Overtime Pay

Dear Management Doctor:

Our legal department has determined that under FLSA rules planners are nonexempt personnel and are to be reclassified as hourly wage earners, whereas until now they have been salaried employees. This interpretation will change the professional status of our three certified planners, and does very little to encourage our up and coming staff to pursue professional certification. Is this something to be concerned about? How do other cities classify their planners? Can you provide any information that can be used to clarify or address this interpretation? I know that APA/AICP is running a job analysis survey but don't know if it could address this matter. I would appreciate hearing from you.

Thank you,

Julianne R. Rankin, FAICP
City of McAllen

Dear Juli,

I never start my responses by saying "this is not intended to constitute legal advice," but - this is not intended to constitute legal advice! This is the Management Doctor speaking, not an attorney.

What we are talking about is the Fair Labor Standard Act, which was adopted in 1938 and has remained virtually unchanged for many years. However, in March 2003 there were major changes. The big issue was are employees "exempt" or "non-exempt?" Exempt means not having to be subject to the overtime provisions. Generally exempt employees need to be:

  • Executive
  • Administrative
  • Professional
  • Outside sales
  • Computer employee
Also three tests must be met:
  1. The employee must be paid a predetermined and fixed salary, not an hourly wage that is subject to reductions due to variations in the quantity or quality of work.
  2. The amount of salary paid must meet the minimum amounts specified in the regulations.
  3. The employee's job duties must primarily involve managerial, administrative, or professional skills as defined in the regulations.
* These are notes from Google attributed to Bracewell & Patterson, LLP.

I suppose we can find some who still don't think planners are "professionals" (like your attorney), but I am not one of them. Thus, I think planners should be exempt.

I have always maintained (and it has been my experience) that any "professional" staff (i.e., those positions requiring a degree) are exempt and therefore not able to earn overtime pay. Comp time - whether formal or informal - has always been my preference. Generally, the exempt positions should have greater benefits, usually in the form of additional "administrative leave" (not earned comp time) that is standard and is to make up for the extra hours required to attend CC/PC meetings after hours. Furthermore, these employees are paid a higher wage as well. Management employees (i.e. the exempt employees) are not usually members of a union. Overtime generally tends to be a union issue, so if you have unions check their provisions on this issue. I believe overtime should be for the non-management employees that have no supervisory responsibilities (and I define supervisory as those that conduct/sign the formal employee evaluations, implement disciplinary actions, are involved in the selection of personnel, etc. - not necessarily "leadworkers" who may be in charge of a group function).

I am working with a few communities that are having trouble keeping up with permitting and have agreed to pay overtime for both planners and engineers. However, I believe this is a local decision and comp time would not likely work in this situation.

Undoubtedly some of our readers have had legal opinions on this issue so I hope we hear from them.

The Management Doctor

Reader Responses

This was done in the City of Austin several years ago. Planners, including senior planners, are subject to overtime. The significant impact turned out to be that the City didn't adequately budget for the overtime and so the remaining non-overtime planners had even more work heaped on their plates. Over time it has worked out as some of the other respondents suggested. Most planners are no longer working routinely uncompensated hours. And it hasn't hurt Austin's ability to recruit candidates. If you work in an environment with employee unions (definitely not Texas) this classification system limits your ability to assign supervisorial responsibilities to hourly employees.

Carol B
San Marcos, TX

In this day and age of "doing more with less," I'm not so sure being exempt is all that it's cracked up to be. In the rush to achieve professional status, you may be cutting off your's, and more importantly, your staff's ability to be fairly compensated for the long hours you put in. One needs to factor in the issues of staff morale and burnout in one's assessment of forgoing fair compensation in return for "paper" status of being exempt. You can't take exempt status to the bank.

Peter Grosshuesch
Breckenridge, CO

Has the City of McAllen talked to the League of Cities, the State AG, or other authority to re-check their opinion? It sounds completely wrong to me. Also, why would the city want to pay all that overtime for planners to attend after-hour meetings? Of course if I were a planner in that city, I wouldn't object to the extra shekels. If other cities did it that way, most of us could retire at 40.

Robert Atallo, AICP, CFM
City of Madison

In the City of San Ramon, our planners are considered professional and are therefore exempt. We have a city attorney who agrees.

Phil Wong
City of San Ramon, CA

I strongly suggest seeking advice from an attorney specializing in employment law. Several of the statements in this discussion indicate some misunderstanding of FLSA; one is that non-exempt is not synonymous with hourly wage, another is that compensatory time/overtime calculated at time-and-one-half as compared to a one-to-one calculation for administrative leave are not strictly union issues.

