Exempt or Non-Exempt?

Proper employee classification now, may mean avoiding expense in the future.

There are three main categories of employees that are generally not entitled to overtime: administrative, professional and executive. These categories are typically known as exempt, but there may be some blurring of the lines. Administrative classification require that those employees have decision-making authority and may be involved with contract negotiations. The professional classification are for those employees with advanced degrees or specific training, but only if they are using those skills while on the job. A lawyer driving a forklift should not be classified as exempt. The executive exemption usually is used for management running the company or a particular business unit. These are all fine lines and mis-classifying employees may cost you. Department of Labor audits usually come on the heals of an employee complaint. If you have misclassified the employee, you may owe back pay for the entire term of that person's employment. In 2006, the Department of Labor collected over $170 million in back wages. In addition to back pay you most likely will have to pay attorney and consulting fees.

Be careful of docking an employee's pay for coming in late, missing a workday or lost company property. When you dock pay you are linking it to the quality of their work. Exempt employees are "guaranteed" regular pay.

If you have questions about proper employee classification, speak with an attorney or business consultant that deals specifically with employment matters; it may help avoid trouble in the future.