Salaried Non-Exempt

gregoryscott · April 2005

From the perspective of an otherwise non-exempt employee, I understand the advantage of being classified as salaried non-exempt: the employee can have his/her cake and eat it too (i.e. guaranteed mininum salary plus 1.5 overtime).

What I'm not clear on is why this would be in the employer's interest to grant this status. Please enlighten. Thanks!

marc · April 2005

Ease of processing and a less rigid timekeeping requirement.

Ease of processing - you can process the basic check faster and adjust for any missed OT in the following check. This can allow less time between the end of a pay period and the actual payment to the EEs.

Less rigid timekeeping - basically you process OT as an exception, but be careful. If the EE keeps better records than you do and challenges your OT calculations, her records will prevail in the dispute - so be careful with this one.

Others may have more reasons, but this is a start.

crawfod · April 2005

Employers who offer salaried overtime arrangements can gain by the employee's feelings of status or prestige and the trust that they will do their job with less monitoring because they are professionals. Plus the culture of such arrangements is that the employee will not normally be a clock watcher but rather is dedicated to the accomplishments of their tasks. If that means staying an extra half hour to finish the project in exchange for a longer lunch or leaving early some day, then the employee did so with no expectation of overtime compensation or even comp time. Employer wins.

When I was in my early career days in this status, it was understood that I would work more than 40 hours at times but that I would also not be penalized for doctor's appointments or other time off. I also understood that to be paid overtime dollars would generally only be for special required situations, maybe a Saturday meeting. I bought into the teamwork, cost savings to my employer, and future career rewards such an arrangement could provide. Employer wins.

Where the problems could arise would be when either side abused this understanding. The socializing, long break, slow working employee who then requests overtime pay angers management, just as management angers the employee by expecting 40-45 hours per week and then not only does not offer overtime pay, but also is even resistant to the "trade-off time". Both lose. Remember too if the proof is clear the employee worked the extra hours, that "non-exempt" status will win the money for the employee, regardless of any "cultural workplace understanding".

Don D · April 2005

[font size="1" color="#FF0000"]LAST EDITED ON 04-07-05 AT 07:59AM (CST)[/font][br][br]It is also not (necessarily) true that the salaried, non-exempt employee will be paid time and a half for overtime. There is always the option of only paying an additional half-time for those hours in excess of 40.

Shadowfax · April 2005

Of course Don and Crawford are right, but I seriously question the validity of the emp/ers position with Crawford, and suggest it only works when the ee 'buys in' to the approach as Crawford did. To be done properly, and as Don suggests, there must ba a clear understanding, in writng, of the number of hours for which the 'salary' is intended to compensate so one may calculate the the 'base rate' from which to calculate the appropriate o/t rate. I have always thought the sliperiness of this slope to be not worth the risk, and when you do get into o/t, I think the time spent calculating the legal comp is excessive. Granted, the DOL has some published co-efficient tables, but I have never been comfortable using them - maybe because I have not spent the requisite time to learn to use them effectively.

pork1 · April 2005

GREGORYSCOTT: We currently have two employees on this type of compensation package. We have two places where the daily work activities requires someone to service the facilities and the animals with food, water, and medication. They are isolated and work alone away from the other farms, the ees are very reliable, and trustworthy. Neither requires close supervison; we estimated that an average employee would get the work done in 55 hours a week. Fixed Salary for a fluctuating work week is the process we used. If the employee can finish the work in less than 55 hours a week then the ee has earned a built in reward. We are happy for the individual to complete the work early, as long as, all job task are accomplished for that day, we really do not care. If something happens in the situation and it took greater than 55 hours then we will owe the employee the additional O/t recorded over 55 hours. The two employees have been getting a super job done and at mid-year we will probably adjust the salary to get the same salary but get the work done in no less than 50 hours a week. 50 then becomes the thresh-hold amount afterwhich we might owe additional O/T.

The work is accomplished without supervision or concern for the cost. We are paying what the job is worth and not necessarily the time, although we still must monitor the time.

PORK

Don D · April 2005

PoRk: Maybe I misunderstand your post. Do I understand you to say that you do not pay overtime for all hours over 40 in a workweek with a salaried non-exempt employee? Paying a guaranteed salary doesn't absolve the employer of the responsibility for paying overtime in accordance with the FLSA. Maybe I didn't understand you.