Jan Livingston
Teton County, WY

Our county has always classified our professional planning staff, except for managers and exempt employees, as nonexempt. The staff is compensated beyond a forty-hour work week at 1.5 times/hour. They can elect to take it as pay, or as compensatory time off . Management cannot dictate how that time is compensated, only to approve or disapprove time worked beyond a forty-hour week. Managers and the exempt employees (there is a formula for providing a certain number of exempt employees per number of department staff for each department) are compensated at straight time (1 hour for each hour beyond 40 hours). Again, that can be in the form of pay or compensatory time at the election of the manager/exempt employee earning that time. The only person who cannot take pay for hours worked beyond forty is a department head - that person can only be compensated at straight time in the form of compensatory time off.

Mike Harper, FAICP
Washoe County, NV

We recently went through the same type of thing here. I had to submit to my County Clerk the reason I was exempt. I used the tests below:

John Johnson
Madison, NE

Executive Exemption Test

  • The employee's primary duty (at least 50% of the time) is the management of a recognized department or subdivision and
  • The employee's primary duty is to customarily and regularly direct the work of two (2) or more full-time employees or the equivalent (e.g. four half-time employees) and
  • The employee possesses the authority to hire and fire employees, or whose suggestions are given substantial weight in such decisions, including promotions and
  • The employee customarily and regularly exercises discretionary power involving the comparison and evaluation of possible courses of conduct in acting or making decisions after the various possibilities have been considered and
  • The employee does not devote more than 20% of hours to items not closely related to the ones listed above.
Professional Exemption Test
  • The employee spends more than 50% of his/her time working as a professional in either a learned or artistic profession
    • For those who work in a learned profession, the exemption requires knowledge of an advanced type in a field of science or learning which is normally acquired by a prolonged course of specialized intellectual instruction as distinguished from general academic education, apprenticeships or routine training.
    • For those who work in an artistic profession, the exemption requires original or creative work depending primarily on invention, imagination, or talent in a field of artistic endeavor. The professional exemption also includes teaching, tutoring, instructing, or lecturing for a school system or educational institution.
  • The employee performs work requiring the consistent exercise of discretion and judgment and
  • The work product is predominantly intellectual and varied in character and cannot be standardized in relation to a given period of time and
  • The employee does not devote more than 20% of hours related to activities that are not an essential part of and necessarily incident to the standards.
Administrative Exemption Test
  • Duties consist of non-manual or office work directly related to management policies or general business operations (Recent interpretations of the Administrative Exemption have placed emphasis on this aspect of the test) or the performance of administrative functions in an educational establishment in work related to academic instruction and training and
  • Customarily and regularly exercises discretion and independent judgment and
  • Regularly and directly assists a person employed in an executive and administrative capacity; or performs work under only general supervision requiring special training, experience or knowledge; or executes special assignments and tasks under general supervision and
  • Does not devote more than 20% of work time to activities not directly or closely related to performance of administrative work as defined above
Generally, there are four types of Administratively Exempt Employees:
  1. Executive or administrative assistants who generally work for an official or manager who has duties of such scope and which require so much attention that the work of personal scrutiny, correspondence, interviews and the like must be delegated;
  2. Employees who act as advisory specialists to management, such as personnel directors, consultants, statisticians, credit managers, purchasing agents and buyers;
  3. Individuals engaged in the overall academic administration of an educational institution. Such persons must perform duties which are primarily concerned with the administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards and other aspects of the teaching program;
  4. "Special assignment employees" such as lease buyers, field representatives and promotion employees.
Compensation of Exempt Titles

Employees in exempt titles are compensated as follows:

  • The normal work week for a full-time employee is considered to be a minimum of forty hours, however, greater emphasis is placed on meeting the responsibilities assigned to the position rather than on working a specified number of hours.
  • Use of vacation and sick leave will be recorded in one-day increments; absences of less than a day will not be charged against accrued leave time.
  • Exempt employees will not receive overtime compensation or compensatory time off.
  • The employee's salary may not be reduced for absences of less than a full day even if approved at the employee's request.
  • In cases of corrective action, suspensions without pay are not permitted for less than one full workweek, except in the case of suspension for infractions of safety rules of major significance.
  • Exempt employees may not be required to record their work time for the purposes of receiving their salary.
I believed, and the clerk agreed, that I qualified under the administrative exemption because I am a Department Head and met all four criteria of the test. I did not fit under Executive because I only supervise one full-time employee, not the required two. This web site www.hr.ucdavis.edu/Comp/Fair_Labor_Standards_Act/#executivetest is a good reference.
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