Wage and Hour Law: Using Job Analysis to Determine Exemption Status

By Toni S. Locklear and Robert E. Lewis

The Fair Labor Standards Act (FLSA) includes provisions that regulate minimum wage, overtime pay, child labor, and record-keeping requirements. State wage and hour laws also exist and generally regulate meal and rest breaks, discharge notices, and how pay is settled upon discharge.

While all provisions of wage-hour law are of interest to employers, one crucial provision generates the most discussion and confusion – determining a job’s “exemption” status. Employers want – and need – to ensure they have appropriately classified their positions under the FLSA’s guidelines.

What does it mean to be an “exempt” employee?

Exempt status means the employee is not covered by the FLSA and is, therefore, deprived of the law’s minimum wage and overtime pay protections.

The FLSA assumes all workers are eligible for overtime pay, but allows companies to exempt some jobs. There is no requirement that a company classify any job as exempt.  Jobs are by definition not exempt (“non-exempt”) unless the organization chooses to claim an exemption.  Because claiming an exemption is voluntary, employers bear the burden of proof and therefore must create documentation that justifies the claim for exemption. 

What kind of jobs can be classified as exempt?

The FLSA allows companies to exempt certain jobs based on the specific work done in those jobs. The five exemptions are the Executive, Administrative, Professional, Computer Professional, and Outside Sales exemptions.  Exemption is based on employee compensation (“salary level test”) and job duties (“duties test”). In general, the “duties test” requires that jobs exercise significant discretion, independent judgment, and authority over decisions to be classified as exempt. Other criteria may be specific to a given exemption. 

As an example, the following tests must be met for a job to qualify for the Executive Exemption.

1.       Employee is compensated at a rate of at least $455 per week

2.       Employee’s primary duty is managing the enterprise, or a recognized department or subdivision

3.       Employee regularly directs the work of 2 or more FT employees (or the equivalent)

4.       Employee has the authority to hire or fire, or their recommendations are given particular weight

Although many employers believe paying a position on a salary basis or labeling it a “manager” job qualifies it as exempt from wage-hour law that is not sufficient!

What are the risks to an employer who incorrectly classifies a position as exempt?

Incorrectly classifying employees can bring severe penalties for employers. Wage and hour actions are considered by attorneys to be the #1 area of monetary exposure for companies. Employers paid out a total of $2.7 billion in wage-hour settlements in the 2007-2012 time frame with settlements totaling $467 million in 2012 alone.

Why is it so difficult to determine exemption status?

Struggles with wage-hour law are commonplace for a number of reasons.  First, the FLSA requires that exemptions occur on an individual basis (technically a “job” is not exempt, the people who perform it are) and be based on an examination of the work as it is actually done (not on the basis of a job description or manager’s opinion). Since exemption status is determined on individual basis, it is challenging to ensure that each and every position is classified correctly.

Another struggle with FLSA exemptions is rooted in the changing nature of work.  To gain efficiencies during the economic downturn, some employers reduced staffing levels to a point where managers increasingly engage in “non-managerial” activities. By doing so, companies may have unwittingly changed the exemption status of their employees.

Companies also struggle to interpret the federal and state requirements.  Because they are intended to apply to a wide variety of jobs, the regulations are generally written vaguely.  Disputes over what constitutes “discretion”, “work time”, and “authority” are common. 

So, what’s an employer to do?

Effectively managing exemption decisions can be accomplished via several approaches.  These include regularly auditing wage-hour policies and job status, training managers on managing overtime and meal breaks, and rigorous job analyses.  

Job analysis is the most rigorous, data-oriented, and defensible method of determining and managing exemption classification decisions.  Job analysis facilitates resolving wage-hour issues because it utilizes input from the incumbents who do the work and assesses critical job components such as the frequency and importance of work activities and the level of discretion and autonomy exercised. 

How do I use job analysis to document work requirements for exemption purposes?

Using job analysis to limit wage-hour exemption risk requires several steps. 

