You must be crazy, pay more overtime? Yes! Most businesses have a position or positions that they incorrectly classify as “exempt” from receiving overtime.
Simply put, the Fair Labor Standards Act (FLSA) defines non-exempt employees as those who are entitled to overtime and exempt employees as those who are not eligible.
If you don’t think this applies to you or your business, here are a few examples of employees that may change your mind. What would be the classification for:
The person you call office manager who has no direct reports and does mostly administrative work?
The field supervisor who oversees a crew but also works alongside her crew?
Computer techs at a company?
A business might consider these employees to be exempt, only to find that the FLSA calls them non-exempt and eligible for overtime pay.
Determining who is exempt from overtime is a very complex process and has to be done on a job-by-job basis. Each job should have a job description that clearly outlines job duties, responsibilities, skills and professional requirements.
The information from the job description is what is used to test against the FLSA to determine whether the job is exempt or non-exempt. Remember, it is not the person but the job that determines overtime eligibility.
Incorrectly classifying a job position as exempt usually happens when a company wants to give a valuable employee a promotion: The employee is given a raise is no longer considered an hourly employee but a salaried employee.
While exempt status is considered to be a “badge of honor” and is hard to take away once given, it can turn into an even bigger problem down the road if the employee’s position should have been classified as non-exempt. If a company is caught with exempt employees who should be overtime eligible, the company must pay fines and projected back pay with interest.
Although it may seem unlikely that a job’s exempt or non-exempt classification would surface, it can easily become known.
Say, for example, a person you fire hires an attorney who figures out that the fired employee should have been overtime eligible. Or this same fired employee files an EEO or unfair labor practices claim. The labor board then conducts an audit as a result and any improperly classified employees would receive back pay even if they didn’t ask for it. The back pay can go back up to three years, resulting in a substantial amount for an employer to pay.
How should you fix this right now? Conduct a proper analysis of job descriptions versus the FLSA. Some employees will be exempt because of salary. Others will be exempt because of managing at least two employees more than 80 percent of the time. Another group of employees will be classified as exempt because their roles require a specific degree.
Most employees are non-exempt. If you are the least bit unsure as to a job position’s classification, seek professional help. It is better to pay your employees overtime now than to pay fines and back pay in the future.
© 2010 Jerry Ballard Perfect People Solutions
When not golfing, cooking, or fixing his kids’ flat tires, Jerry Ballard is the president and lead consultant at Perfect People Solutions, a cutting-edge consulting firm that provides businesses with creative solutions to their people problems. Feel free to contact him if you have any questions regarding this or any other people issue. While people aren’t perfect, your people solutions should be.
http://www.perfectpeoplesolutions.com