Fixing Bad Policies

I just started with a small nonprofit organization and one of my tasks is to look at their classifications. The former COO had a soft heart and wanted everyone to be treated equally. Thus, she classified every employee as Exempt. Now I need to go in and make the proper changes. When I asked the Business Manager if any employee puts in OT she says no because the company allows the employee to counter the extra hours with time off. In order to talk to the Management Team about changing their current policy, I need to have a real understanding of the negatives of conducting business in this manner. Who is watching, what are the legal issues to consider?

My first reaction? Yikes.

Now that I’ve had to think about it, my second reaction is, Double Yikes.

Being a manager is very much like being a parent. It’s fine to be a parent and a friend, but when those two roles come in conflict, you always have to pick being the parent.

It may seem “nice” to classify all employees as exempt, but it’s nice in the same way letting your child eat all their Halloween candy in one sitting is nice. Fun while it lasts, but the consequences can be huge.

Granted, someone has to turn you in so as long as you are a warm loving group you can get away with it. But, don’t count on it.

Possible punishments for misclassifying an employee and not paying overtime when due? (Incidentally, for the most part, it’s okay to give comp time instead of overtime IF no more than 40 hours are worked in a week. This means if someone stays late on Monday they need to take that comp time by Friday or you have to pay overtime. You can’t save it up.)

  • Fine of up to $1000 per violation
  • 6 months jail time
  • initial $10,000 fine for willful violations
  • Doesn’t this sound pleasant?

    Think it won’t happen to you? In 2006

    The Employment Standards Administration’s Wage and Hour Division (WHD) recovered more than $171.5 million in back wages for over 246,000 employees in fiscal year 2006. Back wage collections represent a 3.6 percent increase over back wages collected in fiscal year 2005. The number of workers who received back wages in fiscal year 2006 increased by 2.3 percent over the number receiving back wages in fiscal year 2005. The agency concluded 31,987 compliance actions and assessed nearly $7.9 million in civil money penalties.

    If you want to be “nice” and classify everyone the same, classify everyone as non-exempt. Otherwise, get your checkbook out.

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    6 thoughts on “Fixing Bad Policies

    1. The so called “White Collar Exemptions” were revamped in 2004 DOL regulations, but still remain a source of interpretive confusion or corporate intransigence. The exemptions to minimum wage and overtime requirements apply to executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations. In my experience, the three most frequent errors occur for the following jobs: Working Supervisors; Administrative Assistants; IT Help Desk Employees.

      Corporate intransigence remains for job titles that have traditionally been treated by a company as exempt positions and paid a salary, but which don’t really qualify for any exemption. For example, there are many clerical positions for which an employer tries to recognize the significant contribution and responsibility by treating them as exempt, but these positions don’t meet the “administrative” exemption. An employer’s hesitancy to address the employee relations issue associated with an incorrect exemption is like a ticking time bomb.

    2. Are there penalties that could be applied to organizations if they make changes to job descriptions and do not put the new job through the process of evaluating exempt vs. non-exempt status? Onehealthpro

    3. onehealthpro–

      Absolutely. Some jobs don’t require much analysis–someone who files all day is always going to be non-exempt and the CEO is very unlikely to be anything but exempt.

      But, organizations that don’t pay attention to this can get themselves all sorts of fines.

    4. I worked for a “megabank” that got into trouble in 2001 for mis-classification of employees. And by trouble, I mean “Debt”. We paid out 100’s of thousands of dollars for ONE job code’s misclassification. We also had to pay former employees, which meant trying to find them… not pleasant! Avoid if possible!

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