt.

In terms of the impact and possible problems, make sure that allo toehr positions that do the same job are treated int he same manner. If her duties have changed so that she would no longer be expt then other positions that do the same work need to be changed as well.

Make sure you wind up paying minimum wage rate.

And watch out for possible claims of sex or racial discrimination if other employees aren't switched (be prepared to show why such allegations aren't true).

And explain to the employee why the change is needed and the advantages over being exempt.

carolynm_burgess · February 2004

Thank you - She is the only one in her position - We are going to keep her at her current rate (just making it hourly). There are no worries about minimum wage in this situation.

How would one go about changing from salary to hourly in a correct manner? Naturally, though we aren't doing this in this case, you would drop the pay rate to account for overtime. Does anyone have any suggestions?

Alice1 · February 2004

How does an er change a exempt class to a nonexempt class without taking advantage of the ee?

As a nonexempt the advantage is the overtime when it happens. Where I am working...it seems the salaried employees are ofter on cell phones after hours with no increase in pay...and we have no perks except health insurance(and that is a good one)...but if you offer the exempt ee lots of perks that they would loose going down to the nonexempt class the hourly rate and the amount of overtime would have to compensate.

This is over the fact that going from exempt to nonexempt could be insulting to the ee.. and the employer is going to expect ee to continue to be responsible for their knowledge which ee may feel er doesnt deserve to get from a nonexempt.

CM_D · February 2004

It is actually a disadvantage to the employer to take someone from exempt to nonexempt if you leave all the benefits the same (because they can now earn overtime).

I have spoken to an attorney about this matter and have been instructed that I need to change this position from exempt to nonexempt due to the fact that it doesn't make any decisions that allow it to be exempt.

The employee has taken it very badly - but there is no way around it in order to comply with FLSA.

Rockie · February 2004

In a case like this, the employee often sees this as a "loss of status". Exempt employees often have more freedom of schedule and are not chained to punching a clock. A true exempt employee, more time than not, works over 40 hours in their workweek, but if they feel the need to - they are able to take an hour or two or an occasional afternoon off without being "docked". They are often able to schedule in appointments without being "docked".

I'd still go with what your attorney has said about changing her status. One thing you might want to be careful about. You might want to ascertain how long she has been misclassified and "make it right" by paying her any funds she might be entitled to in overtime. This could be a possible claim by her if she gets disgruntled to the point of quitting.

As others have said, the big advantage of being hourly is that you get paid overtime and that means you often make more money than you would have if you were exempt.

I'd not try to change her hourly rate. If she is full time, just divide out her annual rate by 2080 and don't try to figure out how much of her annual salary was contributable to overtime. This may keep her from being too upset. As with most things, employees tend to get over it after a week or so and may even see where it could be to their advantage.

Dutch2 · February 2004

A few years back we changed a few positions from exempt to non-exempt and we did the same as the last post. Divided their annual salary by 2080 and came up an hourly rate for them. It was amazing how a couple that were seldom working 40 hours a week while exempt suddenly were working 44 to 45 hours each week when they became hourly.
Over all the process went very smooth.
Good luck,
Dutch2

hrdir03nafcu · February 2004

As far as compensation, it is actually to the EE's advantage to be classified as NON-exempt... for the obvious reason that they're eligible for overtime. NAFCU makes no distinction between exempt and non-exempt as far as the EE Benefits provided, so there's no disadvantage in that area, in our organization anyway.

Of course there may be some blow to the ego for an EE going exempt-->non-exempt... but I would think the extra earning opportunities would more than make up for that over time.

I'm not sure how it looks in others' shops... but I could give myself an instant 20% - 25% pay raise by re-classifying myself as non-exempt!

As others have pointed out, there's no legal liability in classifying someone NON-exempt: it's the "exempt" classification that's subject to question, scrutiny, and legal action.

MS HR · February 2004

after you change her status, you may be liable for up to two years of back pay if she can document extra hours she worked that she wasn't paid for.

kjsnyder · February 2004

The backpay penalty is only assessed when the employee has been misclassified for that period of time. If the employee was truly exempt but has become nonexempt due to the restructuring, and the employer can prove this, then no backpay penalty would be assessed. Like the other postings have said, some employees may not like the change, but I'd rather deal with an unhappy employee than the DOL during an audit where an employee was misclassified.

Going from Exempt to NonExempt

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