In a recent BLR webinar, Allen M. Kato outlined the importance of proper classification of nonexempt vs. exempt employees. He explained why employers should conduct payroll audits to ensure that employees are properly classified, and he also talked about the most common exemptions. After the webinar, Kato lent his expertise to answer questions from the participants. Here’s a recap of the question and answer session.
Q: When using the executive exemption classification, what should you do about an executive staff position that does not have direct reports, such as general counsel?
A: The main thing to look at here is that a position may qualify under more than one exemption. The position in question in this example – "even if it doesn’t fit within the executive exemption because there’s no direct reports – will none-the-less come within the professional [exemption] because that person is a licensed professional." Kato explained. Even if we weren’t discussing general counsel – let’s say it’s a higher staff position – it may come within the administrative exemption: someone working on issues directly related to management policies or general business operations.
Q: What do you suggest an employer should do if put in a position where an employee claims you have improperly classified a position as exempt?
A: When this scenario happens, you want to conduct an immediate audit of the position or positions in question. At the end of the audit process, if you conclude that the position is properly classified as exempt, then the legal counsel will likely go back to the complainant and explain the conclusion and the reasons behind it.
Conversely, if the audit team concludes that the position was improperly classified as exempt, then you have to address the situation. You must determine the best solution in the given context. Always engage legal counsel in this scenario.
In conclusion, if you want to be sure that all of your employees accurately classified as nonexempt vs. exempt, you should conduct a top-to-bottom review of your pay practices, with help from an experienced employment law attorney. Don’t risk non-compliance. Conduct an internal payroll self-audit that evaluates your current policies and practices, and discover mistakes before enforcement officials or employee attorneys do it for you.
For more information on nonexempt vs. exempt classification and conducting internal pay practice audits, order the webinar recording for "HR’s Pay Practice Checkup: How to Find and Fix Exemption and Other Costly Errors,". To register for a future webinar, visit http://catalog.blr.com/audio.
Allen Kato is an attorney in the Employment Practices Group of Fenwick & West LLP in San Francisco. His practice concentrates exclusively on representing management in equal employment opportunity, wage and hour, wrongful termination, privacy, unfair competition, and trade secret matters, and litigating individual and class action lawsuits before courts and agencies.