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Five Ways to Clarify Your Exempt Employee Classifications

Five Ways to Clarify Your Exempt Employee Classifications

Attorney L. Reed Bloodworth, managing partner of Bloodworth Law, explains five ways to clarify your exempt employee classifications

Bloodworth Law serves as legal counsel for Florida businesses of all sizes across the state. Our Employment Law Team can work with you remotely, via video conference, or in the office with the appropriate safety measures taken to protect you as we help you with your legal issues. 

How Can Employers Clarify Their Exempt Employee Classifications?

The exemptions I am referring to, in particular, are the exemptions from the Fair Labor Standards Act for minimum wage and overtime requirements. 

Job Description in Writing

#1: The first one would be to make sure your job description is in writing.

You’d be surprised at how many cases are litigated because there isn’t a written job description for an employee, just having to prove what the employee was actually doing.

Review Job Description

#2: The second thing is to make sure that that job description is an accurate reflection of what that employee actually does, and to review that on at least an annual basis.

Executive Exemption: Supervise Two or More Employees

Here’s an example. If an employer is claiming the benefit of the executive exemption, the executive exemption requires an employee to supervise two or more full-time employees or their equivalent.

No Exemption: Fewer Than Two Employees Supervised 

If you do not supervise at least two employees or if the equivalent of two full-time employees, then you do not qualify for the executive exemption. 

Employers will sometimes create positions and classify them as exempt per the executive exemption and that employee is supervising two or three people. 

What If One Person Leaves?

But then, one of those people leaves and is not replaced, and maybe the other person drops back to part-time. So, over the course of the year, that exempt employee has dropped below two full-time equivalent employees that they are supervising, but the classification has never changed.

In that situation, the employer is potentially liable for minimum wage and overtime for that employee that they had had properly classified before, but have now misclassified.

Administrative Exemption: Employee Exercises Discretion, Judgment

Another thing that happens is a position may be given a lot of discretion, and one of the exemptions is the administrative exemption. 

The administrative exemption requires the employee to exercise discretion and independent judgment in matters of significance. 

This is usually a high-level employee, like a marketing director or a CFO, that doesn’t necessarily supervise a lot of people, but does high-level administrative decision-making for the internal operations and controls of the company.

Small Company?

You may have a situation where it’s a really small company and the person that they call their CFO actually ends up, as the business develops, doing more and more bookkeeping and less and less accounting, which has been deferred to the company’s accountant. 

So as this person’s job has migrated from a higher level to a more clerical level, if this classification is not reviewed and changed, that could become a major problem.

Annual Job Description Review

We recommend that employers, when you do your annual review of your employee, which you should be doing anyway, you sit down with the job description and say, “Hey, are you still doing this? Hey, are you still doing that?” 

A lot of times you’ll find that what the employee is actually doing on a day-to-day, maybe without even the employer really knowing it, is different than what’s in the job description. 

Ask About Other Responsibilities 

And you should ask, “Is there anything else you’re spending your time on that isn’t on this list?” And the employee might say, “Well, yeah. We lost our shipping and receiving clerk last year, so I spent half my time filling in, doing that job in addition to my own.” 

Well, that’s not exempt work. So, if they’re spending a lot of extra time doing non-exempt things, you could have an issue there. 

Review DOL Requirements

#3: Number three, plan a meeting with your employees to review whether they meet the Department of Labor requirements. 

The Department of Labor has a really good series of what they call fact sheets for each exemption, with a lot of examples included. There are also specific publications, guidance, and information available from the Department of Labor, wage and hour division related to specific occupations. Checking your exemptions against that guidance is helpful.

Document That You Checked the Records!

And very important: document the fact that you did this. Make sure whatever you look at to help say, “Yes, it looks like this person meets these requirements,” save a copy of that in the record, and have the person who made this decision send an email to the file or something that says: “I reviewed employee X’s job description against the Department of Labor guidance, which I’ve put in the personnel file and determined that yes, this person still appears to meet the requirements of the exemption.” 

Again, this is because just showing the effort helps potentially reduce your damages, even if it turns out that you were wrong.

Is Employee Exemption Unclear?

#4: Number four, there are a lot of borderline cases where it’s not really clear if someone is exempt or not. If that person is paid a good salary and does not work much or any overtime, it’s no big deal because even if the person has been misclassified, they’re not framed by that.

And certainly, there are some employees who are clearly exempt, who might work a LOT of hours. So, if you’ve got an attorney, or a doctor, or somebody like that, that’s working 80 hours a week, you don’t really have to worry about that person suing you for overtime. 

Borderline Exemptions

But if you have someone who’s borderline, like maybe a senior bookkeeper or someone where it’s not really clear which side of this line they fall on, you want to be really concerned about that person working a lot of overtime, because that’s where your exposure is. It’s in the number of hours that that person works. Because you might be asking them to do more and not realize it.

Employers Misclassify to Save Money

The reason that employers misclassify people is that they’re trying to save money and not have to pay overtime.

So a misclassification is of no consequence whatsoever if the person is not working any overtime and is paid at least minimum wage. 

But, if you’ve got somebody that’s working overtime, and their classification is borderline, that is a high level of risk for you. 

On the other hand, if you’ve got somebody who is misclassified, but basically works a 40 hour week each week, even if you’re wrong, that’s not a big deal. So that’s not as big a red flag as somebody who’s putting in 80 hours a week who might be misclassified.

Consult an Attorney

And finally, #5: Number Five is to consult with an employment litigation attorney for any borderline cases:

  • A, to make sure you get it right for any borderline cases, and,
  • B, to help reduce your damages even if you get it wrong, because consulting with an attorney can help you prove good faith, and if you can prove good faith, you owe less money in the event that you made an error.

By regularly consulting with an employment attorney you’re able to clarify your exempt employee classifications and ensure you comply with Florida employment law.

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