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Tuesday, May 29, 2007

Exempt vs Nonexempt

Hello, Evil HR Lady!

I was wondering if you could explain something to me. My job was recently reclassified from exempt to non-exempt. I understand the technicalities of it. What I don't understand is the real implication.

I've never been classified as non-exempt, not even years ago when I was entry level (well, as a kid in summer jobs, but you know what I mean). My perception was that it was essentially for non-professional positions. If it was a positive classification, I have no doubt management would include themselves. I've hunted online, but everything I'm finding discusses the issue from the employer's point of view. I want the big picture. What are the pros and cons of this from the employee's perspective?

Thanks,
Reluctantly Reclassified


First of all, whether or are exempt or non-exempt is based on the Fair Labor Standards Act. For whatever reasons, your company feels like your job doesn't meet the requirements to be classified as exempt.

You didn't mention what you do, so I'm going to assume that your classification is correctly identified as non-exempt. For jobs that are on the border between the two classifications (which yours probably is, since it went from exempt to non-exempt), the company is wise to classify the job as non-exempt. There are no punishments for incorrectly labeling a job non-exempt, but you can get yourself in big trouble for incorrectly classifying a job as exempt.

I'm just going to list one pro and one con of being non-exempt.

Pro:
  • Overtime. Any work more than 40 hours a week and they have to pay you overtime. You take your laptop on vacation and spend an hour working? They have to compensate you for that time. Your boss calls you at home and asks you work questions? They have to pay you. If you are exempt, forget it.

    Con:
  • Mobility. In my experience, it is much harder to get promoted from a non-exempt position into an exempt position than it is to get promoted from a low level exempt job into a higher level exempt job. There is a perception that you lack higher level skills.

    What does this mean for you? Hard to say, since I don't know anything about your job. I do recommend sitting down with your boss and asking to see the criteria that were used to classify your job. If you want to be considered exempt, ask what responsibilities you can take on to be re-classified. It's doubtful your boss will have a clue, at which time you might want to make an appointment with HR. Keep in mind that your employee relations person might not have a clue either. In that case, you need to find out the person in compensation who made the decision.

    Of course, if you work for a small company, that may well be the same person.
  • 19 comments:

    David said...

    Same thing just happened to me. I work in the IT business. Rumor has it, we will be getting 3 years backpay of all Overtime worked for the previous 3 years, but this is still being worked out.

    Lisa said...

    Same thing happened to me after working here for 1 year. I am an administrative assistant and was told by HR that my job should have been non-exempt. I've been an AA for 10 years and have always been exempt!

    Anonymous said...

    And the same thing happened to me as well. I am an administrative assistant in the IT industry and have not been a non-exempt employee for many, many years.

    Anonymous said...

    Same thing happened to MANY employees at the fortune 500 company I work for. Do you think a technical writer is a non-exempt function? We don't, but the courts did!!

    Camille Kemp said...
    This comment has been removed by the author.
    Camille Kemp said...

    Why would you want to be exempt? Non exempt salaried is a great thing you are guaranteed a minimum salary and you also get overtime for any hours worked over forty. I don't think any of the pros to being exempt are of enough value to outweigh that. Too many employees are taken advantage of by being classified exempt because of uninformed employers and employees that don't know what they are entitled to.

    Anonymous said...

    Camille is exactly right! I would love to be non-exempt again. The FLSA law protects those in the non-exempt status from exploitation by employers.

    If Wage and Hour had enough staff, the exploitation would soon end. As it stands now, most corporations think it is cheaper to take the chance and they exempt secretaries because the "administrative assistant" title is so attractive the employee is willing to work long and hard for the exempt status. In reality, you do more work for less pay when you count all the hours you are really working.

    Be thankful you have an HR department that works hard to ensure compliance with the laws.

    Anonymous said...

    I beg to differ on the status of Admins. When I was "demoted" I lost sick days eccentially. Now I have to use my vacation days as sick days. The salaried employees can be off work for a week without any monetary implications. AND my boss told me that he would not pay me overtime. I would still have to "absorb" the work just like I did in the past. I did not "absorb", I worked overtime for nothing, but at least I had sick days. This is definitely a demotion in my world.

    Kim said...

    What does "eccentially" mean? I have never seen this word and neither has any of the dictonaries I looked through.

    Anonymous said...

    I WAS TOLD BY A CO-WORKER TO CHANGE MY STATUS TO EXEMPT,FOR 1 PAYPERIOD,SO I COULD GET ALL OF MY SIGN ON BONUS. IS THIS POSSIBLE

    Erika said...