Shadowfax · April 2005

That is exactly what I meant: 'fluctuating' and 'half-time' are real buggers to adminsiter properly. I read Pork as you do Don, and I see 778.114 as requiring o/t over 40, but perhaps at a half time rate. The problem is that the 'regular rate' changes every week depending on how many actual hours were worked, so the half time rate changes as well. So much for less rigid time keeping problems. If one wants to go through all the calcs, more power to them, but there are other pitfalls awaiting in this process too (ie. emp/ee works exceedingly long hours causing his 'regular rate' to fall below min wage). Not worth the greif to me!

TN HR · April 2005

I would strongly discourage everyone from employing practices such as those suggested by pOrK. Schemes such as these are in clear violation of the FLSA. There was an article on SHRM's web site today talking about these sorts of shenanigans.

BTW, the DOL collected $165M in back wages due to FLSA violations in 2004.

Gene

pork1 · April 2005

TN HR: You know sometimes you should step back from your barbs, read the material before you write your words which load up the gun and point it at yourself!. You words read very dumb to quote to me "778.114 of the FLSA". I will expect no less than a public apology for the above post and recommending that no one consider my words as factual and authorized. I was trained by an expert auditor out of the office of the Federal Wage and Hour Division on this very topic. Guess what not one single word has been changed and it is written for all to read. It is not difficult at all and it certainly motivates the employee to get the work done in lesser time.

May even your day be Blessed, why you "waddle in your shame" in attacking this ole hog man.

PORK

TN HR · April 2005

Puerco (I am honorably addressing you in the spanish version of Pork):

I did not quote anything about 778.114. You may want to reread the posts above mine and you will see it was someone else who quoted 778.114.

I simply stated the obvious. Anyone who has spent 30 minutes as an HR practitioner knows that what you described is a gross violation of the FLSA.

I am not interested in who trained you. It means absolutely zilch if he/she was an auditor or a golden juice extractor. The bottom line is that the scenario you posted violates the law and is specifically addressed in 867.5309.

Don't hold your breath on me waddling in any shame. I have a plane to catch to Monterey, CA. I will be sure to send you some of our fine product from the Salinas Valley. Do you fancy Romaine or are you more of an Iceberg guy?

Ciao,

Lechuga Man

Shadowfax · April 2005

To what reference is the 867.5309? Forgive me if I am just being stoopid, please!

Don D · April 2005

[font size="1" color="#FF0000"]LAST EDITED ON 04-14-05 AT 02:55PM (CST)[/font][br][br]Well, regardless of which of the available formulas and approaches to the extra half-time an employer chooses, there is nothing in the FLSA that would allow an employer to establish the amount of time the employer thinks the job will take in an average week and then pay overtime only for hours in excess of that figure.

Using that train of thought, I can come up with enough job content to establish that it will take 66 hours a week to accomplish the task. Then I will pay only overtime for hours over 66.

--------------------

But, back to the formula that I addressed earlier. Once the employer has arrived at the number of hours worked in the prior workweek and divided that number into the guaranteed weekly wage, the result is the hourly rate for that week. Then all the employer is legally required to pay is half that amount for hours over 40.

--------------------
It's not commonly practiced, but, if I guarantee you, a non-exempt employee, $450 a week and you have 45 hours on your time card for that week, I divide the latter into the former and your hourly rate is $10.00 per hour for that week. Then, according to our guarantee, I owe you $450 for straight time and an additional $5 per hour for the 5 hours over 40, for a total of $475.

The regs allow me to pay you one-half your hourly rate for each hour over 40, since I have already paid you $450 for your weekly work according to our agreement.

(edit) PoRk: Just how far over into Alabama IS that federal prison anyway? I think there's one at Montgomery that has liberal visitation policies and golfing privileges. Maybe that 'retained attorney' can slip you a file in a cake. x:-)

pork1 · April 2005

Don: The process is termed "Fixed salary for a Fluctuating work week". We took 55 hours and calculated the cost of 55 hours of work for any non-exempt employee with 15 hours of O/T. We then set up an agreement document with the employee that he will earn the salary single amount every week, regardless of the time worked less than 55 hours. Should he go over the 55 hours, then in that week, we would owe him the additional O/T not already calculated and agreed for payment.

