Exempt Status

We currently have a Sr. Accountant and Accountant that are classified as exempt status. There immediate supervisor believes that they are missed classified and should be non-exempt. The president of the company from his days as an accountant believes they are corretly classified. In researching the wage and hour meanings for these individuals They should be showing independent judgement and discretion in 50% of there job. In reality they should be doing this but, the boss isn't enabling them to do so. what are thoughts on this?


  • 3 Comments sorted by Votes Date Added
  • First, I’m not sure about the 50% rule. I’ve seen several references to it, but I can’t find it in the actual statutes or regulations. The professional exemption is covered in 29 CFR 541.3(d), which says that, to meet the exemption, employees must devote no more than 20 percent of their time to non-exempt activities. At least the version I saw says that.

    Second, titles are relevant, but they do not control whether an employee is exempt. It only matters what people do in actuality, not what they do on paper.

    Finally, whether an employee is exempt from overtime is determined week by week, so it’s entirely possible that your accountants could be entitled to overtime one week but not the next.

    Julie Athey
    Senior Attorney Editor
    M. Lee Smith Publishers

  • There are 2 ways to deal with your situation:

    1. Restructure the jobs so that the employees are doing exempt work. This will also require some training of their supervisor. Then make sure that you hold the employees accountable for the work exempt work they are doing (otherwise, this problem will continue to resurface).

    2. Change the status from exempt to non-exempt. This can cause moral problems. Some employees are proud of their exempt status, and feel that being non-exempt is a demotion. You will also have to determine any back overtime due.

    Any change in the employee's status could cause them to file a complaint with the DOL about overtime pay. The DOL generally is very employee friendly, and of course will hear their story first. As one attorney I know likes to say "Simple formula -- employee fair labor standards act claim = employer loss"

    Good luck!

  • To be exempt from overtime, an employee must fit one of three general exempt categories, executive, professional, or administrative (there are also some wild card categories, not applicable here). Your accountants would only be eligible for exemption under the professional category. To be exempt they must consistently exercise discretion and judgment and their work must require advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study. There's a good 9th Circuit case, O'Dell v. Alyeska Pipeline 856 F.2d 1452 that explains discretion and judgment that your employment counsel could review with you, and there are many cases that deal with whether accountants can be classified as exempt or non-exempt for overtime purposes. This is an important classification, because failure to properly classify an employee can be very expensive for a company. I recommend you check with your labor and employment counsel to be sure you are properly classifying these employees as exempt. You're right in that the determination is based on what they actually do, not what their job title is or what others do in similar positions. Good luck.

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