Shari’s Solutions: FMLA Leave, Exempt vs. Nonexempt Workers, Frequent Reclassifications

By Shari Lau Aug 25, 2016
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Advice on all things HR from Shari Lau, SHRM-SCP, SHRM’s knowledge manager. 

E-mail your questions to Shari at AskShari@shrm.org.

Can we transfer employees on intermittent medical leave to different positions if doing so meets our business needs?

While workers on intermittent leave can put a strain on business operations, there are strict limitations under the federal Family and Medical Leave Act (FMLA) as to when an employer can require these employees to transfer to alternative positions. 

An employer may offer a different job, but in most cases the individual’s acceptance must be voluntary.

There are a few exceptions. A job transfer can be required when the absences are “foreseeable based on planned medical treatment” for either the worker or the family member that he or she is caring for, according to FMLA regulations. Such treatments could include weekly chemotherapy or dialysis, regular physical therapy, or even weekly counseling sessions.

New parents are another example. Under the FMLA, employees must be allowed to take off for 12 consecutive weeks to bond with their infant or newly adopted or fostered child—but they needn’t be permitted intermittent leave for this purpose. If they are granted such leave, however, the company can require these employees to transfer to a different job during the period of intermittent leave. For example, if Eric wants to take four hours of FMLA leave every day for 20 weeks to be with his newborn and the employer allows it, the company could move Eric to an alternative role. But once Eric no longer needs FMLA leave, the employer must restore him to his regular position.

In contrast, employees who miss work on an unscheduled basis, such as for recurring migraines, can’t be forcibly transferred to another position. In reality, those unforeseeable absences create the most difficulty for workforce scheduling, so the regulations seem a bit backward.

Even if an employee would accept a voluntary transfer while on FMLA leave, it’s not a realistic option for many smaller businesses. How many alternative jobs do they have? Besides, the FMLA requires that the individual receive the same pay and benefits for the alternative position, so the company could end up with an employee doing less work for the same pay—which may cause morale problems for those who regularly hold the position at lower pay. 

And, while many employees may be eager to get back to their original jobs, some would have no incentive to do so if the other role is less taxing. 

Therefore, even when an employer is allowed to offer an alternative position, it might not be worth the trouble.

Can we classify some employees as exempt and others in the same position as nonexempt?

Yes. There is nothing in the federal Fair Labor Standards Act that would prohibit an employer from classifying two employees in the same position differently. Indeed, it is an option that employers may need to consider in light of the new federal overtime rule that goes into effect on Dec. 1. That’s when the federal annual salary threshold for employees exempt from overtime will increase to $47,476 from $23,660.

But while there is no legal requirement to use just one designation for the same job title, there are some potential drawbacks to having different classifications for the same position.

First, it could raise a red flag that attracts the close scrutiny of a Labor Department auditor seeking to determine whether the job duties qualify the position to be exempt from overtime protections. Make sure you have adequate documentation to substantiate the classification. 

Second, it could raise questions of possible discrimination if, for example, only women or minorities are made exempt from overtime. Remember, the payment of overtime is considered to be more beneficial to employees than exempt status under the law, so be mindful of the distribution of all legally protected classes when separating employees in the same job this way. Courts don’t take it lightly when employers misclassify workers, whether inadvertently or intentionally, to avoid paying them overtime.

Third, it could stir resentment. Some exempt employees may feel cheated that they aren’t being paid overtime for putting in more than 40 hours a week, while hourly workers might perceive that their salaried colleagues are compensated more for doing less or receive additional benefits and prestige. The perception of pay inequity could become a reality if hourly workers earn enough overtime to eclipse the earnings of the salaried workers. That could lead to lower morale and productivity.

When employees believe the terms and conditions of work are unfair, the atmosphere becomes ripe for unionization. Any existing collective bargaining agreement should be reviewed for provisions that might prohibit classifying employees with the same job title differently.

Can we change an exempt employee to nonexempt and back again as often as we want?

While you can change the Fair Labor Standards Act classification of a position, varying it frequently would likely cause trouble. 

I’ve often heard HR professionals suggest this option to curb an employee’s attendance problem. When exempt workers know their salary can’t be touched as long as they perform some work in a day or week and disciplinary measures to address the absences have proven ineffective, reclassifying the position to hourly and docking pay for any unscheduled absences could solve the issue fairly quickly. It’s not unlawful to do this. But if the status changes back and forth often (say, every few months), a Labor Department auditor might question whether the position was ever really exempt in the first place.

Good documentation can resolve the classification issue, especially for others in the same position who are still classified as exempt, but frequent reclassification might not be worth the trouble and attention it could draw. 

More employers are asking about this since the announcement of the new federal overtime regulations scheduled to take effect in December, doubling the salary threshold for positions to be exempt from overtime. Currently exempt employees earning below the new threshold must be paid overtime as nonexempt workers under the new rule. However, during a company’s busy season, those same individuals may work a lot of overtime, and their hourly pay plus overtime will likely exceed the minimum salary level. So can employers reclassify these folks as exempt during hectic periods?

Such a system might technically be allowed—if the employees are paid overtime when the position is classified as nonexempt and are provided a guaranteed salary when it is considered exempt. 

However, without clear guidance from the Labor Department, it’s risky. Changing a position’s classification from nonexempt to exempt during busy times might be seen as an attempt to avoid paying overtime; conversely, changing from exempt to nonexempt during slow times might be interpreted as a way to avoid paying an exempt position’s full salary. Additionally, your employees might start feeling litigious and give the Labor Department a ring. Even if you emerge victorious, the costs of defending your position and the hit to the company’s reputation would most likely not be worth it.    

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