Clothes do not make the man or woman, and job titles do not turn a nonexempt employee into an exempt employee. The Fair Labor Standards Act has been consistent over its 85-year existence: Job titles don’t determine an employee’s status.
Misclassifying employees, whether done intentionally or by mistake, can land you in trouble. While you might get away with not paying misclassified employees overtime, you’re likely to pay it back and some in potential lawsuits and fines. That’s why it’s important to get it right. One place to look for sources of confusion is in job-title inflation, changing job titles to sound more impressive while the work performed remains relatively the same.
Too many chiefs
“Engineer” used to be the word of choice for job-title inflation. So apartment building supers became maintenance engineers and school janitors became custodial engineers. But this rebranding was back in the 1960s, when engineering was cool because we were in a space race to the moon.
Today’s buzzword is “chief.” So we have such titles as Chief Talent Officer for HR and Chief of Reservations for receptionists, for example. This goes hand-in-hand with the “C-suite,” which a quick Google search tells us has been around since at least 2004.
Now you “c” it, now you don’t
There are lots of reasons for job-title inflation, aside from not wanting to pay overtime. Company org charts are much flatter these days, robbing employees of opportunities to climb the corporate ladder. A fancy job title is one way to reward and retain employees. It can also substitute for raises in a tight economy.
Employees do it, too, sometimes for ego and other times to satisfy algorithms used by job recruiting websites.
Nevertheless, the only letters you need to be concerned with are FLSA. The FLSA considers employees’ job duties as determinative of their status, not their titles. And the duties tests for exempts are precise.
Executive exemption: Executives’ primary duty is managing the business or a department. Executives wear many hats, but each role contributes to the overall success of the business.
- They supervise at least two full-time employees or the equivalent (e.g., four part-time employees).
- They can hire and fire, promote or demote, set and adjust subordinates’ pay rates and work hours, and handle subordinates’ complaints and grievances.
- They plan and control budgets.
- Their suggestions or advice regarding the company’s overall direction is relied upon.
Administrative exemption: Administrators’ work supports the primary business. Their duties test requires a two-step analysis: Determine the type of work they perform (i.e., functionality) and the level or nature of their work (i.e., independence).
- Their regular, periodic and occasional duties are directly related to the employer’s management or general business operations or customers (e.g., they plan, negotiate or represent the company; purchase or promote sales; or troubleshoot or solve problems).
- They use their independent judgment and discretion with respect to matters of significance (e.g., they’re responsible for comparing and evaluating possible courses of conduct and then acting or making decisions based on their analysis).
- They can spend significant amounts of company money.
- They formulate, interpret, or implement management’s policies and can deviate from those policies without prior approval.
- They provide expert advice to management on which the company relies.
- They use their own judgment to solve problems, rather than apply well-established techniques or procedures described in manuals or other sources.
Assessing your employees’ status
The only way to know if exempts’ jobs and job duties coincide is to conduct a job description survey. To minimize the likelihood of having to disclose the findings of the survey to, say, an employee’s attorney, retain outside counsel to conduct it. This way you can claim the attorney-client privilege or the work-product privilege.
Downside: You probably won’t be able to work with the attorneys, so steer them in the right direction beforehand.