No matter what you might want to believe, employers—yes, even good employers like you—can and do get into hot water with the Department of Labor. One issue that employers frequently face is classification of employees.

What, exactly, does it mean for an employee to be exempt? 
Remember that in this context, exempt (or nonexempt) refers to whether an employee is exempt from Fair Labor Standards Act (FLSA) regulations—most notably, the requirement that the employee be paid overtime wages for any hours over 40 worked each week (or over the daily overtime limit if your state is one which implements daily overtime rules). Additionally, some states require meal and rest breaks with the exception of exempt employees. Misclassifying an employee is more than simply unfair to your employee—it is dangerous for your business. Misclassification can lead to penalties and back wage payment requirements, not to mention the loads of paperwork and audits that come with this difficult lesson. 

Determining whether an employee is exempt 
The best approach is to classify your employees correctly the first time around. One of the safest places to start is by assuming that all of your employees are nonexempt and therefore entitled to overtime. Nationally, most employees are nonexempt, so when in doubt, always classify as nonexempt as there is no risk associated with classifying someone as nonexempt. The risk comes along when you classify someone as exempt and they do not meet the exemption requirements. With that being said, the Department of Industrial Relations (DIR) is extremely unforgiving for employers who misclassify their staff as exempt, as this is construed as a deliberate workaround for employers to overwork their employees and avoid paying overtime.  

FLSA rules for exemptions 
As a starting point, you should know that any salaried worker who earns less than $23,660 per year will be considered nonexempt. For employees who earn more than that, their exemption status will be determined by the type of work that they perform. Also, note that many states have rules which eclipse those of the FLSA (to the benefit of the worker); therefore, familiarizing yourself with all of these rules is crucial. For more information about FLSA standards and classifying employees, visit flsa.com/coverage.

Misclassifying your staff can lead to costly penalties, back wage payments, and even more troubling, your time! If you feel your practice may be at risk, or you need assistance maintaining compliance, reach out to HR for Health by calling 877-779-4747 (option 1) or emailing [email protected] today.

HR for Health is an AAHA Member Values Program–approved provider. This article was contributed by Ali Oromchian, J.D., LL.M.

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