Should the employee's effectiveness allow him to complete all work assigned in 45 hours he gets to keep the 10 hours of O/T already agreed to be paid and received by the individual.

This authorized system and very handy for those special one person jobs that will not reach the level of mental and physical activities to warrant an EXEMPT classification.

PORK

Don D · April 2005

PoRk, my friend; what can I say? You are in violation of federal law. Determining the relative average of time a job might take a normal person to perform is not at all what the 'fluctuating workweek' regulation is about. You do not gain a 'get out of overtime free card' by running the analysis you say you ran. I'll Fedex you a box of donuts and a twenty dollar bill if your Wage & Hour contact authorizes what you say you have done.

By the way, I read the article in the Business Journal on your company, including your quotes. Congratulations! Good article!

pork1 · April 2005

Thanks, I thought so too, there were very few errors with the actual words provided the journalist.

Don, in no way are we in violation of the overtime provisions, in fact we are doing better than the O/T provisions. Paramount to this system are the words in the rugulations: "Where there is a clear mutual understanding of the parties that the fixed salary is compensation for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period, such a salary arrangement is permitted by the Act if the amount of salary is sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage for every hour worked in those workweeks in which the number of hours he works is greatest, and if he receives extra compensation".

Our employees are salaried at greater than $455.00 per week and the written agreement clearily points out, that we do keep record of hours worked and as long as the employee does not go over the 55 hour pre-calculation he keeps all monies paid. If he goes over the 55 hours we pay the additional 1 1/2 multiplier for the additonal hour/s worked over 55. Their time cards reflect all hours worked. Our computer pays the designated total amount. We simply check to see that the ee has not worked over the agreed 55 hours.

It was the wage and hour division in our fair city that taught me the advantages of such a system and eliminated all of the administrative time keeping efforts and recalculations. The written agreement was provided by the auditor and I have continued to use that system of compensation ever since. It works for us and the effort on our part to get the necessary work accomplished in less time than written, is very helpful. It sure makes the employee happy. When the individual gets a base pay rate change the letter of agreement must be redone and signed and agreed. The employee has never clocked over the 55 hours and more times than not they are below 50. A good agreement for the employee and the employer.

PORK

Shadowfax · April 2005

My dearest Pork - It was I who quoted 778.114 and opined I read it as apparently Don did. Now that you have clarified your position, I remain confused, and skeptical. In your quote of .114, you left out the parens..the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek... On that basis I can see where you are coming from. However, part (b) goes on to say:...'whose overtime work is never in excess of 50 hours...and whose salary is paid with the understanding that it constitutes his compensation, except for overtime premiums, for whatever hours are worked in the workweek.' Then the example the regs works through appear to me to calculate o/t on hours over 40, not the hours conmtemplated as the greatest hours to work. Two questions come immediately to mind: What is your reaction to the "never in excess of 50, especially when your situation contemplates 55; and the example appears to me to pay half time for all hours over 40. You raise an interesting, and important point, but even though your DOL guy ok's it, I can't see the justification in the regs. HOw do we resolve this?

Don D · April 2005

PoRk: You went to great length to cite certain passages from the law while carefully overlooking or accidentally omitting others. Overtime is required to be paid (to non-exempts) in the United States for all hours worked over 40 in a workweek, regardless of what agreement you reach as to a guaranteed salary for a non-exempt. You have worked half the formula but ignored the bigger part of the formula which is the one that will get your employer fined by the government, that of not properly paying overtime. Arriving at a guaranteed salary is one thing. Paying the lawfully due and required overtime is another. One is not mandatory. The other is.

The 'gov'ment man' who helped you arrive at a guaranteed salary either told you half the formula or has probably been 'retired' by now. The other possibility is that you misunderstood him.

And, as you know, it matters not one whit how happy the employee is with the arrangement or how well it seems to be working out for everyone or how long it has been in place.

My offer of a dozen donuts and a crisp twenty still holds. Will you match that with a smoked ham?

pork1 · April 2005

Don & Shadowfax: First I believe that we are reading from interpretive Bulletin Part 778.