First, identify the jobs that present the most wage-hour risk for your organization.

Next, collect job data by developing a comprehensive list of work activities and competencies with the assistance of job experts, and, determining the information you need to know about each work activity and competency. It is common in job analysis to assess what work is done (e.g., how frequently tasks are performed and how important tasks are).  For wage-hour purposes, it is also critical to assess how work is done (e.g., whether procedures must be followed) and when work is done (e.g., during meal breaks).  Once activities and rating scales are determined, the next step is to administer the survey to job incumbents.

Finally, analyze survey data relative to the applicable exemption test.  Means and standard deviations are the first statistics to calculate, and it may be important to analyze work activities deemed exempt separately from those deemed non-exempt.  Mean ratings will indicate generally how incumbents view a work activity or competency whereas standard deviations will indicate the level of agreement among the job experts.  These analyses will directly feed job descriptions that can be used to illustrate exemption status as well as to recruit and manage performance. 

Summary

Managing the risk associated with wage-hour decisions requires knowing the target job. A well-designed and well conducted job analysis supplies all of the information needed to understand the job and accurately define exemption status.

 

References

Fulbright & Jaworski, LLP. (2013). Fulbright’s 9th annual litigation trends survey report.

Maatman, G. L., Jr. (2013). Annual workplace class action litigation report: 2013 edition. Chicago, IL: Seyfarth Shaw

Martin, D, Plancich, S., & McIntosh, J. (2013, March 12). Trends in wage and hour settlements: 2012 update. NERA:  New York, NY.

Leveraging The Intersection of Talent and Diversity to Grow Your Leadership Pipeline

Mary L. Martinéz, Director, Diversity & Inclusion Practice

By focusing on the “numbers,” many organizations have seen increases in the hiring and promotion of diverse talent. A good percentage of these same companies, however, continue to struggle to retain these same diverse individuals, and fail to make long-term gains in overall diversity at senior levels. They have got the “diversity” part right, but have not yet developed talent management processes that are fully “inclusive.” This often leads to discouragement and disillusion for those who were promised the outstanding career opportunities that are not always delivered -- as well a loss for the organization of the investment of time and effort made to obtain that diverse talent.

Embedding diversity and inclusion (D&I) into the full range of talent management (TM) processes means taking a hard look at the way the organization defines “leadership,” “potential” and “readiness,” and making some changes to how talent is “spotted,” developed and selected via internal talent review and succession planning processes. It also requires an honest examination of the organization’s leadership culture: What does it take to be successful here? How can we broaden our notion of what characteristics, skills and experience a successful leadership candidate must have? Taking the following steps will help your organization increase the inclusiveness of its leadership culture and TM processes.

Identifying and Overcoming Challenges
to a Diverse Pipeline: Dig Deeper to Understand Root Causes

If your organization is experiencing the phenomenon described above, you know
that you have a “revolving” door for certain levels/functions/roles. You have the charts and graphs that show the bottlenecks and attrition points, but what are the underlying reasons for the patterns that you observe? Insights into the barriers to a more diverse leadership profile and pipeline can best be obtained through interviews or focus groups with managers and employees.

Research has shown that women, racial-ethnic minority groups, and non-headquarters nationals face some of the same obstacles to full inclusion in the leadership pool. However, these groups are not always affected equally by the same barriers. For example, women are more often held back by their bosses’ perceptions of their leadership styles than are men of color or non-headquarters nationals. Racial-ethnic minorities, on the other hand, have been found to be affected to a greater extent by manager bias and unwillingness to take a risk on “non-traditional” candidates.

These general findings may point to potential cultural barriers in your organization, but the best practice is to conduct company-specific research to identify the more subtle root causes of differences in career advancement and selection for leadership roles. This data can then be used as a motivator for increasing the awareness and changing the behavior of talent decision makers.

