HR Hotline: Exempt or Nonexempt?

HR & Safety

Q: We pay a supervisor $18 per hour. He works 40 hours per week fairly consistently, supervising five production employees. He provides a lot of input on personnel issues related to his staff, including staffing needs, hiring, firing, and discipline. Because of new production orders, we anticipate a longer work schedule for the foreseeable future, likely 45 to 50 hours per week. Must we pay him overtime, or is he exempt as a supervisor? If we have to pay him an additional amount, can we simply agree upon a mutually acceptable figure for the additional hours?

Call Mark Soycher at the HR Hotline: 860.244.1900.

Call Mark Soycher at the HR Hotline: 860.244.1900.

A: You may have an overtime compliance problem, unless you change this supervisor’s compensation terms. Whether an employee is exempt from overtime under state and federal law depends on job duties and salary.
To fulfill the “duties” test for exempt status, the employee’s primary duty must be to perform tasks of an exempt nature, based on actual job responsibilities. The Connecticut Department of Labor (DOL) provides detailed descriptions of the exempt categories: Executive, Administrative, and Professional: but suffice it to say that job descriptions and job titles alone are not enough to determine exempt or nonexempt status, particularly because they often do not accurately reflect the employee’s actual duties.
If your description of your supervisor’s job duties is accurate, it appears he meets the duties test under the Executive Exemption category. However, exempt status also requires meeting the “salary test.” The employee must receive a consistent, guaranteed weekly salary: a predetermined amount of compensation each pay period that is not reduced because of variations in the quality or quantity of the employee’s work.
In your case, determining your supervisor’s weekly pay based on an hourly rate of $18 fails to meet this test. As a result, you must pay him at a time-and-a-half rate of $27 per hour ($18 x 1.5) for all hours worked above 40 hours per week.
To overcome this problem, you might change his compensation terms from hourly to a guaranteed fixed weekly salary of $720 per week ($18 per hour x 40 hours), which would not be reduced if he worked fewer than 40 hours. That way, he would fulfill both the salary test and the duties test for exempt status. His position could then be classified as exempt from overtime. In that case, it would be permissible for you to require him to work any additional hours necessary to complete his job responsibilities without having to provide him additional pay for the extra hours.
If you still wanted to provide some additional pay to reward his extra availability and effort, you could do so without having to use the overtime calculation. You could calculate the additional pay based on any formula you wish, for example, a flat amount or some production-related figure, or even an hourly amount, but only for the additional hours, leaving the basic weekly guaranteed salary in place.


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