Exempt? Non-exempt? Independent Contractor? Intern? Are Your Employees Properly Classified?

One of the most misunderstood and mismanaged aspects of human resources that I come across is employee classification - exempt versus non-exempt; independent contractor versus employee; intern versus regular employee.

Much more focus was paid to this topic recently because of the ill-fated changes to the overtime and classification rules. However, even though the law is in political limbo at this point, all employers must understand how employee classification works, and what they need to do to be in compliance with current labor laws with respect to each classification.

Employers cannot simply label certain people or positions as exempt or non-exempt, nor does the title of the position dictate its classification. Converting an hourly employee to a salary does not, in turn, change the classification to exempt. The job duties of each and every position in each company, no matter the size, must be examined, as does the method and amount of wage payments before a classification can be determined.

Misclassification is one of the top mistakes businesses make, resulting in huge penalties and costly back-wages issues for the business, not to mention the employee relations nightmare that can result. And if you think that you will easily go undetected, consider this: since 2008, the U.S. Department of Labor has hired thousands of additional investigators to "detect and deter" companies from misclassifying employees under a "Misclassification Initiative." Under this initiative, the DOL shares their information and coordinates their enforcement efforts with state agencies.

Classification drives elements of employment such as:

  • how employees are paid

  • if and how work hours are tracked, recorded, and maintained,

  • how meal breaks are handled,

  • when and if overtime pay is required,

  • how vacation or paid time off is managed,

  • and much more.

So our advice from Alliant Human Resources is to get all of tour positions and employees properly classified as soon as possible.

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