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Are Your Employees Classified Correctly?

Updated: Nov 27, 2022

Did you know that the FLSA has strict requirements on employee classifications? In this blog post, we’ll give you an overview so that you can get a better understanding of how to classify your employees.

Types of Employees

All W2 employees are classified as either exempt or non-exempt. Generally, exempt employees are paid a fixed salary each pay period, regardless of how many hours they work. Non-exempt employees are paid an hourly rate for all hours worked.

But it's not as simple as that. The FLSA has strict requirements for classifying an employee as exempt, and it can be extremely costly to classify an employee incorrectly.

Exempt Employee Qualifications

There are a couple of "tests" that can be performed in order to classify employees.

The first is the Salary Test. In short, there is a minimum fixed salary that an employee must earn in order to be considered exempt. If the employee makes less than that minimum, they cannot be classified as exempt, regardless of their position within the company.

The second is the Job Duties Test. The FLSA has several categories for exempt classifications, including Executive, Administrative, Professional, Computer, and Outside Sales Employees. Each of these categories have specific job duties that would qualify an employee for being exempt (note that job titles have nothing to do with exemption status).

What Happens If I've Misclassified My Employees?

Misclassifying an employee as exempt can be costly. Penalties could include compensating employees for all unpaid overtime for up to three years, paying "liquidated damages," and being subject to fines of up to $10,000 per each misclassified employee.

How Do I Know If I've Classified My Employees Correctly?

If you do not have an HR professional on staff who is knowledgeable in FLSA regulations, you're going to want to contact a certified professional to review your employee classifications and make any necessary corrections.

That's where we come in! Contact us to learn how Elevated HR Consulting can assist you with your employee classifications... and much more!

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