Can Employees Agree to Be Exempt?

In a word, no. This question comes up more often than you might think. We get these calls all the time! In some cases, particular industries have developed a practice of treating certain categories of employees as “salaried” and assuming that they are not 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 is state equivalents can’t be waived or modified by an agreement with the employee. 

Please understand, 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. 

Keep in mind 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.

There are many employers who 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 very problematic and 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 not only preferable but in accordance with the state and federal requirements.  

Next Week-Calculating Overtime for Salaried Employees! Stay Tuned!