Many industries and businesses are seasonal and I have been often approached with a client question to the effect of whether the client can change the exempt status of workers, depending on the season. This occurs, for example, in the case of an employee who is the Head Coach of an athletic team for a college, when that particular season is over. Can the status be changed (and compensation reduced) so as to lower labor costs? The answer is, under the Fair Labor Standards Act, an employer is able to do so.
Head Coaches, who are salaried at $455 or more per week (the current salary threshold), are considered exempt employees under the executive exemption of FLSA/state law. During the off-season, they may engage in some recruiting activities or other preparatory work, but the number of hours they work is considerably lower than what they work during the season. By still paying the agreed-upon salary, a College is spending money needlessly, given the work produced during the off-season which stresses the labor budget.
The issue of whether an employee is exempt is a week to week analysis. For example, if an otherwise exempt employee performs an inordinate amount of non-exempt work in a particular week, the exemption will be lost for that week and the employee would be due overtime if he worked in excess of forty hours in that week. If, in the following week, the employee performs exempt work the requisite amount of time, the exemption is re-gained.
It is possible to re-classify, in this example, the Head Coaches (or other employees) as non-exempt employees during the off-season, by paying them on an hourly basis and, naturally, paying them time and one-half overtime should they (by chance) work in excess of forty hours in any particular week. Importantly, this seasonal switch will not jeopardize their exempt status when the sports season gets underway, provided they are switched back to a salaried status and perform the exempt work they had been doing previously. Wage Hour Opinion Letter No. 93 (November 11, 1970).
As indicated in this Opinion Letter, however, “recurrent changes in an employee’s status may lead to an across-the-board denial of the exemption.” In other words, a seasonal change in status is acceptable and will not impact the overall exempt status of employees, but frequent changes, (e.g. monthly) might have such an adverse impact. Accord Wage-Hour Opinion Letter (November 29, 1968) (approving change in compensation from salaried to hourly and back again to account for seasonal variations in work flow, provided notice was given to the employees of the proposed changes and when they would take effect).
So, it is possible to change the status of Head Coaches or other employees to account for seasonal swings in their work hours, provided that such changes are not done frequently. The employer need not be tied to or imprisoned by the “yoke” of exempt status.
Tis’ the season…