Guidelines for Managing Exempt-Status Employees
In the world of HR, one area that has produced a significant quantity of writing, thought, and opinion is that of employee exemptions within the Fair Labor Standards Act (FLSA). This area, however, is not particularly flashy or trendy. In fact, it is the boring material that HR professionals must learn and internalize in order to add value to their organizations. But, while not flashy, this knowledge area is one where millions of dollars can be saved by sound HR practices.
There are different types of employee exemptions that we should recognize before we dive into the more useful real-life examples. Those employee exemptions include executive, professional, and administrative (among others). Since you can Google “FLSA exemptions” and find clinical definitions, we won’t address them much here. To me, it is more critical to know how to properly judge who should be exempt and non-exempt from overtime and how to manage their work.
Exempt Employee Guidelines: Review and Update Job Descriptions
While I am not the biggest fan of job descriptions as they can serve to limit the flexibility of a given position, a thoughtful examination of each position and whether the duties are exempt or non-exempt should be a requirement of every employer. The question an HR professional or business leader should ask is: “What will this person actually do?” Then, it is a requirement to constantly assess: “What does this person actually do?” It is critical to understand the difference.
Real-Life Example of an Exempt vs. Non-Exempt Issue
I am familiar with a case where the employee was clearly exempt in her job duties, but she, for some reason, thought she was non-exempt. After leaving the company, the ex-employee filed a claim asking for overtime pay she felt she deserved. The details of the case could fill a book but I will focus on the HR management side of the case.
The employee enjoyed performing some of the non-exempt work elements of her job to the point of interfering with her effectiveness in her job. Interestingly, the claim she filed centered on her interpretation that these non-exempt work elements actually changed her status. In my mind, it was akin to a human resources manager who copies and files so much that they feel they are owed overtime. Could that self-direction actually re-define whether the employee was exempt or not? It seems the answer is yes.
The manager in this case was convinced that the claim was without merit because the employee was disobeying what he specifically demanded – stop all of the non-exempt work that is distracting from the higher-level work. My job, in this case, was to advise him that this viewpoint was not enough in the eyes of the Fair Labor Standards Act.
Be Sure to Prevent Non-Exempt Work
How could this be the case? Well, the Fair Labor Standards Act, and the governmental employees who administer it, only look at what the employee is actually doing. If you hire a mechanical engineer who has a bachelor’s degree in Mechanical Engineering from MIT but all they do is photocopy and make coffee, they are a non-exempt employee – even if this is in disagreement with what their manager expects from them. Getting an employee to actually comply with their assigned work duties is an issue of managing the employee.
If an employee actively disobeys the directives of their management, it is a reason for performance management, up to disciplinary action. This seems to be a difficult pill for many managers to swallow. This, however, is exactly how a company can avoid FLSA claims in this area. In the example above, the state’s response to the company claim that the employee was told to stop the non-exempt work duties revolved around the manager’s handling of the employee. In other words, if the employee was actively and continuously disobeying your directives and you did not discipline her, how serious were you about the actual job duties being performed in the first place?
In the end, the company was very fortunate to prevail because the totality of non-exempt work tasks amounted to a minority of her work time. The fact that the manager told her to stop those tasks didn’t help our case in the least.
A Smart Approach to Exempt vs. Non-Exempt Work
My advice is to classify each position carefully when it is created and then periodically audit whether each employee is actually performing assigned tasks listed on the position description. It is much more defensible, if there is need to defend, if the company shows active management of employees and their duties than if, over time, the actual duties stray dramatically from exempt work duties.
To many, this is dry subject matter. To me, however, this is where HR professionals can make a huge impact on the fortunes of their company. How much top-line revenue does it take to cover the bottom-line cost of a major FLSA claim? My advice is to never lose sight of that when providing advice to your business partners on this topic area. They will thank you for thinking that way – like a business partner.
Do you have a topic you would like Compensation Today to cover? Write us at email@example.com.
Are you paying your best employees enough to retain them after the economy picks back up? Get up-to-date and make sure your external salary market data is specific enough to the education, skills set and experience of employees you want to keep. Give a PayScale demo a try.