Ok, I could be wrong in some points, but I'm very clear that 778.114 (a)gives the employer the ability to develop a compensation plan which clearily lays out a process of paying overtime pre-calculated and understood by the employee and employer. The overtime is there in our plan up to 55 hours, once the individual clocks in greater than 55 we must be ready to pay not half time but 1 1/2 have time his basic rate which was use to calculate the agreed to salary over the minimum rate of pay.

The interpretative bulletin that I believe we are reading is just that "an interpretative bulletin". (b) is written and does apply to the interpretative example of a agreed to a plan, as an example for working hours up to 50. I was not instructed that we could never put a plan together that would exceed 50 hours. The first sentence to the (b) "The application of the PRINCIPLES above stated may be illustrated by the case".............and it goes on to lay out a plan for 50 hours. It could just as easy have laid out a plan for 55 hours.

We choose to not pay the half time but to pay the full 1 1/2 rate for all ours worked over 40. Our base is calculated from an established rate well beyond the minimum rate.

Keeping the employees happy and satisfied is the most sure way to keep good employees around for all sorts of reasons. We do give a hoot< and we do abide by the Federal Law.

Finally, as I have always maintained this forum is the greatest piece for learning. My trainer could very well have retired, but nothing has changed in this arena. I felt comfortable in her explanation for it was during an audit of our Information Systems and programming Department and she suggested this process in order to be within compliance of FLSA. All of the Information Systems programmers wanted to stay on salary and flexible with their time coming and going. We were slapped on the hand because we were paying them a salary as a computer science graduates; they were improperly classified long before I came on the scene. We took the auditor's suggestion and examples, we set up an agreement in writing with each of them and management. We paid them for the past wrongs began to pay them under the new agreements.

This is PORK and an agriculture operation, we are exempt from the Federal Law and State Laws (if there were any) for the farming operation; however, we choose to use the FLSA and the computer programs associated with other industries. Therefore, if my words and experiences help the reader of this post, then great. If it does not then go on past to the next postings.

I will do more research with the actual words of the law. If this procedure has been changed I will come back and let all know I AM WRONG OR I AM RIGHT. It will most likely not be on this thread.

It is so beautiful outside, I feel like getting my fishing pole and go sit by the lagoon and catch some "monster catfish".

PORK
PORK

Shadowfax · April 2005

I sure do like a mystery! We are agreed that 778.xxx is part of interpretive regs. But as I read the above, and looked further, I come away less sure of anything - and even more confused. 778.402 (and sections which follow), interpreting section 7(f) [the real culprit here] can be read to permit what you posit, so long as the payment over the work week max is 1.5 not .5. But then 402 puts a cap on 'salaried' hours of 60, not 50 as set out in .114. These regs also reference at .404 'statutory maximum hours...' (presumably 40) and at .402 (and .409 for that matter) reference 'maximum workweek'. I do not understand the difference (assuming there is one) between 'irregular' hours (.402) and 'flucuating' hours (.114). My guess is that your plan is based on the irregular hours provision of .402 and not flucuating hours of .114. The only distinction I can see is that under .402 the o/t is 1.5 and under .114 it can be .5. Finally, .411 seems to clearly imply you can do what you are doing, but, as I said, I am even more confused than ever. The best I can make of it is that under 402 the 'regular' rate remains fixed, while under .114 it must be calculated on hours worked - but it can't be that simple...can it?

Shadowfax · April 2005

Damn! I thought I posted some interesting questions regarding the interplay, or lack thereof between .114 and .402 the the sections that follow. Looks to me like .411 actually permits what you are doing, although I do not understand it. Nor do I understand the difference between 'fluctuating' hour and 'irregular' hours except that 'irregular ' hours are capped at 60 and flucuating at 50, and o/t paid at 1.5 instead of .5, and 'regular' rate seems not to habve to be calculated each week under the irregular provisions where it must under flucuating provisions. Looks like my long ago decision to avoid these 'slilppery slopes' was more intelligent than even I thought. If .411 applies to you Pork, then it appears you are under irregular not flucuating hours.

pork1 · April 2005

Don: Get the donuts on the way:

32b04b, of the FLSA is the paragraphs and subparagraphs that covers Irregular hours worked. You are absolutely right, however, What was missing to you guys was the base salary agreed to in our agreement. The base salary is set at 40 hours times a base rate of pay well over the minimum. From there, in our agreement, we set a given amount of cash that is added to the base rate and it is the figure that we put into our computer. The additional cash is the 1 1/2 times the rate for all hours over 40.

