We created a position 3 years ago that we now believe was misclassified as exempt/salaried and should have been non-exempt/hourly. We have had an individual in the position for the past 3 years and are going to change them to hourly ASAP. Importantly, we also want to address potential overtime worked during this time. What is a typical “good faith” commitment to recognize our error?
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Thank you for your inquiry regarding changing an existing exempt position to a nonexempt position.
The information below was excerpted from a BLR HR Daily Advisor article. It was provided in response to a question about how managing a situation like the one you reference in your inquiry:
“In this situation, it is advisable to interview the incumbent—first to confirm the proper classification for the position and subsequently to determine the estimated overtime owed. After completing the process, document the change to the classification and the payment of the overtime wages.
Obtain the employee’s acknowledgement that the estimated overtime hours are accurate to his or her best knowledge. In the event the employee later sues for additional overtime, the employee will be hard-pressed to explain why his or her best estimate at the time should be set aside in favor of his later “recollection.”
[P]aying the back pay does provide several benefits. It stops any further liability from accruing on the misclassifications and demonstrates your good faith if your classification practices are later challenged. Further, it locks in the employee’s agreement to the estimated overtime.”
You may also find helpful a DOL opinion letter regarding the calculation of the overtime rate for back pay in these situations (see: http://www.dol.gov/whd/opinion/FLSA/2009/2009_01_14_03_FLSA.htm). Because of the potential for a wage claim, we strongly recommend consultation with local employment counsel who can review the employee’s duties, salary, all other relevant facts and circumstances, and advise you on how to proceed.