 

 

Using Information on Barriers to Reshape TM Processes

When collecting data on the root causes of differences in representation, advancement and/or retention, it is important to also do some investigation of how the currently prescribed processes for talent management (and the way they are actually put into practice) may be limiting the talent pool. For example, do established, formal career progressions eliminate inflow of diverse talent from a wider range of backgrounds and experience? At what point or points in the development, staffing or promotional process are diverse candidates being filtered out? Are talent decisions actually being made following the prescribed processes or are managers cutting corners and making unilateral choices based on expediency? Based on these findings, the organization may need to consider some of the process enhancements described below

Looking for Talent in the Early Career Ranks, on a Global Basis

Identifying diverse talent lower in the organization, in order to build the pool and ensure retention of diverse high potentials, can help to increase the proportions of women, people of color and non-headquarters nationals in upper level management. This means pushing the talent assessment and review processes deeper into the organization – into business unit, global and local geographic structures and into earlier career stages. This approach can have a significant impact on the diversity of the organization’s talent.

Defining Roles in Culturally Balanced Ways

As suggested above, the place to begin is with the organization’s definitions of “leadership” and the criteria used to identify high-potentials. Like other aspects of corporate culture, the mental picture that decision makers have of a successful leader is built on the biases and assumptions of those who make decisions on talent. For example, a study by Catalyst found that the majority of talent managers evaluated their senior executives as primarily displaying stereo-typically masculine characteristics. In addition, competencies related to stereo-typically male characteristics appeared more frequently in descriptions of senior executive roles.[1]

This study reinforces that corporations still have work to do in evaluating their competency and leadership potential definitions for underlying biases. For example, how is “decision making” characterized? If the competency is named “decisiveness” and the description conveys that the company values the speed of decision making, implying a more unilateral -- rather than collaborative -- style, white males may be more likely to be rated highly on this criterion.

Interestingly, the more recently recognized and broader competencies, such as learning agility and emotional intelligence, have the potential to level the playing field when it comes to identification of potential: Learning agility because it is inherently gender neutral (see,
for example, the definition proposed by DeRue, et al[2]), and emotional intelligence because it gives weight to a cluster of competencies important to leadership that, on at least some of which, women appear to be stronger[3]. This change, coupled with declining emphasis on a set job progression as the sole means for acquiring the required leadership competencies, will open up the range of candidates beyond those with stereotypical styles, strengths, and experience patterns.

Using Multiple Assessment Instruments and Assessors of Talent Potential

Although more and more companies are providing training to increase awareness of “unconscious bias” (reliance on stereotypes and assumptions without recognizing their influence on our thoughts and actions), there are other ways to reduce potential bias in assessing and selecting talent. One of the most effective means is to utilize multiple assessment tools and assessors. In the case of talent assessment or review, this can be accomplished by using an objective assessment instrument or instruments and soliciting internal evaluations from a variety of individuals with differing perspectives on the candidate. In the same way, hiring decisions can make use of a diverse panel of interviewers, rather than relying on the decision of just one hiring manager.

Adding Diversity as a Formal Discussion Point on the Talent Review Agenda

When a leadership team gathers to review progress on talent development and identify or confirm high-potential employees, D&I should be essential elements of this conversation. This should include more than a quick review of the pipeline numbers by race/ethnicity and gender. Leaders need to challenge each other to not only identify diversity (of both visible and less visible kinds, such as thinking style differences) in their talent pools, but to report on what is being done to develop these individuals and to request support from their peers to overcome any challenges related to lack of development opportunities, mentors or sponsors. Requiring senior leaders to take personal responsibility for development of their teams and other diverse high potentials in the organization is a corollary to formalizing the D&I discussion as an integral part of the talent review. In the talent review, each leader should report not only on the overall profile of his/her unit, but also on what he/she has done to sponsor, mentor and otherwise support development of diverse leadership candidates. This includes holding direct reports responsible for doing the same. By adding some different types of measures to the talent tracking report, coupled with increasing leadership accountability for progress, more concrete action to create greater diversity in leadership pools can be spurred.