We could have done the words to fit the "Chinezee Overtime and .5", but for our employer purposes it is easier to understand and explain, if you set a base, based on a certain hourly rate of pay, then expertly decide how many hours and the cost we are willing to pay for the individual to get the work accomplished. Base salary amount plus 1 1/2 times for all hours over the 40 in our case up to 55 hours gives one a dollar amount to put into the payroll program to be payed out ever week regardless of all hours few or many up to our situation of 55 hours. Any hour over 55 is also to be paid at 1 1/2 hours, should that occur; it has not.

In that, we are doing better than the .5 required by the law there is no violation of the Federal Law FLSA.

Got run check the feed and water! I am sorry for the confusion and failure to clearly identify the base rate for 40 hours as the starting point.

PORK

Don D · April 2005

PoRk: Notwithstanding your prejudicial remark about Chinese people, you have further confused yourself by those last two diatribes. The exercise you went through to establish the weekly guaranteed salary for your non-exempts was smoke and mirrors, mumbo-jumbo and trickle-down pig-Latin. Nevertheless, an employer is free to come up with that figure however he chooses to arrive at it. And once it is agreed to, it is the guaranteed salary that is paid for hours worked, 'whether many or few', as stated in the law. Then you have, for the umpteenth time, the equation's other side, which is the federal requirement that overtime be paid. Overtime is due for hours worked over 40, period. Hope you catch a monster.

pork1 · April 2005

DON: I AM OUT OF HERE, TWO HARD HEADED OLD HRs stuck in their belief and experiences may be entertaining for some, but for others it may be a waste of time. Prejudical, I am not, if you had gone to the paragraphs to which I refered, you would have found these very words and term. A term that is often spoken of by "we HRs" that understand the system and the accountabilities. We also understand there are employees who are just as confused as you are about the ability within the Federal Law to comply and be safe with same.

PORK1

Don D · April 2005

I'm not at all confused PoRk. And if you will re-read the posts on this thread you will see at least two others (Gene and Shadow, both who know their stuff) who have told you repeatedly that you are incorrect in your application of the law. Shadowfax was, however, the most delicate and gentlemanly in his disagreement.

It's yours to lose. All I'm doing here is making sure others don't fall for your personal brand of malfeasance. Good day.

lnelson · April 2005

I am trying to follow all of the postings but I think I understand where Pork is coming from bear with me on this...

EXAMPLE: There is an agreement between ee & er to pay $750/wk for 55hrs of work. The rate is calculated at $12hr for 40 hrs & $18hr for 15hrs. If the ee works less than the 55 hrs he keeps his normal salary no deductions are made if ee works more than 55 hrs a week he is compensated 1 1/2 times reg rate or $18hr for each hour in excess of 55.

Would this process still be considered illegal under FLSA?

Pork,
Is this how it is being calculated?
Please clarify.

Shadowfax · April 2005

Thank you Lisa! How appropriate that one from Caleefourniaea would so succinctly put the equation. I don't know what reference Pork is making to 32b04b, but as I said in #21 or whereever those posts go when they're out in the ether, 778.411 seems to permit the calculation we now understand Pork to have made as 'irregular hours', providing you cap the calc at 60 and pay 1.5 for anything over the max hrs used in the calc. Of course there are a lot of other considerations one must make before making valid use of this section - but I have learned a new trick over the last couple of days. I think the utility of this provision is extremely limited and still loaded with potential disaster, but at least you don't have to recalculate 'base' or 'regular' on a weekly basis. Anyone looking to jump into this area had better carefully read .402 through .414, and pay particular attention to .406 which requires that BOTH o/t and regular hours be irregular. I guess that means there had better be some weeks where the ee works less than 40 or you will be in violation of the 'irregular' requirement and youu plan invalid and the co. subject to penalties and punitive damages. Of course this plan does require that all hours over 40 are paid at time and a half, it is just that the o/t rate is calculated into the regular or 'guarenteed' rate. This time the Hogman wasn't sellin hogwash! Thanks for the lesson Pork. Hope that catfish was scrumptious!

