December 03, 2024
Worker and FLSA Misclassification – Lesson 2.4
A recent headline from the U.S. Department of Labor (DOL) reminds us of two worker classification issues and the importance of getting both of them right. One employer learned this lesson to the tune of $2.4M.
When you engage the services of a worker, you first need to decide if you will classify that worker as an employee or independent contractor. That’s not so easy. Not only do you have to follow federal rules, but many states use different factors to make this determination. On top of that, the federal rules vary, depending on which agency is considering the classification under which law like the DOL under the Fair Labor Standards Act (FLSA); the National Labor Relations Board under the National Labor Relations Act; or the EEOC under the Americans with Disabilities Act.
Once you determine a worker will be an employee, then you must properly classify the employee as exempt or non-exempt, meaning they are/not exempt from the rules requiring overtime and minimum wage. Once again, easier said than done. There are the rules under the FLSA plus at least 19 states that have their own rules.
Lessons learned? Get it right the first time. If you think the dollar amount above is high, some states impose greater penalties for misclassification. Talk to your company’s legal counsel to ensure you are complying with the current federal and state rules.
