An Employee Asks: What Happens When I'm Forced to Go Non-Exempt?

Business.com / HR Solutions / Last Modified: February 22, 2017

The new overtime idea from the Department of Labor may cause all parties involved to be negatively affected. Here are the facts.

I have been an exempt supervisor for the past ten years. With all this talk of the changes to exempt federal minimum wage, I have some questions. I've already heard rumors in my company that their intentions are to make the exempt employees who are making less than the proposed new minimum wage into nonexempt employees and schedule us for 36 hours per week.

My question is, will they be able to lower my pay below what I'm making now? In other words, say I am paid salary, and if it was to be broken down hourly it would be $16/hour, can they decide they want to give me $14/hour? The other question is if they change me to nonexempt without changing my job duties will I be able to sue for two years of back overtime?

Thanks for you help.

I'd just like to point out that this new idea from the Department of Labor doesn't make everyone all giddy—not even the people who are going to benefit from their latest change. 

Related Article: Exempt vs Non-Exempt Employees: Know the Difference

1. Yes, Your Pay Rate Can Be Lowered

As long as they tell you in advance, they can. Most likely, your hourly rate will be lower than your current salary in order to compensate for any overtime that you work. Everyone who is being switched from exempt to non-exempt during this new rule must be notified about how it's going to work, so keep your eyes open.

If you're used to working a ton of overtime and they want to keep you working the same amount of overtime, you may see your hourly rate be incredibly low. It just has to be minimum wage.

2. They Can Cut Your Hours So You Don't Earn Any Overtime

Yep. Even if you're working 50 hours now, they can cap you out at 36, or 40, or whatever they choose and fire you if you work more than that. Of course, they do have to pay you for all hours worked (including overtime when applicable), but they don't have to give you the hours you want. 

3. No, You Can't Sue for Back Overtime

I'm presuming you are correctly classified as exempt right now. If you're managing two or more employees or have a professional exemption, then it's not the company that has made a mistake in not paying you overtime. The government has decided to change the rule. The reason why you are becoming non-exempt is because you're not making $50,440 a year, not because you were incorrectly classified.

And here are some answers to questions that you didn't ask, but you or others might need to know. 

4. It is Possible, But Unlikely, That This Will Be a Financial Windfall for You

Some companies may just take your current salary, divide by 40 hours a week, and make that your hourly rate, and give you overtime on top of that. That would be great for your wallet, but it's unlikely to happen. Companies pay what the market will bear, and right now that's probably what you're making. 

5. This Kills Professional Part-Time

There are no pro-rating exceptions, according to Jim Coleman at Constangy Law. This means if you're a professional person who is currently working as an exempt part timer, your salary still has to be at $50,440 even if you're only working 20 hours a week in order to be exempt.

This means that if you're not making a six-figure salary, dropping to part-time will make you non-exempt. You'll have to track all your hours, not be paid when you go to a doctor's appointment (like you are now), and be classified differently than the full-time employees who are doing the exact same job. Stupid, but reality.

The way around the pay thing is to make someone salaried non-exempt. This means that they receive the same amount of pay every week up to 40 hours per week. This is legal. However, because of the non-exempt status, you still have to track all hours worked. Even if you never even crack 30 hours.

Related Article: Goodbye Contractor, Hello IT Staff: Managed IT Services vs. Hourly Rates

6. You'll Have to Change How Your Work—and So Will Your Boss

It's not a big deal (other than work-life balance) for an exempt employee to do some paperwork at home, or take a phone call on the weekend. It will be now. You'll need to record every hour worked and be paid for all hours worked.

So, catching up on paperwork at home means a bigger check—yay for you, but your boss will not be thrilled. Your boss may be used to just giving you a quick call, but that has to stop or you have to record it on your time sheet.

7. If a Good Amount of Your Pay Will Come From Overtime, Vacation Pay Stinks

Vacation is generally paid out based on an 8 hour day. So, if you normally work 10 hours a day, you're pay is including 2 hours of overtime. But, go on vacation, and you'll see a tiny paycheck.

For example, if your pay rate is $15 per hour, with 10 hours of overtime, your weekly paycheck will be $825 before tax (40*15 + 10*22.50), but when you go on vacation, you'll only see $600. Plan accordingly.

 

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