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The only possible benefit to paying a salary to a non-exempt employee is ego enhancement, but the disadvantage is obvious.
There is a real possibility of inadvertently being in violation of certain sections of the applicable Industrial Welfare Commission Wage Orders and the Labor Code.
Employers must keep time records of hours worked by nonexempt employees in accordance with Section 7 of the applicable Wage Order regardless of whether those employees are salaried or hourly.
Employers who have nonexempt employees on salary often fail to keep these time records simply because they believe these records are not required. This practice can lead to complaints that an employee was not paid for all hours worked.
Overcoming such a charge is not insurmountable; the burden shifts to the employer, however, and proving one’s case can be difficult and costly. In any case involving pay issues, expect to hear the question, “Where are the time records?”
Because Section 7 of the Wage Order requires meal periods to be recorded, and Section 11 provides for penalties for the failure to provide required meal breaks, the importance of time records cannot be overstated.
There is a tendency, however, to be slack with nonexempt salaried employees, which can result in difficulties. Simply writing down eight hours is not sufficient.
Labor Code Section 226 requires several items be on the wage stub or statement. One such requirement is that total hours be recorded; another is that the hourly rate or rates also must be recorded. These are not required of exempt employees, but must be on the documents for nonexempt salaried employees.
Employers may want to periodically review the exempt status of employees. You can find more information in the Exempt/Nonexempt section of the HR Library.
CalChamber also has an
Exempt/Nonexempt Wizard to help determine whether your employees are exempt or nonexempt.