Strengthening TM Metrics by Applying a Diversity Lens

The following chart illustrates ways to institute diversity-related enhancements to talent tracking. On the left of the chart are frequently used talent measures.  On the right are questions that should be asked from a D&I perspective and for which leadership can be held accountable. Based on the organization’s specific challenges (for example, difficulty in retaining senior sales representatives who make up the pool for regional sales managers), data can be collected and
reviewed as part of the regular talent review cycle and appropriate actions taken to improve talent outcomes by the business leader who “owns” the development of the individuals in this pool.

Final Thoughts

One additional impediment to embedding D&I more deeply in talent management processes also needs to be addressed: improving the partnership between the D&I and TM functions. In a few cases, companies have actually united these functions under one HR leader, but in far more organizations the D&I staff still have trouble getting a hearing from their TM colleagues. Stronger collaboration begins with a joint approach to addressing some of the issues and opportunities presented in this article, with both functions working together to more fully engage top executives in the business case for focusing on diversity in the talent pool.

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[1] Warren, A. K. (2009). Cascading gender
biases, compounding effects: An assessment
of talent management systems. New York, NY:
Catalyst. Retrieved August 23, 2013 from http://www.catalyst.org/knowledge/cascading-gender-biases-compounding-effects-assessment-talent-management-systems

[2] DeRue, D. S., Ashford, S. J. and Myers, C. G. (2012), Learning Agility: In Search of Conceptual Clarity and Theoretical Grounding. Industrial and Organizational Psychology,
5: 258–279. doi: 10.1111/j.1754-9434.2012.01444.x

[3] Freedman, J. M. (2012, September 11). Women’s leadership edge: Global research on emotional intelligence, gender and job level. Six Seconds, The Emotional Intelligence Network. Retrieved August 27, 2013 from http://www.6seconds.org/2012/09/11/research-emotional-intelligence-gender-career/

 

 

 

 

 

 

 

 

Should job applicants be allowed to access online selection tests using mobile devices?

Written by Neil Morelli and A. James Illingworth

Online selection testing has grown tremendously in recent years due to its ability to process heavy applicant volume, efficiently score assessments, and increase test availability. As a result, how organizations deploy talent assessments, and the ways in which applicants access these assessments, has changed dramatically. Whereas in the past applicants reported to a central location to complete assessments using a desktop computer, now, with the proliferation of wireless technology, applicants can access and complete assessments remotely over the Internet on a variety of mobile devices (e.g., Smartphones, hand-held tablet computers).

Despite the added benefits of this new accessibility, such as lower delivery costs and greater contact with larger, more diverse applicant pools, organizations are faced with a dilemma: Should the administration of online assessments be extended to mobile devices? Before a clear recommendation can be made, two questions must first be answered. Do the hardware features (e.g., smaller screens, virtual keyboard) of mobile devices change how the test works, and thereby change the interpretation of the test results? And, does completing an assessment on a mobile device drive meaningful performance differences?

To address these questions, APTMetrics investigated the test equivalence, performance differences, and differential adverse impact of a text-based, non-cognitive test administered to a large sample of customer service job applicants (N= 937,243), using both desktop and mobile formats. It was discovered that the assessment could be interpreted the same way across devices, and that job applicants performed equally well regardless of the administration format. This finding is encouraging as it provides evidence that non-cognitive assessments can be just as reliable and valid when delivered on a Smartphone or tablet computer as they are on a desktop computer. 

Since this initial examination, two other studies were conducted to replicate and extend the previously described findings. The first research study was designed to replicate the results of the previous investigation using a different non-cognitive selection assessment and job family (e.g., retail sales job applicants). Using a similar study design and analysis methodology, it was discovered that the assessment operated similarly across devices and no meaningful performance differences between device groups were detected. The second study expanded the previously described findings by focusing on the potential differences between devices based on their operating system (e.g., Windows 7, OSX) and Internet browser (e.g., Internet Explorer, Mobile Safari). An examination of three different non-cognitive performance predictors discovered that operating systems and Internet browsers native to mobile devices did not change how the assessments function or result in meaningful performance differences between applicants.

