If you reclassify employees after a self-audit, you’ll likely face some tough questions, especially about back pay. Attorneys Allen Kato and Saundra Riley recently offered tips on how to respond.
But first, here is Kato’s third option for dealing with reclassification (see yesterday’s issue of the Advisor for the first two).
(The attorneys are associated with the San Francisco and Mountain View offices of law firm Fenwick & West, LLP.)
3. Reclassify with no backpay. With this approach, caution is needed about involving the incumbent in the audit process. Reclassifying the position after interviewing the employee is likely to pique his or her interest in the change and may raise questions about why the reclassification is occurring and why you’re not paying overtime for past work.
What’s more, if the incumbent has been involved in the audit, portions of the audit (if not the entire audit) would lose the attorney-client privilege. This means that in a lawsuit, you could be required to produce documents that would reveal that you knew about the problem but failed to compensate affected employees for back overtime. Still, this strategy minimizes the employer’s immediate costs and stems further liability.
Answering Tough Employee Questions
Employees whose jobs are subject to reclassification are often up in arms. Sometimes it’s the money, but sometimes it’s the prestige. For example, say you’ve had to reclassify an exempt person to nonexempt. (This might happen in a job that used to require significant judgment but now requires none because decisions are computerized.) That employee may say, "But I don’t want to be hourly. I’m an executive."
Going the other direction, nonexempt to exempt, an employee may say, "I need that overtime to make ends meet."
But the primary legal issue is whether back overtime is owed to employees who are switched from exempt to nonexempt. Here are Kato and Riley’s suggestions for answering tough questions.
Q: You interviewed me about my duties and I haven’t heard anything
further. What is happening?
A. The company audited certain positions to confirm the position’s job duties. Thank you for your help with the process. If anything further is needed, we’ll contact you.
Q: Why are you reclassifying my position?
A. The company audited your position and determined, going forward, your position should be treated as nonexempt.
Q: I don’t want to punch a clock. Why can’t my position be exempt?
A: I understand that it might be frustrating, but the company takes compliance with its legal obligations seriously and believes it best accomplishes that compliance by treating your position as nonexempt.
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Q: If my position is now nonexempt and my job duties have not changed, don’t you owe me overtime pay for all the past overtime?
A: The company reclassified your position [insert appropriate
reason, for instance, “as part of a restructuring of the position” and/or “out of an abundance of caution” ], but we remain confident that we could have continued to classify the position as exempt from overtime. Accordingly, you are not owed any overtime.
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Just as a point of discussion on the “answers to tough employee questions” question 4. If you respond to the employee that “we remain confident that we could have continued to classify the position as exempt from overtime” the most likely response will be “then why didn’t you?”. We’ve recently had to reclassify a position, and one of our responses to question 4, was to let the employees know that although the CURRENT duties have not changed, the duties that initially caused the position to be classified as exempt are no longer part of the position, and therefore the position became nonexempt due to the evolution of the position from its inception to current times.