Are you exempt or non-exempt? Judging by the questions I get, there is something psychologically satisfying about being declared a “professional.” But there is something more than psychologically satisfying about getting a check with a large amount of overtime pay.
The Fair Labor Standards Act gives a bunch of criteria for evaluating a position to determine whether it is overtime eligible (non-exempt) or not (exempt). Unfortunately, even those of us with magical HR crystal balls can disagree over how a position should be categorized.
It’s to the company’s advantage to have as many exempt positions as possible. However, it’s more to the company’s advantage to be correct, or else they can get hit with lawsuits, fines, and then there’s the issue of back overtime pay. (Most exempt employees don’t punch a clock of any kind. So, there’s no record of what hours actually were worked. So, the back overtime pay is nothing more than a guess–a very expensive guess.)
But, as I said, sometimes it’s not exactly clear. Enter the lawyers–and the lawsuits.
IBM in recent months has been hit with lawsuits filed on behalf of thousands of U.S. employees who claim the company illegally classified them as exempt from federal and state overtime statutes in order to avoid paying them extra whenever they worked more than 40 hours per week.
Bad for IBM, but potentially good for the employees? Well, it depends. Read on:
The good news for those workers is that IBM now plans to grant them so-called “non-exempt” status so they can collect overtime pay. The bad news: IBM will cut their base salaries by 15% to make up the difference, InformationWeek has learned.
The plan has been greeted with howls of protest from affected workers.
So, if you have been someone who has been putting in a straight 40 hours a week, now that you are overtime eligible, you’ll see your paycheck drop substantially. Even if you regularly work more than that, you may not benefit as much as you think you might.
If you were earning $50,000 a year before, that translates into an hourly wage of $24 an hour for a 40 hour work week, or $961 per week. Now, with your 15% pay cut, you are earning $20.43 per hour, or $817 a week. Sure, if you get overtime, you get $30 an hour. You’ve got to work nearly 5 extra hours every week to get your old base salary.
Now, if you were regularly putting in 50 hour work weeks anyway, this is a benefit to you. If you weren’t–well, bummer. The hour you took off last week to go to a doctor appointment? As an exempt employee, it made no difference to your paycheck. As a non-exempt employee? You lose that hour of pay. Same thing goes for the occasional long lunch. Oh, and you need to clock out when you are eating lunch. Technically, you shouldn’t even answer a work related question while on your lunch break.
There are benefits to being exempt and benefits to being nonexempt. Before you call a lawyer and start a class action suit, you want to think through all of these things. And if a lawyer calls you, ask yourself why he’s doing it? Is it for your good or for his financial gain? You may not be pleased with the outcome.