March 18, 2015

employee reclassification This is Part 2 of our 2-part series on Cutting Hours and FT/PT Employee Reclassification. For circumstances in which cutting hours and reclassifying is NOT justified or advisable, click HERE for Part 1: Cutting Hours.

Almost all employers use both full-time (FT) and part-time (PT) employees at various points, and how a small employer defines full-time employment – 35 hours/week, 32 hours, or some other figure – is generally left up to the employer’s discretion*.

However, it is wise to choose a few hours under 40 per week. This makes it easier for FT employees to avoid overtime. It also gives you some leeway to adjust employee hours to suit business needs, without necessarily prompting reclassification. Otherwise, in some states, a FT employee who is consistently not getting the chance to work their FT hours (as designated by your practice) may become eligible for underemployment insurance.

Regardless of the specific boundary between FT and PT status, there are times when an employer may need to reevaluate an employee’s classification for a valid business reason.

Valid Business Reasons for Employee Reclassification

Here are some situations in which your practice may decide that reclassification is necessary and justified:

  • When a full-time employee is consistently not working FT hours over a period of time.
  • When a part-time employee consistently picks up extra hours, reaching FT status, or is consistently needed to work extra hours.
  • When the employer must make a change to employee hours for another valid business reason (e.g., a change in staffing needs for the foreseeable future).

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In Your Handbook: Your Classification Policies

Your employee handbook should clearly define FT and PT classification, including any relevant information about qualifying for benefits. It should also state that FT and PT positions and hours are set based on business needs and not employer or employee whims. (Don’t fall into the habit of distributing hours based on employee demands: This is a slippery slope!) Whether a particular position is FT or PT should be included in the employee’s job description.

Additionally, define in your handbook the length of the measurement period after which employees may be reclassified as FT or PT based on average hours worked. While your business can set this time period, it should be consistent across all employees and not shorter than 3 months.

New employees should sign to acknowledge their receipt of this and all policies contained in your handbook. They should also receive a copy of their job description.

Be Fair and Consistent towards Employees

Reclassifying employees because they’re habitually working more or less than scheduled should never be a surprise – in part, because employees should be aware of the policy they’ve already acknowledged in your handbook, and in part because you will want to warn the employee ahead of time if reclassification is imminent.

Make sure the employee is aware of the upcoming change at least one pay period in advance, but further if possible (especially if they have simply not been working their FT schedule and could potentially self-correct the situation). Advance notice of the situation and the reasons for it can do a great deal to mitigate any shock or dismay. Remain calm and provide the valid business reasons why the change is necessary.

Similarly, if you find you must make across-the-board cuts to employee hours – for instance, for budgetary reasons or if the practice as a whole is reducing its hours of operation – be fair, be compassionate, and give as much advance notice as you can. Employees will probably not be happy about the situation, but if they see that you are trying to be fair, they may be willing to stay.

In all of these circumstances, enforcing your FT/PT employee classification policies in a fair and consistent manner is essential to avoiding excessive turnover and the complaints of disparate treatment, discrimination, or retaliation that can lead to lawsuits.

Need Additional Clarification?

If you’re thinking about clarifying your practice’s standards for FT and PT classification, or if you think reclassification of certain employees may be needed, please seek the help of a qualified HR expert such as the advisors on the CEDR Solution Center Team. ESS members can call us anytime at 1-866-414-6056 or email info@cedrsolutions.com – we’ll help you resolve one issue for free!

Friendly Disclaimer: Tips presented here are general in nature, and are not intended to replace good counsel about a specific issue with either your attorney or your favorite HR expert.

*One notable exception to the employer’s ability to determine FT vs. PT classification is found in the Employee Retirement Income Security Act (ERISA) with its “1,000 hour rule.” Employees who have completed 1,000 hours of service over 12 consecutive months are eligible to participate in any company pension or profit-sharing plan that is offered to other employees. This requirement applies to both full-time and part-time employees.

Additionally, the Affordable Care Act (ACA) uses 30 hours as its standard, so employers with 50+ employees need to consider this when determining health insurance eligibility.

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.