The Fair Labor Standards Act (FLSA) has a set of guidelines for employers. One of these is demanding that employers categorize their employees as either exempt or nonexempt from the FLSA's overtime pay. The common and dangerous mistake that employers make is misclassifying their employees as exempt from the Overtime Labor Law. In doing this, employees can bring about a lawsuit and reclaim up to three times their normal hourly rate for the overtime that they were not paid enough for.
Classifying employees the right way
The most important step in avoiding overtime lawsuits is to adequately assess new hires when they start working for you. If new employees are paid a regular salary and they carry out duties such as administrative, managerial, and desk work, or are highly compensated for their work, they are likely to be exempt from the overtime labor law.
However, if workers get paid per hour with no regular salary, or they perform practical hands-on activities, they most likely should not be exempt from overtime labor law, and employers could face expensive lawsuits if they fail to classify them correctly.
Tips for avoiding a lawsuit
It's important as an employer to stay organized and keep on top of the status of all employees through regular auditing. It might be that an employee's role changes but the classification does not, and this could lead to them pursuing legal action for unpaid overtime.
As an employer you should keep aware of all labor standards so that you can avoid facing expensive overtime lawsuits in the future.
Source: Business management daily, "Overtime labor law," accessed Nov. 08, 2017