Narrowing and Validating the Grey Zone

The Grey Zone has many meanings. I would like to refer to the grey area where organizational jobs/positions are not obviously exempt or non-exempt from hourly overtime pay. From the smallest mom and pop to the very large fortune 500 companies, each organization must determine the Exempt/Non-Exempt status for all positions to comply with Department of Labor regulations. Narrowing and validating the number of position located in the GREY ZONE is becoming more critical for Human Resources and Compensation professionals. Organizations/Companies are at risk for monetary overtime pay, taxes and related penalties for not properly identifying and placing positions in the correct exempt or non-exempt status.

We have heard from our clients that the Department of Labor’s efforts to hire, train and release additional labor investigators are having an impact on the number of organizations that are being investigated for the first time. The DOL investigators are focusing on the exempt and non-exempt job title designations and evaluation of independent contractors. Of course, the Department of Labor is looking for overtime tax dollars associated with improper designations. Based on recent DOL web page postings, the number of successful investigations and subsequent fines are increasing dramatically compared to past historical trends.

Human Resources and Compensation professionals are encouraged to reevaluate positions in the Grey Zone and to utilize internal job evaluation systems or programs that validate exempt and non-exempt designation with compensable factors and descriptions.

We recommend an objective 15 factors job evaluation system that will help narrow and validate the positions located in the grey zone. The job rating chart located on the following page helps to illustrate this process of utilizing fifteen objective compensable factors on all jobs within the organization. For the purposes of this illustration, the positions in the grey zone have been highlighted in yellow caution?? The Department of Labor exemption tests are applied to the positions in the grey zone and the positions outside of the grey zone are validated with the compensable factored points. Outside of newer DOL regulations regarding sales positions, loan officers and information technology positions, we have found the grey zone typically to be 550 to 750 points range and for some organizations this range can tighten down to 600 to 700 points. The use of an internal proven job rating system in a fair and consistent manner helps to 1) ensure greater confidence when determining exempt and non-exempt status designations, 2) express to employees and external DOL investigators that the organization is diligent and systematic with internal job evaluations and 3) create an internal job classification structure and pay system that can be compared with external market pay benchmarks and 4) mitigate risks for DOL overtime exemption investigations and monetary damages.