Re-evaluation of Worker Classification & Other Employment Strategies In The Face of A Business Slowdown

Cynthia Stamer
September 25, 2008 — 1,577 views  
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Businesses concerned the uncertain economy will adversely impact their business should act early to evaluate their existing worker classification and other employment practices for opportunities to manage costs and promote efficiency.  For example, a business anticipating a business slowdown that currently employs workers covered by the Fair Labor Standards Act (FLSA) minimum wage and overtime rules on a salaried, non-exempt basis rather than a straight hourly basis often can reduce costs by converting these employees to a straight hourly pay arrangement.

The recordkeeping mandates of the FLSA require that employers keep records of actual hours worked by non-exempt employees regardless of whether the employer chooses to compensate its non-exempt workers on a straight hourly or a salaried, non-exempt basis.   Employers that commit to pay a non-exempt worker a salary when it is foreseeable that the worker will actually work less than a full 40 hours a week often takes on unnecessary labor expense. 

When an employer's workload needs are at a peak, compensating non-exempt workers on a salaried, non-exempt basis in conformity with the applicable FLSA regulations and recordkeeping requirements can help minimize the overtime costs under certain circumstance.  Continuing to compensate non-exempt employees on a salaried basis when the employer does not expect the worker to work 40 or more hours per week can drive up labor costs, however.  Like exempt salaried employees, the FLSA generally requires that an employer pay non-exempt employees compensated on a salaried basis the full amount of the promised salary for the entire pay period regardless of the actual hours worked during that pay period if they work at all during that pay period.  The FLSA also generally requires that employers also pay salaried, non-exempt workers that work more than 40 hours a week overtime calculated in accordance with the applicable FLSA regulations.  Consequently, businesses concerned about labor costs that are compensating non-exempt workers on a salaried basis who the business does not expect to work regularly 40 or more hours a week may be able to minimize wage costs by converting those workers to a straight hourly pay arrangement. 

To avoid unintentionally violating the FLSA overtime and recordkeeping requirements, businesses also should review any existing arrangements under which workers are compensated on a salaried basis to verify either that the employee qualifies as exempt under the FLSA, or that the arrangement is documented and administered to ensure that the employing business can demonstrate its compliance with the overtime and other mandates of the FLSA with respect to its workers.

Management attorney and consultant Cynthia Marcotte Stamer helps businesses, governments and associations solve problems, develop and implement strategies to manage people, processes, and regulatory exposures to achieve their business and operational objectives and manage legal, operational and other risks. When working with clients, Ms. Stamer combines a client-oriented approach with an extensive practical and technical knowledge of human resources, insurance, employee benefits, health care, privacy & security, corporate compliance and other legal matters to assist clients to formulate and administer pragmatic operational and risk management strategies and effective internal controls taking into account the financial, operational, political, legal and other realities confronting the client.  If you need help reviewing and updating your businesses employment practices in response to a changing business environment,  or  other assistance with regard to any other workforce management, employee benefits or compensation concern, you may contact Cynthia Marcotte Stamer at 972.419.7188 or a [email protected]  You also can find additional tips on recession readying your workforce  and other resources and information on human resources and internal controls matters by logging into to the resources available at CynthiaStamer.com, or contact Cynthia Marcotte Stamer at [email protected]

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Cynthia Marcotte Stamer, is nationally and internationally recognized for her work assisting businesses, governments, and other entities to develop creative strategies for dealing with employee benefit and related human resources, insurance, health care and finance concerns. Ms. Stamer helps businesses design, administer and defend cost-effective employee benefit other human resources programs, policies and procedures to meet their budgetary and other business objectives.