Can You Make All Employees Nonexempt?
To be exempt from the minimum wage and overtime pay requirements of the Fair Labor Standards Act, an employee must pass the FLSA job duties test (specific to his or her position) and receive no less than a certain amount of pay. For some positions, there is no minimum pay requirement, only a job duties test.
But, if the employee passes the job duties test, do you have to make him or her exempt?
The short answer is no. According to the Society for Human Resource Management, "There is no requirement to ever make any position exempt." Even if the employee's primary duties clearly qualify him or her for the exemption, you do not have to make him or her exempt.
To start with, employees are nonexempt until proven to be exempt. You don't need to designate employees as nonexempt; they naturally are, unless their job duties and, in some cases, salary/pay make them eligible for exempt status.
But, if you decide to make the employee exempt, you must follow some FLSA standards in order to keep the exemption. If you fail to meet those standards, the exemption will be lost — at which point, the employee will revert to nonexempt, and will be subject to the FLSA's minimum wage and overtime pay provisions.
Should you make employees nonexempt, even though their job duties are exempt? It depends on several factors, including the pros and cons of taking or not taking the exemption. One advantage of taking the exemption is that you don't have to pay overtime to exempt employees who work extra hours. Also, you don't need to track the hours of exempt-salaried employees; this can save you a lot of time and money, administratively.
Exempt employees have much to gain as well. For instance, those who are salaried must receive their full salary each pay period, regardless of hours worked, unless a permissible deduction applies.
It's important to note that many exempt employees are in white-collar positions and have grown accustomed to the privileges that come with being exempt. They are used to receiving a certain level of pay and benefits, and not having to clock in and out. If they are rendered nonexempt —even though their job duties qualify as exempt — morale issues could ensue.
For example, although they would be eligible for overtime, they might find having to clock in and out demoralizing. Also, consistency matters. So, if a position has been established as exempt in your company, it may be best to keep it that way.
Still, there may be times when making the employee nonexempt is the better route — such as if the employee doesn't work a set schedule and you would like to track his or her hours.
Ultimately, this is a complex decision, so be sure to look at the practical and legal ramifications of your decisions.