Can we change an exempt employee to hourly status to cure an attendance problem?
Paying exempt employees for actual hours worked as a means of curbing disruptive and undesirable attendance issues is tempting, but it can create a host of problems, including the loss of exempt status. Don't do it.
For a position to be classified as exempt from overtime, the employee in the position must meet a job duties test and a salary basis test. U.S. Department of Labor Fact Sheet No. 17G states: "Being paid on a 'salary basis' means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work."
Employers can impose unpaid suspensions for infractions of workplace conduct rules, but the Labor Department has made it clear that this provision refers to serious misconduct, not performance or attendance issues. The suspension must be imposed under a written policy that applies to all employees. Employers will lose exempt status for the position if they have a practice of making improper deductions from salary.