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Exempt Employees

As an employer, am I required to notify the employee (such as in writing) if they will be classified as exempt? Can they refuse and insist on being non-exempt?

Also, can you refer me to what laws (federal, or California) cover comp time for exempt employees?

Any help would greatly be appreciated!

This is an important question, because the U.S. Department of Labor reports that misclassifying employees as exempt is one of the most common causes of complaints to their offices, and resulting lawsuits.

The best practice would be to inform the employee in any offer letter or contract that he or she is an exempt employee earning a salary of $x per year (or per month), however, this is not a legal requirement in California.

While California does impose some restrictions on exempt status, in general they are similar to the federal regulations under the FLSA, the Fair Labor Standards Act. As an employer, you should be familiar with both. (See the links below.) When an employee is covered by both state and federal law, the employee is entitled to protection under whichever law provides the greater benefit to the employee. This may mean, for example, that an exempt employee is covered by most provisions of the federal law but also entitled to the higher minimum salary required under California law.

Exempt or non-exempt status is based on an employee's primary job duties under the federal FLSA or Fair Labor Standards Act. Only 5 classes of employees can be exempt, under federal law. They are Executives, Sales People, (some) Computer Pros and Professionals (such as doctors and lawyers). Administrators can also be exempt, but in the past year the federal courts have limited the application of this category to those who have significant authority to make independent decisions that affect the business. A CFO could be an exempt Administrator — a secretary would probably not qualify as an exempt employee.

Exempt employees are never entitled to overtime regardless of the number of hours worked. They are exempt from both federal and California overtime laws, and minimum wage laws. Employers usually make workers exempt because they have significant responsibilities that may result in the employee putting in a lot of overtime.

Some employers try to avoid paying overtime by putting every employee on salary. However, an employee on salary is still not exempt unless his or her primary duties meet the test. On the other hand, you can legally treat any employee as non-exempt or hourly. There is no law that requires you to make any worker exempt.

If you are operating a business, there is no requirement that you offer comp time or compensatory time off to an exempt employee who works extra hours one week. You could legally require an exempt employee to work 45 hours every week or 100+ hours every week without additional compensation, and without comp time. If you choose to offer comp time, you will be among the most generous of all employers, and you can establish the company policies regarding comp time.

Assuming that the employee's duties genuinely qualify him or her for exempt status, the employee has no right to force the employer to treat him or her as non-exempt. As with most work situations, it is up to the employer to establish the expectations and working conditions (within legal limits) and up to the employee to determine if he or she will accept the job. Employees do not get to dictate working conditions, particularly in a job market such as this one.

You probably should not be negotiating exempt status with the prospective employee. Usually an employer who hires an exempt employee is looking for a full-time commitment to do “whatever it takes” to get the job done, in a position with a high level of responsibility. An employee who is trying to negotiate comp time or overtime before he or she is hired, is probably not a good fit for such a job. In this labor market, it should be fairly easy for you to find someone who is eager to put in the hours necessary to do a good job, and understands that exempt status is simply part of the total compensation package being offered.

The fact that this applicant has not even worked one hour yet and is already focused on taking time off and working less speaks volumes about this person's lack of motivation. This would be a red flag to most HR pros.

Many employers would withdraw a job offer of an exempt position if the employee seems reluctant to work the hours expected — and that is the message this applicant is sending.

It is not wise to hire an employee who seems determined to dictate working conditions to you. As the employer, you set the working conditions and the employee can accept the job or not accept the job. It is reasonable to negotiate salary or vacation time — it is usually not reasonable to try to negotiate non-exempt status when the primary duties merit exempt status.

Read more about exempt status under California and federal law at:

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This entry was posted on Tuesday, January 4th, 2011 at 1:16 pm and is filed under
Compensation, Human Resources Management.
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