HR Hotline: What Happens When an Employee Is Incorrectly Categorized as Exempt?

Q: I employ a long-time executive assistant who is angry with me because I recently changed her compensation status from salaried to hourly. 

I did this because a review of our personnel practices revealed that several of our employees, including this one, were incorrectly categorized as exempt. 

She is now insisting that I switch her back to salaried because she prefers the reliable paycheck, she believes the change in status was a punishment, and she says she will waive her right to overtime. 

Is it OK if I agree to that? She’s threatening a state Department of Labor complaint if I do not agree.

A: No. Neither an employee nor an employer may choose exempt designations, even if both of them agree. 

The question of whether an employee is exempt is strictly a legal determination that involves no choice by the parties involved. 

An exempt employee is identified as such because their duties and salary level make them exempt from state and federal requirements regarding minimum wage, overtime, and recordkeeping.

A legally non-exempt employee cannot simply agree to be exempt, and cannot waive their right to overtime payments.

Who is exempt?

Connecticut law recognizes three primary categories of exempt employees: (1) executive; (2) administrative; and (3) professional.  

State law also recognizes several other specific exempt positions, such as television news editors, certain types of sales employees, and taxi drivers, for example. 

It’s important to remember, however, that job titles alone will not determine an employee’s exempt status. 

Job titles alone will not determine an employee’s exempt status.

In order to be legally exempt, the employee’s duties and salary level must both meet specific requirements.  

The labor department has summarized the requirements for executive, administrative, and professional employees.

It sounds like you made the correct decision in reclassifying your executive assistant. 

Generally speaking, if she doesn’t manage a department, supervise others, make hiring and firing recommendations, use her own discretion and judgment, or perform work requiring advanced knowledge and education, she is likely to be non-exempt. 

Can I continue to pay her salary as and still properly classify her as non-exempt?

Yes, but this would not make a lot of sense.

If you pay a non-exempt employee a regular salary, this will mean that the employee is entitled to both (1) a regular weekly salary, even when she works fewer than her usual hours, and (2) overtime compensation when she works more than her usual hours.

And you still must comply with recordkeeping requirements that track her precise hours of work.

What about the threat to file a complaint?

You will be much more at risk for wage and hour liability if you continue to inappropriately maintain her exempt status.  

The longer you pay her a salary with no overtime and no time card recordkeeping, the longer you expose your company to liability for overtime violations.  

The state labor department presumes the accuracy of an employee’s overtime claims, where an employer cannot offer reliable evidence to the contrary.

The longer you pay her salary with no overtime and no time card recordkeeping, the longer you expose your company to liability.

And, while it is a violation to incorrectly classify an employee as exempt, the reverse is not true: an employer will not violate state or federal law by classifying an exempt employee as non-exempt. 

So, if you choose, you may pay an executive, administrative, or professional employee by the hour.

Thus, the labor department will dismiss a complaint that alleges your “refusal to pay on a salary basis” or a “wrongful designation of non-exempt status.”

Explain to your assistant that the change to hourly status is not a punishment, but a protection—one mandated by law.

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HR problems or issues? Email or call CBIA’s Diane Mokriski at the HR Hotline (860.244.1900) | @HRHotline. The HR Hotline is a free service for CBIA member companies.