Sea Bright Enterprises, Inc.

Classifying employees correctly can be frustrating and tricky. But, with the proper process in place, it can be done effectively to meet the guidelines established by the Fair Labor Standards Act [FLSA] and administered by the Wage and Hour division of the Department of Labor [DOL]. Proper classification of employees identifies those who are subject to basic wage standards, including, but not limited to minimum wage and overtime pay standards and the employment of minors.

A key classification ingredient is to properly identify which employees are “exempt” and which are “non-exempt”. Some employees are exempt from overtime pay provisions or both the minimum wage and overtime pay provisions. Exemptions are generally narrowly defined under FLSA, and as a result, employers should carefully check the exact terms and conditions for each. We have compiled the following list of items to consider when classifying employees as exempt or non-exempt:

1. Is there an established and current “job evaluation process”, and has this position been fully described and evaluated?

2. How are similar positions classified?

3. Has the classification for this position been modified in the past?

4. How many people will the person in this position manage or supervise?

5. How much of the employee’s time will be spent in management or supervision?

6. Does the person in this position have the authority to make hiring and firing decisions?

7. Does the person in this position have the ability to regularly exercise discretionary powers, “freedom to act”?

8. Will the person in this position perform work which requires the consistent exercise of discretion and judgment?

9. Is this position considered to be executive, administrative, professional, outside sales, or qualified computer-related as defined in DOL regulations?

10. Are there any “motivators” to classify this position as exempt, e.g. avoiding paying overtime, rewarding an employee, etc.?
     

If the answer to number 10 in the above list is yes, rethink your process. The act of substituting a salary for an hourly wage, or giving an employee an impressive title doesn’t automatically make an employee exempt, it’s the duties of the position that count. Ignorance of the laws and regulations outlined in the FLSA and the DOL Title 29, Part 541 of the Code of Federal Regulations is not an acceptable excuse when confronted with a claim by an employee. If you uncover a problem, don’t ignore it. It probably wont go away. It will probably get bigger and become very expensive. This is the time to address and solve the problem as quickly and economically as possible.

The proper classification of employees does not have to be frustrating or tricky. By establishing appropriate procedures, your organization can avert the pitfalls of improper classification of exempt and non-exempt positions.

Detailed information may be obtained by contacting the DOL and requesting a copy of the “Employment Standards Administration Wage and Hour Division Handy Reference Guide”, or by consulting with your local Wage and Hour office. If further assistance is needed, contact Sea Bright Enterprises, Inc.