California Wage Law Attorney

Can an Employer Change an Employee from Salary to Hourly

July 16, 2017 Overtime 0
Can an Employer Change an Employee from Salary to Hourly - California Wage Law Attorney

Can an Employer Change an Employee from Salary to Hourly

In the United States of America, when the status of an employee is modified by the employer, it is advisable to prepare documentation that justifies the change (if needed by the U.S. Department of Labor Wage and Hour Division).

It is the Fair Labor Standards Act (FLSA), which oversees employment activities related to exempt, nonexempt, salaried and hourly employee status. This means that it could possibly conduct an investigation and even charge penalties or fines if an employer is found to consistently reclassify employees (i.e. from salary to hourly and vice-versa).

Switching employee status

In 2016, the Department of Labor released its long-impending overtime rule that offered three distinct compliance options to employers. These are:

  • Raise the salary of non-exempt employees to help those people hold the exempt status
  • Reclassify salaried workers as hourly by making adjustments to the base pay, thereby accounting for overtime
  • Reclassify hourly workers as salaried workers

The second option, i.e. reclassification of salaried workers as hourly workers is perhaps the most cost-effective. When done correctly, it allows employees to earn the exact amount of money they earned prior to the status change.

However, when reclassifying employees, an employer has to take a lot of other factors into consideration than just the monetary aspects.

Misclassifying employee status

A lot of times, employers who consistently reclassify employee statuses, might be held guilty for misclassifying the employees. The fact is that the U.S. Department of Labor Wage and Hour Division is not really in favor of employers who make frequent switches. Even then, an employer has the right to change the status of its employees (salaried, hourly, exempt and nonexempt) during the course of the employment, provided they offer a sound, documented justification for it.