Billable workers and FLSA rules

[Incognito]

Good morning -

We have employees who are contracted out. These workers would fall under the exempt category based on their job, however as we are billing the company by the hour for these employees, is it okay to pay them by the hour? Many of them work 10-20 hours OT during peak times but it can fall back to 40 -45 hours during other periods. We want to make sure they are compensated fairly and more so during the peak periods which can last for several weeks. I understand paying someone as exempt when they should really be non-exempt can be an issue, but wasn't sure if it was an issue going the other way.

Thanks.

 

[Betty3]

Exempt employees can be paid on an hourly basis.

 

[cbg]

Correction - some exempt employees can be paid on an hourly basis. If the employee is exempt under the Executive or Administrative exemption, paying them on an hourly basis would convert them to non-exempt.

What you might want to consider is a series of bonuses during the busy time, rather than trying to do an hour-for-hour compensation. That has a nasty way of backfiring on you.

 

[Betty3]

Thank you cbg - it's true paying "some" exempt employees hourly may convert them to hourly non-exempt.

 

[Incognito]

The employees in question are classified as "professional." I thought about the bonus aspect and originally believed flat OT would be the easier way to go. Now that I am re-thinking it, salaried with bonus (ie their OT hours) might work better. I appreciate everyone's input. Of course, if I am missing something, I'm happy to get more advice. This business is a different world for me so I have to look at things a bit differently but obviously still stay within the legal boundaries.

 

[Betty3]

I concur with cbg that bonuses are probably the best way to go.

 

[Elle]

I wouldn't tie the bonus directly to hours worked as it just looks like you are treating them as non-exempt.

 

[DAWW]

Agreed. Past that "Exempt" is a federal law (FLSA) concept. FLSA requires most employees to be paid minimum wage and overtime. Under FSLA, if an employee is Exempt, it means that they fall under one of the 100 or exceptions defined in FLSA. All Exempt means is that the employee falls under on these exceptions and per the rules of that particular exception, the normal rules for MW, OT or both are not applicable.

Did you know that Sheepherders are Exempt? So are most farmworkers, and people who fish professionally. They are Exempt from the OT premium requirement but not from MW. They can be paid hourly (but do not have to be) and must be paid at least MW on a workweek basis. This is not what most people think of when they say Exempt. There are exactly four Exempt classifications with a "salary basis" requirement (Administrative, Executive, Professional, IT Professional) and the last two of those can sometimes by paid Hourly.

When you say someone is Exempt, you need to know why they are Exempt. Exactly which FLSA classification do they fall under. Then the rules for that specific classification must be followed. Another example, Outside Sales is Exempt from both MW and OT. You literally do not need to ever pay an employee anything under t his classification. It is indeed for commission only employees, and has some tough job duties requirements.