Misclassification of exempt employees can lead to significant legal and financial consequences for employers. If an employee is classified as exempt when they should be non-exempt, the employer may be liable for back pay, overtime wages, and penalties. In this article, we will discuss three red flags that an employee is misclassified.
The employee is Paid a Fixed Salary
One of the most common ways that employers misclassify employees is by paying them a fixed salary. Under the Fair Labour Standards Act (FLSA), most employees are entitled to overtime pay for hours worked over 40 in a workweek.
However, exempt employees are not entitled to overtime pay. To qualify as exempt, an employee must meet certain criteria, including being paid on a salary basis. If an employee is paid a fixed salary but does not meet the other criteria for exempt status, they may be misclassified.
Employee’s Job Duties Do Not Match Exempt Criteria
Another red flag that an employee is misclassified is if their job duties do not match the criteria for exempt status. The FLSA provides a list of job duties that are typically associated with exempt status, including executive, administrative, and professional duties. If an employee’s job duties do not fall into one of these categories, they may be misclassified.
Employee Works More Than 40 Hours per Week
If an employee is classified as exempt, they are not entitled to overtime pay for hours worked over 40 in a workweek. However, if an exempt employee consistently works more than 40 hours per week, it may be a red flag that they are misclassified. In this case, the employer may be liable for back pay and overtime wages.
How to Avoid Misclassification of Exempt Employees
It can be a costly mistake for employers. Here are a few steps employers can take to avoid misclassification:
- Review job duties: Employers should review the job duties of each employee to ensure that they meet the criteria for exempt status.
- Keep accurate records: Employers should keep accurate records of hours worked by all employees, including exempt employees, to ensure compliance with wage and hour laws.
- Seek legal advice: Employers should seek legal advice from an experienced employment lawyer to ensure that they comply with all federal and state wage and hour laws.
Misclassification of exempt employees can lead to significant legal and financial consequences for employers. Employers should be aware of the red flags that an employee is misclassified and take steps to avoid misclassification. By reviewing job duties, keeping accurate records, and seeking legal advice, employers can ensure compliance with wage and hour laws and avoid costly mistakes.