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Exempt vs Non-Exempt

We've had some discussions internally regarding exempt and non-exempt employees as defined by Wage and Hour and how we compensate our lower level agency resources (account coordinators, etc.). Those of you who've dealt with the Wage and Hour definitions probably understand what I'm getting at. I'm just wondering how other agencies are handling this. Are you paying all your employees salaries (exempt) or do you pay your lower level agency resources hourly (non-exempt)?

Any feedback would be greatly appreciated, especially how you compensate your lower level resources and your rationale in regard to the Wage and Hour definitions. Thanks!

Barry J. Owens Controller MAI Sports, Inc.

Barry,

All of our employees are paid on a salary basis with the exception of our accounting clerical positions.

Dawn Jackson

Barry -

We are a company of 25...all of our employees regardless of the position are salaried (exempt) employees. It is understood that in our industry (Marketing & Advertising) that there will be times when employees will need to work extended hours. Fortunately we have very dedicated people who take pride in their work and would rather put in the extra time than send something to a client that is not up to standard.

We've never really had an employee complain mainly because of the flexibility we give our employees to take care of personal matters (Dr Appointments/parent teacher conferences etc) during work hours without having to use up vacation/personal time. I guess you could call it comp time but we don't advertise it as such.

Hope this helps.

Kathi Sheehan Coyne Communications

It is my understanding of California employment law that exempt or non-exempt is not defined only by whether an employee is salaried or hourly. Level of authority to do one's job tasks without direction, level of responsibility and other factors define exempt workers. Lower level workers would almost always be non-exempt whether salaried or hourly. Salaried employees who are exempt are not docked for partial days off, nor is their vacation or sick time affected. They may be required to keep certain hours, as well as work longer hours when required without additional compensation. Lower level workers must be paid overtime. I have not recently reviewed the provisions of SB1208 and would suggest you do so.

If the current administration in Washington has its way, there may in the future be more latitude in defining salaried exempt employees as far as federal law is concerned. This may or may not affect California laws.

I am not an attorney and the above is what I have learned about the exempt vs. non-exempt employee status from various sources over the years.

-- Valerie Sexton Buzzsaw Advertising & Design

It is actually determined by an employees job description, as understand it. Our managers and executives have the exempt salaries (without OT), everyone else that produces and does not manage 2 or more employees, are paid hourly with OT. Business planning would be so much easier if everyone pulled a salary, but the world is not perfect.

Jo Bos Gerry Bos Design, Inc. HR Manager

We pay all employees hourly who do not work a 40 hour week. All of our account coordinators are part-time and are non-exempt. Any one who is 40 hours or full time are exempt and are eligible for benefits.

Kathy The Creative Alliance

I ditto Valerie's response....it's the same in Missouri.

Michele Padilla, Controller Moosylvania

JOB CLASSIFICATIONS: This is a legal definition, based on federal law, = and it determines who is and is not entitled to be paid overtime: Exempt employees are not entitled to overtime pay. Nonexempt employees must be paid overtime.

This definition depends primarily on the type of work a person does. = Following is a brief summary of the most common job classifications that = are exempt:

Executive: Spends at least 80% of his/her time managing. Directs two or = more other employees. Can hire, fire, or suggest changes in status of = other employees. Exercises discretionary powers.

Administrative: Spends at least 80% of his/her time on non-manual work = relating to policies or operations. Assists an executive or administrator,= or does work requiring special training or knowledge. Exercises = discretion and independent judgment.

Professional: Spends at least 80% of his/her time on work requiring = scientific or specialized study. Work depends primarily on imagination or = talent.

Outside sales: Work on commission. Spend most of their time doing sales = outside the office.

Many employers assume that if employees are paid by salary rather than = hourly, they are automatically exempt. This is not correct. Recent = interpretations of the law state that employees must be paid on a salary = basis in order to qualify as exempt. However, this does not automatically = make them exempt. They must also fit the above definitions with regard to = the type of work, qualifications for the job, responsibilities, etc.

Do not be tempted to knowingly misclassify any employees as "exempt" in = order to avoid paying them overtime. If a complaint is filed and you are = found in violation of the law, you may be required to pay damages as well = as back wages for a misclassified employee.

Pat Hardesty

Barry -
Connecticut labor laws are similar to Valerie's California laws. Ours are further defined that an exempt employee must be a supervisor of at least one other employee. Art directors and management are the only ones that are exempt in our firm.

User

Ditto this reply! We are much smaller but have the same setup in place re: all exempt employees and real flexibility around personal time.

-- Kay Rosburg, V.P., Dever Designs

AMEN! This is exactly how I do it and I agree with your interpretation of the law. I just wanted to make sure that other agencies do it the same way.

Barry J. Owens Controller MAI Sports, Inc.

Hi Barry,

All of the positions in our company are salaried with the exception of the Receptionist and the Fulfillment clerk at our warehouse. We use several resources for keeping up with the salary trends in our geographical area. I would recommend Second Wind and Salary.com.

Wendy Lokan Accounting Manager/Human Resources RV Brandau Marketing, Inc.

The problem with the way you are working this by making everyone exempt, is that it's against the law.

An employee who should be classified as non-exempt can go back and sue you for back pay very easily. There can also be penalties involved. I've seen it happen and I still struggle with it, because there are some gray areas to the definition of non-exempt.

An all around rule of thumb, is most clerical/receptionist employees should be, by law, classified as non-exempt. I have a great brochure thru our payroll specialist... usually they can help you or you can look on line for the guidelines.

Hope this helps,

Kim Medoff Moxie Interactive

Kim -

Thanks for the info...I generally rely on our accountant to guide me on these types of matters...you can bet that I will be bringing this up the next time we speak!!

Fortunately, after reading the various definitions that have gone around on this topic we only really have one employee that would be non-exempt and she barely gets her 40 hours in so I think to date we would be safe legally.

Kathi Sheehan Coyne Communications, Inc.

Kathi, thanks for the feedback. What is your rationale for doing this according to the Wage and Hour definitions (the law)?

Thanks again for your feedback!

Barry

This sounds exactly like us!! Ditto.

Christine Wardwell The Phillips Agency

You can pay anyone on a salary basis. That is required for exempt employees, as only one of the criteria for exemption from overtime. As you said, job description, responsibilities, supervisory position, amount of time working on one's one without direction etc. are determining factors for exemption. Salaried does not automatically mean exempt.

I can't find anywhere that our industry qualifies for exemption of all employees from overtime as was stated in another's response to this issue. If that is so, can anyone cite the section of the California Labor and Employment law on this?

-- Valerie Sexton Buzzsaw Advertising & Design

Barry,

We operate the same way as Kathi Sheehan wrote below.

Jody Breiland McClenahan Bruer