Salary misclassification

On Behalf of | Sep 17, 2022 | Employment Litigation |

You do not have to pay all your staff overtime if they work more than 40 hours a week. Generally, salaried employees are exempt from this portion of the Fair Labor Standards Act. That said, instances of salary misclassification still occur.

Since salary misclassification is illegal, you want to ensure you understand how to avoid it. In addition, you need to know specific information to adhere to the FLSA.

What is it?

Salary misclassification occurs when you tell employees that they are exempt from overtime when they are not. Whether you do not understand the FLSA or are trying to save money, it is still illegal.

How do you identify exempt and non-exempt employees?

Attempting to misclassify all of your employees to save money is a bad practice. Exempt employees must have some executive, professional or administrative role. Generally, that means that they must:

  • Perform managerial duties at least half of their time
  • Use independent judgment when performing duties
  • Supervise other employees

Giving employees a title that implies these duties does not exempt them unless they perform them.

Do you need to offer overtime to hourly employees?

Generally, you must pay hourly employees overtime. Therefore, employees can only be exempt if they receive a set salary. However, computer employees are typically exempt because they must receive an hourly wage. Additionally, outside sales workers have no salary requirements so you can classify them as exempt.

Misclassification allegations can occur to any business. Therefore, you need to make sure you guard against these potentially costly disputes.