HR Management & Compliance

7 Most Common Misconceptions Around Exemptions

Exemption mistakes mean enormous liability for employers, yet many put surprisingly little effort into their classification decisions. Even when they are sincerely trying to comply with the law, many employers misunderstand or misapply exemptions.

To identify the most common exemption myths, we turned to BLR’s Wage & Hour Compliance—Practical Solutions for HR.

It offers the following common mistakes and fallacies regarding FLSA exemptions:

  1. Employees who are paid a salary are exempt. (First of all, exemption decisions are based on the job duties and responsibilities, not on the fact of being paid hourly or by salary. There is a category of employees who are “salaried nonexempt.” These employees are not paid extra for the hours they work over 40 in a week; however, they are due the overtime premium when they work overtime.)
  2. If an employee’s job title is that of manager, supervisor, or administrator, he or she is exempt. (Title is not determinative; again, the job duties, not the title, determine the exemption.)
  3. Highly compensated employees are exempt. (Highly compensated employees are more likely to be exempt, but that is not the determining factor.)
  4. Employees who are college educated and perform white-collar office work are exempt. (Again, job duties, not education or clothing, are the determinates of the exemption.)
  5. Employees who have advanced degrees are exempt. (Same story.)

Are class action lawyers peering at your comp practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Try it for 30 days … on us.

  1. If employees prefer to be paid a salary and do not want to record their time, it is OK to treat them as exempt. (Employees can’t give up their rights under the Fair Labor Standards Act. And employers have to maintain their obligations under the Act, including tracking hours worked and paying overtime.)
  2. If employees who have been classified as exempt don’t work overtime, it doesn’t matter if they are misclassified. (Perhaps their amount of pay won’t be affected, but the employer will still be violating provisions of the FLSA. For example, the recordkeeping requirements of the FLSA must be adhered to, and there are other tricky situations relating to meal periods, breaks, time off, and leave that will cause trouble (and cost big money) eventually.

Any employer that has classified employees as exempt under any of the rationales above should take a second look at those decisions as soon as possible.

Figuring out who’s exempt and who’s not—just one of every comp manager’s wage/hour challenges. How about the regular rate for overtime? Prevailing wage? Mobile devices after hours—the list of ways you can get into trouble seems endless. How do you really know if your managers and supervisors are following your guidelines? There’s only one way to find out what sort of compensation shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based program called FLSA Wage and Hour Self-Audit. Why are checklists so great? Because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit, and fix what needs fixing, before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s FLSA Wage & Hour Self-Audit Guide. It is both effective and easy to use, and even won an award for those features. Here’s what customers like about it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated the FLSA’s endless legalese into understandable terms.
  • Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Find out more.  

  • Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
  • Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
  • Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s FLSA Wage & Hour Self-Audit Guide includes all the changes.

You can examine BLR’s FLSA Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it.