Exempt To Non-Exempt Reclassification

Q

On Monday, March 10, some employees were given memos stating that there was
a reclassification from exempt status to nonexempt status beginning that
same day. The only explanation in the memo was that Human Resources had
completed a Federal Labor Standards Act audit and that clarification to the
changes resulted in HR’s determination of our positions being subject to
FLSA wage and hour guidelines. The audit and change were not discussed with
supervisors or lab associate directors before the Thursday or Friday prior
to the Monday when affected employees were told.

This action raises the following questions:

* Was this change mandatory and, if so, why?
* Who decided the reclassification was necessary and how was this decided?
* Why was this not communicated earlier—at least to supervisors and
associate directors?
* Why was there no input from supervisors or associate directors
regarding classifications and ranges?
* How were the ranges decided—especially since some of the ranges are
lower than the original ranges (thus having the appearance of a demotion)?

UCAR professes leadership, yet the way HR handled the reclassification is a
poor example of that leadership and communication. How can a company that
is supposed to be considered one of the “2007 best companies to work for in
Colorado” not take into account the impact this could have on the affected
employees? We understand that laws and policies may change, but we would
expect better communication from HR. Better communication means less shock
and anger on an employee’s part.

Some employees are wondering what else will change without
notification—benefits, retirement?

Answered on March 19, 2008

A

I think I hear a couple of things in this question. First, a request for
additional information concerning the change; second, disappointment in the
effects of the change and the way it was ­communicated.

Regarding the change, it was made as a result of external requirements over
which UCAR has no control. It was not made because of any internal desire
to change the status of certain jobs. If it were up to us, we would have
left the jobs unchanged. The Federal Labor Standards Act (FLSA) prescribes
standards for the basic minimum wage and overtime pay, and affects most
private and public employment. Following recent guidance from the
Department of Labor, many organizations are changing the exempt status of
certain jobs.

Human Resources reviewed several job categories. Some of the positions we
reviewed remained exempt, while others were changed to nonexempt. The
affected jobs are Software Engineer I, Systems Administrator I, Network
Engineer I, Executive Assistant I, and Web Developer I and II. Other
Boulder employers have also recently changed the status of jobs similar to
ours.

Before making the changes, we had external attorneys review the jobs to
ensure we were required to make these changes. Other than the change in
exempt status, there was no change in the jobs, and the classification
stayed the same.

UCAR has a separate salary range for nonexempt positions, so all of the
affected positions were moved to that salary range. This means there were
minor changes in the midpoints for all of the affected jobs, but these were
less than $300. No employee’s rate of pay was changed, and no one was
demoted. (We are aware of one major employer that did reduce pay rates by
15% concurrent with the change to nonexempt status, but UCAR did not.)
Those who moved to nonexempt positions will be eligible for time-and-a-half
pay for all hours worked over 40 in a work week, as required under the FLSA.

Concerning the disappointment in the effects of the changes, I think the
­disappointment is real. The FLSA is written to “protect” some employees
and ensure they receive overtime pay, but its actual impact feels
different. These changes were not made based on employee ­performance,
value to the organization, or any other internal motivation. Based on our
internal and external review of the jobs, and on the recent Department of
Labor guidance, we had no option but to make the change.

Regarding the communication, senior management was made aware of the issue
prior to the announcement. Some ­managers who had multiple employees
affected were briefed on the changes from the Department of Labor and the
likelihood of UCAR changing the status of some jobs to nonexempt. Because
of the sensitivity and uncertainty of the issue, these discussions were
confidential. Until we were certain which jobs would be impacted, we did
not want to unnecessarily alarm employees in jobs not affected by the changes.

You are correct that most supervisors were unaware of the change until a
few days before it went into effect and that employees in the affected jobs
were given no advance notice. Because the change was legally required, we
wanted to put it into place as soon as practical. Meetings and discussions
were held with administrators, supervisors, and/or directors, depending on
availability, the week of March 3. However, in retrospect, we could have
done better in communicating the necessary changes to affected employees
and supervisors.

As to the future, there are likely to be other legally required changes to
some of our policies and plans. Every year we have some minor changes and
they are included in our communications to employees. Benefit plans are
reviewed every year, and we have seen some changes. The last major change
was the implementation of the High Deductible (HSA) Health Plan. This
change was widely communicated months in advance.

—Bob Roesch, Director, Human Resources