I have a question about determining the exempt or nonexempt status of our lowest-level managers. We think they are exempt, but we’ve read about some pretty expensive lawsuits and want to avoid that. We classify these employees as exempt, and they seem happy enough with that designation. Most of them are eager to move up our management ladder, and they willingly put in a lot of hours each week. In our bigger stores (we’re a retailer), they are mostly department shift managers, and they spend about half their time on the floor and about half in managerial duties such as scheduling, stock management, discipline, and so on. There are extensive guidelines for them to follow, and a senior manager whom they can turn to for advice is always on duty. In our smaller stores, the managers are on their own; however, they still spend a good deal of time behind the cash register, stocking shelves, and so on. Their district manager usually visits them once a week, and they can call a corporate manager’s help line. Are there some simple guidelines for us to use in evaluating whether we’ve correctly classified these people as exempt?
— Anonymous
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We sent this tricky compensation question to Lloyd W. Aubry Jr.
This is an interesting question and a more common situation than you might think. A lot of employees try to better themselves by working on their skills out of the office-by practicing higher-level work or even by going to class. However, your situation is a little different because these employees seem to be performing a service for your organization, which is taking advantage of it and getting some value out of it.
The way to analyze this is, are they doing it for themselves or for the employer?
If it’s a volunteer activity they undertake to prove they have this skill, that’s more like a tryout. There’s nothing wrong with a tryout, just as you can have someone do some typing to see how well they can type. If the employer doesn’t get anything out of it, it’s probably not hours worked. For example, if the employer has someone else reading the same manuscript anyway, and the real opinion is going to be from that other person whom the organization knows it can rely on, the work is not so much for the employer’s benefit.
However, in many of these situations, there’s some of both: the employee is getting a chance to prove themselves and the employer is also getting a benefit out of it. If that is the case, the safest answer is that if your organization is getting value out of it, it’s time worked.
To compensate the employee for the time, remember that if it’s different from their normal work, you can compensate at a different rate, e.g., the minimum wage, even if their normal rate is higher.
As to the question of paying it as piecework, you can certainly do so as long as you pay at least minimum wage. Piece wages have to equal the minimum wage for the amount of time worked, so you’re relying on the employee to accurately report the actual hours spent.
Lloyd W. Aubry Jr. is of counsel at the San Francisco office of law firm Morrison & Foerster and former California Labor Commissioner.