TN HR · April 2005

I have been carefully watching this thing unfold ever since El Puerco accused me of improperly quoting laws and pointing weapons at myself. I will lay the capstone on this thread by quoting a few of the posts and commenting on each.

First, I would like to say that the fixed salary for a fluctuating week does exist. However, there are several caveats to using such a compensation structure and is the stuff that separates a true senior-level HR professional from a loose cannon admin clerk.

For starters, it is a difficult and problematic system to use. Second, it has been challenged in several legal jurisdictions with mixed results.

There are several legal rulings which have repeatedly stressed the fact that in order for this arrangement to be considered legal then certain criteria have to be met. The fluctuation in hours worked must be caused by the particular duties of the individual employee and must be the direct and unavoidable result of the employee's duties. The general requirements of the employer's business may not be the cause of the fluctuation.

There are recordkeeping requirements that must be maintained in order to demonstrate the true fluctuation of regular hours both above and below 40 hours.

I cannot possibly imagine why or how anyone would try to justify two farm laborers, performing rather routine tasks such as administering food, water and medicine as meeting these requirements.

Last but not least, one must bear in mind that employing a provision simply because it is allowed by the FLSA does not make it legal when it can be clearly shown that it is being done solely and explicitly in an effort to circumvent and avoid paying regular overtime. Plain and simple!

Now, you're about to enter the no spin zone:

-Shadowfax: "'fluctuating' and 'half-time' are real buggers to administer properly"

Exactly! As HR professionals should we not follow our engineering counterparts and adopt Lean and Kaizen methodology to streamline our processes and improve efficiencies?

-Don

"PoRk: You went to great length to cite certain passages from the law while carefully overlooking or accidentally omitting others."

Shocking development? I don't think so! We've seen these convoluted misquotings regularly. El Puerco has a knack for only quoting the pieces that he thinks will support his argument. What he did on this thread is no different than his twisted mis-quoting of the I-9 handbook to support his preposterous belief that a Permanent Resident Card has to be re-verified at expiration (it does not).

-pOrK: "We could have done the words to fit the "Chinezee Overtime and .5"

Once again, another example of pOrK's insensitive and racially-charged comments.

-pOrK: "Prejudical, I am not, if you had gone to the paragraphs to which I refered, you would have found these very words and term"

Really?! Please, Pork, please show me where the term Chinese Overtime is used in any law or regulation. I also challenge you to explain to me how this term is any different than any other assorted terms which use a race, ethicity or nationality to portray a negative idea, thought or action.

-PoRk: "A term that is often spoken of by "we HRs" that understand the system and the accountabilities"

One of your best contradictory statements to date. Any HR who "understands the system and the accountabilities" would never use such a racist term.

May everyone have a blessed day today.

Gene

pork1 · April 2005

GENE: Everything, that you have written is well taken by all that read you masterpiece.

You too should go to the effort to "Google" up the words referenced by me, where you can then issue an apology toward me in this open forum. You will find that this process of compensation is legal, permitted, and refers to the process with the unkind terms written by me, but taken right out of the screen while researching this educational opportunity. These unfavored words by you are not now written by me for fear of your rebutt. I forgive you for your shame placed upon my thoughts, it is a shame that the same HRhero policemen that watch over my words so carefully, have not taken the opportunity to, likewise, police your charm and meanness. Have at it!

Obviously, your day was Blessed for your words were displayed and you must feel much better. By the way my e-mail is not "inabled".

PORK

TN HR · April 2005

PORK: I Googled the term you used and could not find any reference to actual laws or regulations.

I would love to issue you a formal apology here in the Forum. As a matter of fact, I hereby commit to taking an ad out in your local paper with a public apology and I will donate $500 to the charity of your choice if you can show me where, on an official piece of published law or regulation, you see the term "Chinese Overtime" or "Chinezee Overtime and .5" (your actual quote).

The ball is in your court. I would, of course, ask that you issue me a public apology in this forum if I am correct in that, once again, words you have quoted from laws and regulations are nothing more than nittwittery that simply do not exist.

Gene

Gillian3 · April 2005

I feel positively ecstatic that the California wage and hour regulations are so simple! No fluctuating work weeks here - overtime over eight, no matter what.

Salaried Non-Exempt

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