Can my employer reclassify me as non-exempt to avoid the new minimum salary requirement? [closed]

Question

If you are currently an exempt employee according to the classification of exempt, is a company allowed to make you non-exempt to keep from paying you the minimum salary requirement to remain exempt?

Answer 1

Note: due to a preliminary injunction issued by a federal court judge on November 22^nd the new overtime rule is on hold and will not go in effect on December 1^st 2016.

As of June 2017, the rules remain on hold with the DOL issuing an RFI while the administration is expected to block the rules or, more likely, significantly reduce the salary requirement.

---

A company cannot arbitrarily reclassify its employees. If you do not meet the legal requirement to classify for exempt status then you are officially consider non-exempt. Heavy fines are applied to companies who incorrectly classify non-exempt employees as exempt.

The upcoming changes, which will go into effect on December 1^st 2016 change the minimum salary treshhold to classify as exempt from FLSA overtime rules. As Alison Green summarises in her article on the changes:

• Employers must pay overtime (time and a half) for work beyond 40 hours in a week to all workers earning up to $913 per week or $47,476 annually.
• Up to 10% of the salary level used to make the calculation can come from non-discretionary bonuses, incentive payment, and commissions. (Previously, there’s been no provision to count those.)
• The salary and compensation levels will be updated every three years, to meet the 40th percentile of full-time salaried workers in the lowest-wage Census region (currently the South).
• No changes were made to the “duties test” to determine exemption.

The only people impacted by this change are those who earn less than $47,476 annually and are currently classified as exempt. That group will henceforth be required to receive overtime pay as they are no longer considered exempt.

Alison Green goes on to state the possible actions your employer may take:

• Your employer may limit you from working overtime (in order to avoid new costs of paying for that overtime).
• If you regularly work more than 40 hours a week, your employer might choose to reduce your base hourly wage to account for the overtime pay you’ll need to receive, in order to ensure that your overall annual compensation stays about where it is now.
• If you’re used to having flexibility in your schedule, that might change, depending on how your employer handles this. For example, let’s say that currently your employer lets you work 50 hours this week, 35 hours next week and 40 hours the following week, trusting you to simply get the job done without scrutinizing your hours. Under the new rule, that will probably be much harder to do, since those hours over 40 will now cost your employer more.
• If you’re pretty close to the $47,476 threshold and/or you work significant amounts of overtime, your employer may raise your salary to meet it in order to keep you exempt. If that happens, nothing else in the list above should apply to you.

---

To answer your specific question: your employer is not only allowed to reclassify you, they are legally required to do so.

For full details on exempt versus non-exempt status and details on the other checks that need to be met, see my answer here.

Answer 2

You are thinking about this wrong.

The issue is not 'there is a minimum wage for exempt employees', the issue is 'if you are not paid a certain amount you cannot be exempt'.

It is within the rights of your employer to keep your wages below the minimum. However if they do you automatically become non-exempt. Again that's something your employer is allowed to do, BUT if they do that they will have to start paying you overtime, and all the other things that apply to non-exempt workers.