Reclassifying A Position From Exempt To Non-Exempt

In the first installment on FLSA classifications we suggested that employers perform an internal audit to assess compliance with FLSA and state law exemptions from overtime. In this post, we review a key strategic tool to address the misclassifications. Reclassification from exempt to non-exempt is a key compliance step under the FLSA. When done proactively, it helps reduce risk and ensures employees are properly compensated.

When Should You Reclassify?

Reclassification is appropriate when a position no longer meets exempt requirements. Common triggers include:

– Changes in job duties
– Failure to meet salary basis requirements
– Audit findings
– Organizational restructuring
– Increased enforcement risk

Classification should be based on actual duties, not job titles.

Five Steps for Reclassification

1. Conduct a duties-based analysis.

Start with a fresh, objective review of the role:

• Compare current duties to FLSA exemption criteria
• Interview managers or incumbents if needed
• Avoid relying solely on outdated job descriptions

Document your analysis—even informal notes can help demonstrate good-faith compliance.

2. Update the job description.

Before making the change official:

• Revise the job description to reflect actual, current duties
• Ensure alignment between the description and how the job is performed

This becomes a key piece of your compliance record.

3. Determine pay structure and overtime approach.

Moving to non-exempt means the employee is now eligible for overtime. You'll need to decide:

• Hourly vs. salary non-exempt (both are permissible). A salary basis structure works for a consistent weekly schedule, but still has compliance requirements.
• Expected hours and scheduling practices
• Overtime approval and tracking procedures

Also consider whether base pay needs adjustment to account for anticipated overtime.

4. Communicate the change to the employee.

This step is often underestimated. An employee paid on a salary basis will likely be concerned about moving to an hourly pay structure.

• Run pay scenarios to assist the employee in understanding any financial impact
• Frame the change as a compliance-driven update, not a demotion and avoid language that describes pay practices as “wrong” or “unlawful.”
• Clearly explain:
  • Timekeeping requirements
  • Overtime eligibility
• Train managers on how to reinforce the message

Keep an open dialogue with the employee to express concerns or ask questions about the change in the pay structure.

5. Document the process.

Your file should reflect a clear, defensible process:

• Written classification analysis (even brief)
• Updated job description
• Internal approval, e.g. use normal change in status or action forms (HR/legal, if applicable)
• Employee communication or acknowledgment
• Payroll and timekeeping changes

Good documentation is critical if the decision is ever questioned by regulators or in litigation.

Final Thought

Reclassification is a proactive compliance measure that can reduce legal risk when handled properly. Do not hesitate to address misclassifications through a thoughtful reclassification process. It will mitigate damages that can arise from a misclassified position, and the process will demonstrate a good faith compliance effort.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.