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Exemption Status Misunderstandings

  • Author: Kathy Barany

    Talk about opening up a can of worms...or disgrunteld employees as the case may sometimes be.  This whole deal about exemption status, being able to classify someone as exempt (some say salaried) versus non-exempt (hourly), so far is causing more trouble than it is worth.

    First, many employers don't get what "exempt" means.  Technically it means discharged, or freed, or better yet "immune".  What it really means is that the Department of Labor has said that exempt employees do not have to be paid overtime and do not have to record the hours/time they work.  You can pay them a salary, and work them as many hours a week as you want.

    HOWEVER, what is misunderstood is that employers cannot arbitarily make someone exempt; there are rules to follow in order to be able to legally classify them as exempt.

    This new rule, which says that effective 12/1/2016 "real" exempt employees have to be paid at least $913 per week if they are in the Executive, Administrative, or Professional categories, has everyone confused.  I've heard from clients that they "need" to increase salaries to $913 a week, and they cannot afford it, or from employees that say "now my employer has to give me a raise because I am exempt", or better yet "I don't have to do anything because their duties are not changing."  I have also heard how inconvenient it will be to have to record hours (by the way, the DOL doesn't care how inconvenient it is).

    The truth of the matter is that employers do NOT have to increase the salary of any employee to $913 UNLESS they want them to remain exempt.  And even then, the employer has to make sure the duties meet the duties test that the DOL has set forth.  The other truth is that if an employee does not earn $913 a week, they CANNOT be exempt; you must record all hours worked and pay them overtime for any hours worked in excess of 40 per work week.

    The above is federal law; NYS law currently requires a minimum salary threshold of $675.  NYS has historically adopted the federal DOL's duties tests.  Keep in mind that whichever law benefits the employee the most (federal or state) prevails and the employer must follow that low.   That means that effective 12/1/2016 you cannot classify someone as exempt if they earn between $675 and $913.

    We have our current President to thank for this mess.  Let's add a twist to this....a new President will be in office January 1, 2017.  Will things change after that?  Maybe.  In any event, for now we have to proceed to follow the new law that will go into effect December 1, 2016.

    Note I haven't even addressed the employee relations end of will be a huge adjustment for some to have to record hours, and a blow to some egos to be kept track of, so please tread lightly when implementing this stuff.