Overview: The Fair Labor Standards Act (FLSA) was written in 1938, at a time when manufacturing and agriculture dominated the American economy. The law's structure for employee classification as exempt or nonexempt from minimum wage laws and overtime requirements reflects that simpler time. Although it has been updated periodically in the decades since, the FLSA's classification scheme is often difficult to apply to more modern service- and information-related jobs.
One type of employee that has proven especially difficult to fit into the employee classification structure – and has also been the plaintiff in hundreds of lawsuits – is managers. Today's lean, flexible workplace often necessitates that managers pitch in and perform nonexempt work, rather than stand around with a clipboard in hand directing other employees. The more nonexempt work they do, the more likely it is they need to be paid overtime.
Complicating matters is the fact that employees' job duties change frequently. Employers often make the mistake of classifying all employees with a particular job title as exempt. When changes in the workplace necessitate changes in an employee's job duties, that classification can be jeopardized. HR is well-positioned to stay on top of these changes, and must remember that FLSA classification is an ongoing challenge, not a one-time task.
In addition, it's important that employers follow state requirements regarding employee classification.
Trends: The two-headed dragon of employee lawsuits and government enforcement continues to make FLSA classification a key concern for HR. Many lawsuits have been collective actions, in which hundreds and sometimes even thousands of similarly situated employees sue as a group. The standard for certifying these collective actions is relatively lenient compared to other employment laws, and for many years, most courts allowed them to proceed. Recently, the pendulum appears to be swinging in the other direction, with more and more courts taking a more stringent stance on whether employees truly are similar enough to sue as a group.
Author: Michael Cardman, Legal Editor
Legal actions may result in an order or settlement requiring an employer to reclassify certain workers as employees. An employer also may voluntarily decide to reclassify certain workers for other business reasons. An employer should follow the steps in this How To to reclassify an independent contractor or group of independent contractors as employees.
To manage independent contractors effectively, an employer should set clear expectations about the project's scope, budget and timeline; keep the lines of communication open; and pay independent contractors promptly so that they will want to do business again. An employer should avoid actions that could result in a reclassification of the parties' relationship. After hiring an independent contractor, an employer should consider following the steps set forth in this How To.
Hiring independent contractors can provide an employer with cost savings in salary and benefits and give staffing flexibility to address temporary projects or demands. When deciding to hire an independent contractor, an employer should follow the steps in this How To.
When school is out, many students and new graduates look to gain real-world experience through internships. However, an employer hoping to take advantage of these interns as a source of free labor should think twice. Unless an internship satisfies strict criteria, interns must be treated like employees, meaning they must be paid the minimum wage and overtime.
Employers that care more about an end result than how it is achieved can avoid certain taxes, legal liabilities and administrative challenges by hiring independent contractors instead of employees. The risks of incorrectly classifying a worker as an independent contractor instead of an employee, though, have never been higher.
An employer that uses independent contractors should adopt written policies regarding the hiring and payment of independent contractors to limit the risk of misclassification.
An employer can customize this agreement to detail the project, deadlines, payment arrangements and termination provisions of an independent contractor's work.
In-depth review of the spectrum of West Virginia employment law requirements HR must follow with respect to employee classification.
The US Department of Labor is considering updates to its Fair Labor Standards Act (FLSA) regulations to require that overtime-exempt employees spend a certain percentage of their time performing exempt work.
New York employers need to be aware that the New York State Commercial Goods Transportation Industry Fair Play Act's effective date has been extended to April 10 and its scope of coverage has been slightly expanded.
HR guidance on complying with the FLSA and state employee classification requirements. Support on following rules and regulations regarding this topic.