Employment Status Change: Hourly to Salaried Pay

If you are an exempt employee, there is generally no upper limit to how many hours you can be made to work per week. (Or more technically: you can be made to work up to 168 hours per week.) There are some specialized exceptions to this—for example, certain industries may have safety rules that mandate maximum hours or minimum time off, such as the way some states cap how many hours interns can be asked to work in hospitals. Also, if a given employee is being made to work longer than others due to an illegal discriminatory reason (e.g. because of his or her race, sex, religion, age over 40, or disability) or illegal retaliation (e.g. as punishment for having brought a discrimination complaint), that might itself be illegal and actionable. However, barring those few, special cases, exempt employees can be made to work any number of hours.

As for when an employer can shift or change an employee’s classification from non-exempt (e.g. hourly employee earning overtime) to exempt, there are only two legal occasions for that:

First, if the employee has been misclassified to begin with, the employer is allowed to correct that misclassification. That is, if the employee really should be an exempt employee and it was wrong to classify him or her as non-exempt, the employer may start paying him or her on the correct basis.

Second, if the nature of the employee’s job changed, so that a formerly non-exempt employee now truly is exempt. For example, say that someone was a manager without a staff—in all ways, he or she met the test for being an exempt executive (managerial) employee, save for not having staff reporting directly to him or her. However, the company has expanded and hired, and now that person is supervising at least two full-time staff or their equivalents. In that case, that person would now meet the requirements for exempt executive and could be paid on that basis.

However, the important thing to remember is this; employers cannot arbitrarily change an employee’s classification. An employee must truly be exempt to be treated or classified as exempt.

Case Studies: Transitioning From Hourly to Salaried – Implications for Insurance Coverage

Case Study 1: Correcting Misclassification

Sarah has been working for a company as an hourly employee, receiving overtime pay for any hours worked beyond 40 in a week. Due to the nature of her job and her responsibilities, her employer realizes that she should have been classified as an exempt employee all along. The employer rectifies the misclassification and transitions Sarah to a salaried position.

As a result, Sarah’s insurance coverage, which was previously based on her hourly status, needs to be updated to align with her new employment status. Her employer works with the insurance provider to ensure that Sarah’s health insurance coverage is seamlessly transitioned, reflecting her new salaried position.

Case Study 2: Job Role Change

John has been working as an hourly employee for several years. Recently, his job role expanded, and he is now taking on additional managerial responsibilities, including supervising a team of employees. Recognizing the changes in John’s job responsibilities, his employer reevaluates his classification and determines that he now meets the requirements to be classified as an exempt employee.

Consequently, John’s pay structure shifts from hourly to salaried, and his insurance coverage needs to be adjusted accordingly. The employer updates John’s insurance plan to reflect his new employment status, ensuring that he continues to receive comprehensive health coverage.

Case Study 3: Proper Classification From the Start

Emily joins a company as a salaried employee, exempt from overtime pay. Her insurance coverage is aligned with her salaried status from the beginning. However, after a few months, the employer realizes that Emily’s job responsibilities have changed, and she should have been classified as a non-exempt hourly employee. To comply with labor laws, the employer rectifies the misclassification and transitions Emily to an hourly position.

Along with the change in her employment status, her insurance coverage also needs to be updated to reflect her new classification. The employer works with the insurance provider to ensure that Emily’s coverage is adjusted accordingly, providing her with appropriate health insurance benefits.