ee’s salary varies based upon the hours
worked, or otherwise does not stay the
same week to week regardless of hours
worked, the employee will not qualify as
exempt under the salary test.”
Whew! Let's unpack this.
IS THE WORK INDEPENDENT
AND ADVANCED?
“Designer” can mean a million things.
If it’s advanced work that has some in-
dependence and is well paid, it can be
an exempt job, but if it’s, “Hey, draw this
figure exactly,” it’s not. Fromholz said
the distinction is a concern, and you
should listen. It’s not that an exempt
employee can’t do basic work (the CEO
doesn’t lose her exemption when she
puts her own files into the filing cabi-
net), but that the majority of his work
needs to be eligible for salary exemption
— even with the extra work.
IS THE WORK LONG TERM?
You can raise his salary to include the
extra work and responsibilities, but it
can’t be temporary. One of the essential
criteria for exemption is that an em-
ployee’s paycheck remains the same ev-
ery pay period. If someone gets an extra
$500 for two pay periods and then goes
back to their regular salary, the Depart-
ment of Labor will say this is not an ex-
empt employee. So, that’s a problem. If
the extra work is for six months or more,
it might be OK (check with your own
lawyer).
WHY CAN'T HE BE AN INDEPENDENT
CONTRACTOR?
Fromholz referred to the ABC test, is-
sued by the California Supreme Court in
its Dynamex ruling in 2018, which Jack-
son Lewis law firm lays out as follows:
A The work is free from the control
and direction of the company in con-
nection with the performance of the
work, both under the contract for per-
formance of the work and in fact;
b The worker performs work that is
outside the usual course of the compa-
ny’s business; and
c The worker is customarily en-
gaged in an independently established
trade, occupation or business of the
same nature as that involved in the work
performed.
Because this person is already an
employee of your company, it’s hard to
separate it out as “free from the control
and direction of the company.” The fact
that he does this for others (the C por-
tion) is helpful but may not be enough.
In other words, for an exempt em-
ployee, this is really complicated! So if
I were you, I’d hire someone else. If he
were nonexempt, then it would be easy
to just pay him an additional per hour
rate (don’t forget overtime) for the de-
sign work. You can pay a different rate
for the design work, but make sure your
overtime payments account for this.
(And, remember, California law requires
overtime at more than eight hours in a
day and more than 40 hours in a week.)
All in all, what should have been a
simple solution becomes a complicated
legal and payroll problem. If you decide
to proceed with this, sit down with your
own employment lawyer to double-
check everything. n
Suzanne Lucas spent 10 years in corporate
human resources, where she hired, fired,
managed the numbers and double-
checked with the lawyers. On Twitter
@RealEvilHRLady. Send questions to
[email protected].
Are you an exempt employee who also
does freelance work for your company?
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