The Federal Labor and Standards Act (FLSA) protects employees from meager wages and extensive hours. However, the regulations only cover certain types of employees. Unfortunately, business owners might misclassify employees, either intentionally or not, and these practices can lead to wage disputes and lawsuits.
Understanding two crucial aspects of the FLSA may help employers avoid these mistakes.
1. Know the difference between a contractor and a W-2 employee
Contractors perform a specific job for which the business hires them. They are independent workers and are not W-2 employees of the companies. Most contractors decide what jobs they want to perform and set their business hours. When hiring contractors, businesses do not need to adhere to overtime or minimum wage regulations.
The problems arise when employers hire people and designate them as contractors, but the employer regulates all the work. The worker does not benefit from working for themselves and misses out on FLSA wage and hour regulations.
2. Understand which employees qualify for overtime pay
For some types of positions, employers do not need to meet overtime pay and minimum wage requirements. Administrative workers, professionals and executive-level employees who earn salaries over a specified minimum may be exempt. All other employees qualify for wage and hour protection through FLSA. However, there is room for interpretation concerning the job requirements that are necessary for an exemption, leading some employers to classify positions as exempt even though the job does not meet all the conditions.
Employers are liable for misclassifying workers as contractors or exempt employees. Following the regulations outlined by the FLSA can prevent wage and hour complaints.