Q. Our employees consider themselves “professionals” and don’t want to be treated as hourly workers. If our employees agree to it, can we still treat them as “exempt” even if they don’t meet all of the requirements under the FLSA or state law?
A. In a word, no. This question comes up more often than you might think. In some cases, particular industries have developed a practice of treating certain categories of employees as “salaried” and assuming that they are exempt. In others, employees would simply rather be “salaried” or “exempt” because this suggests a higher status than an “hourly” position, or because they prefer not to have to track their time.
Unfortunately for employers, an employee’s choice generally had nothing to do with whether or not the employee can legitimately be classified as “exempt” from overtime requirements under state and federal law. With very few exceptions, the rights provided by the Fair Labor Standards Act and its state equivalents can’t be waived or modified by an agreement with the employee.
So how can employers manage employee expectations without running afoul of the law?
First, there is nothing in the Fair Labor Standards Act that precludes employers from paying a non-exempt employee a “salary.” The employee must still receive extra compensation for any hours in excess of the work time covered by the salary, and must receive 1-1/2 times the “regular rate of pay” for any hours worked in excess of 40 hours in a single workweek. However, if the employee works 40 or fewer hours in a single week and the salary is at least equal to the minimum wage for all hours worked, there is nothing wrong with paying a flat salary.
Unfortunately, this still means that you need to keep a detailed record of each employee’s daily work hours so that you can determine when overtime is owed. While there is no way around this, there are a number of relatively painless timekeeping systems on the market.
Alternatively, many employers practice “payroll by exception,” in which employees who work on a known schedule report only deviations from their schedule, rather than “clocking in” and “clocking out” at the start and end of each shift. Such a system is permissible if it results in an accurate record of time. However, such systems require close attention by supervisors and management to ensure that employees are accurately reporting all deviations from their schedules. For that reason, a system in which employees affirmatively record their actual hours on a daily basis is generally preferable.