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3 Steps to Conducting an Audit on Non-Exempt Vs. Exempt Worker Classification

FLSA/Wages
by Stephen Bruce, PhD, PHR

Do you know the law when it comes to non-exempt vs. exempt workers? The Fair Labor Standards Act (FLSA) requires employers to pay employees overtimeif they work over 40 hours. However, the FLSA also contains exemptions. Employers may not have to pay overtime to certain personnel groups, including administrative, executive, professional, computer, outside sales, and certain highly-compensated employees. In order to qualify as exempt from the overtime pay requirements, an employee must pass three tests: the salary level test, salary basis test, and duties tests.

When it comes to staying in compliance with non-exempt vs. exempt employee status, understanding the law is the first step. Once you understand your obligations in terms of properly classifying non-exempt vs. exempt workers, it may be in your best interest to conduct your own internal audit to ensure you’re meeting the requirements.

In a BLR webinar titled "2012 Exemption Checkup: How to Find and Fix Pay Practice Problems with An Easy Audit," Susan G. Fentin and John S. Gannon outlined three steps to conducting an audit.

3 Steps to Conducting an Audit on Non-Exempt Vs. Exempt Worker Classification

Step 1: List all employees, including job titles, job descriptions, wages, and current classification. Fentin noted: "there are a number of jobs that you will be able to classify either as exempt or non-exempt without much analysis, but for any jobs that are at all questionable, you should be sure to take a more in-depth approach. The most dangerous jobs are jobs that are classified as exempt but where you are not certain whether or not the employee is properly classified. So, focus on those jobs first."

Step 2: Review job descriptions to ensure accuracy. You may need to involve members of management to get all of this information on the employees. Are there parts of the job that are no longer done by the incumbent? Are there new responsibilities that are not included in the job description? What is the current classification for this position? Job descriptions need to be updated to reflect the true responsibilities of the role. Fentin explained that "accurate job descriptions are key to an employer’s ability to defend a lawsuit that alleges that an employee was misclassified."

Step 3: If job is currently classified as exempt, apply the tests for the appropriate exemption. Again, you may need to involve management or supervisors to determine the employee’s primary duties. Pay extra care if relying on the administrative exemption, as it is the most difficult to apply correctly. Remember that some jobs may need to be tested under more than one exemption, such as employees with major computer responsibilities. Be sure to watch for deceptive job titles such as a manager who is not really managing any subordinate employees. Finally, review the regular rate and other pay practices.

Attorney Susan G. Fentin is a partner in the labor and employment firm of Skoler, Abbot & Presser, P.C. Her practice concentrates on labor and employment counseling, advising large and small employers on their responsibilities and obligations under state and federal employment laws, and representing employers before state and federal agencies and in court.

John S. Gannon is an associate with Skoler, Abbott & Presser, P.C., and practices in the firm’s Springfield, Massachusetts, office. Prior to joining the firm, he served as a judicial clerk to The Honorable David M. Borden and George D. Stoughton at the Connecticut Appellate Court.

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  1. Anonymous        
    May 16, 2012 5:54 pm

    I am an office manager and my question is:
    Are Dental Hygienist paid salary or hourly and how is this classified? my previous office paid the hygienist $450 per day weather they saw patients or not. Some hygienist say they should be paid that same amount but has to leave exactly at5pm sharp even if she didn’t complete her last patient. what is the correct way to handle this and what category do they fall in? excempt or non?