    @ Anon May 13th - I think that's illegal (refusing to pay you overtime if you are, in fact, working above 40 hours a week)

    @ Amy - If you want to be a smart ass, you might want to spell "dictionaries" correctly.

    Anonymous said...

    Yet another unintended consequence of the push by the "labor rights" crowd to supposedly improve the lot of white collar workers. For decades white collar meant get a salary and work your butt off, and no one complained. But then the whiner culture took hold. The weakest of the bunch went to slip and fall scum sucking lawyers and class action suits were the result. Rather than have a real debate and hopefully reaffirm the right of free association and general principles of economic freedom nanny government fell on the side of the Wobblies.

    And now? An increasing number of white collar workers find themselves pushed down the stack and reclassified as blue collar nobodies with ever less power than they had before.

    Nice work whiners!/sarc

    Anonymous said...

    I am a product engineer and I was jut been re-classified from exempt to non exempt. after I asked why the told me that my grade level ( ii) is classified as non exempt, but same people in my group with the same grade level are classified as exempt. what does this mean?

    Anonymous said...

    When employees are converted from salaried to hourly, do companies traditionally take their former salary (say $60K annually) and do the math to make it approx. $30/hour? How have companies made those hourly rate decisions when an existing job changes classificatons?

    Anonymous said...

    To comment on the original answer: "First of all, whether or are exempt or non-exempt is based on the Fair Labor Standards Act." This is deceiving, the employer can ALWAYS choose to pay an employee by the hour (AKA non-exempt). The reason some don't are for a multitude of reasons, some include; (1) budgeting. It is easier to add up the salaries of hundreds of employees to estimate a budget rather than hourly employees that may get overtime...overtime is hard to account for. (2) other times employers do it for "status". For whatever reason, some people actually want to be exempt. It's rediculous to me! If you are exempt, without fail, you will work a minimum of 2 - 3 extra hours a week, and that is with an employer that "doesn't take advantage of your exempt status".

    @ anonymous on July 19th: Yes, you are correct. When reclassifying a position from exempt to non-exempt (assuming no other duties about the position change) the pay for the position will stay the same. So, 60k/yr equates to roughly $30/hr.

    You never have to qualify to be hourly, however if a company wants to make you exempt, then your position must qualify - seems rediculous to "qualify" for less benefit to the employee.

    Final thought. @ the administrative assistant - without looking at your duties, I would bet your position does NOT qualify for exempt status and that's why they "demoted" you...otherwise if you sue, they must pay back wages for all the overtime you worked. And even though you got sick days...were you using them at such a rate to make it more beneficial than all the overtime you were most likely working?

    Anonymous said...

    I have worked most of my life as a non-exempt employee. Six years ago I received a promotion and went to an exempt status and I hate it. It is the fairness factor! Several times a week and most weekends I receive calls that take 15-45 minutes of time. I get calls on vacation as well. It is expected that you will be available anytime. If I need to leave early or have a doctors appt. I am expected to deduct this time or to make it up. I would rather just clock in and out and be done with it. It is very frustrating to be expected to give and give of my own personal time and have to deduct or make up one hour spent out at the doctor. The first year I worked as exempt I had only seven days of vacation so when I had used that and was out for the afternoon at a doctors appt. they deducted the time from my pay. This occurs on a regular basis with all exempt employees at this company. In fact one employee came in early so that she could leave early and her time was deducted from her pay without telling her or consulting her manager. She had consulted her managerin advance and permission. It was later corrected. I would love to see legislation requiring the monitoring of companies and how they treat exempt employees!

    Anonymous said...

    I am being demoted from an exempt to a non exempt with the same responsibilities. I run a program and have done so for several years. I have enjoyed the exempt status because it gives me the freedom to not be a clock watcher and run my program effectively. I am unable to go over 40 hours. I am confined to "get the job done in 40" regardless. I would have to stay late come in early and write down my time, it will be a night mare I don't relish. I prefer to come and go when I need to and make sure the job is done and have the flexibility that I need. Going non-exempt is a slap in the face, I don't care how anyone tries to dress it up. Exempt positions reflect the positions that are held. It is an insult to have those types of responsibilities and be expected to punch a clock. I haven't done that since I worked at Wendy's.

    Anonymous said...

    I believe it is illegal to make deductions from Exempt employees pay.

    Anonymous said...

    It is indeed illegal to deduct from exempt employees pay, unless they are completely absent for an entire day. If they work 6, they get paid for 8, etc etc., no ifs, ands, or buts..