So, should job applicants be allowed to access online selection tests using mobile devices? The evidence gathered thus far is extremely encouraging.  Based on this research, text-based, non-cognitive assessments of performance predictors appear to function similarly across devices without affecting applicant performance or resulting in adverse impact.

While these findings suggest organizations can give the green light to job applicants using mobile devices for text-based, non-cognitive tests, many unanswered questions still remain about the broader use for mobile devices for administering assessments. For instance, what happens as organizations and test developers design assessments that are specifically intended for mobile devices? Or, how will mobile devices react to more technologically advanced assessments, such as those with images or video? In addition, it will be important to know whether these results can be extended to cognitively oriented tests.  Research is underway to address these questions as mobile devices become more pervasive and assessments evolve in their reliance on audio and video multi-media.

Communicating the Value of Assessments to Line Managers

Communicating the Value of Assessments to Line Managers

By Ron Tepner and Dan Lezotte

Although those of us in the human resource field understand the value of using assessments in candidate selection, it is often difficult to convince line managers of their value and to gain complete buy-in to an assessment program.

It is particularly important to "make the case" for assessments in a down economy where we have the unusual luxury of more applicants than openings, and the opportunity to be very
selective in our new hires.

Additionally, like most HR tools, assessments must be applied consistently across the board to be both legally defensible and effective.

In implementing assessment programs for Bridgestone Retail Operations’ customer-service teammates and technician/mechanics, several challenges and obstacles were presented by the field managers that had to be overcome.

Making the Business Case

Common concerns expressed by our field managers regarding the use of assessments included:

There is a shortage of available talent for our open positions and we can't let anyone "get away;" we don't have the luxury of being selective.

Response: The benefits of being selective outweigh the perceived lack of luxury. The new practice of requiring the assessment assures a larger population of more productive, longer-tenured employees who help create customer loyalty.

Customers like to be served by the same consistently proficient technician every time they visit. Additionally, we will be offering a new staffing and scheduling tool from our workforce-management initiative that will help keep candidates in the pipeline, reducing the last-minute panic that leads to taking a higher risk approach to selection.

Our applicants will not put up with an involved, time-consuming selection process -- they'll just go somewhere else

Response: The poor economy has actually helped us. One of the few advantages of a down economy is that more qualified applicants are available for open positions. While we should always be sure we are hiring the best person for the job and a person who has a high probability of success in the job, having a larger applicant pool provides us the luxury of being even more selective.

Now more than ever, we need assessment tools to help us sort through the applicants and identify those that have the best chance of success. We need to take the time to make the right decision, without being concerned about losing a candidate because we require them to go through an assessment process.

In fact, we have found that many applicants (who are now employees) viewed our organization more favorably as a result of having gone through a rigorous selection process. Who doesn't want to become a member of an "exclusive" club? We also believe that it honors our existing workforce to not just allow anyone into the camp and expect good folks to work with those who are not the best.

It's too inconvenient and time-consuming to ask an applicant to drive to a district office or testing location to take an assessment. We need them to start right away.

Response: The assessment is part of a process to screen in the very best, which includes a physical, drug screen, interview and background check. The test will fit nicely into the time space required to be in compliance with the other screening requirements.

Not taking the time ensures the continuation of higher levels of turnover, more training investment and a significant portion of the workforce always ramping up to cover those who are exiting. The assessment changes this dynamic significantly.

The assessment will take control away from me in making hiring decisions. What if I really want to hire someone but the assessment says I can't?

Response: As the positive impact of less turnover and higher productivity takes hold, the candidate pool will be populated with more qualified candidates from which to select. If the
assessment results suggest a candidate is not a good fit, the manager will have several other qualified candidates from which to choose.

Our experience with other assessments has been that, as managers see the positive impact from using the assessments, they place more trust in the results and quickly embrace it as an effective tool to help them make more informed