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FLSA Audits

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Are your employee exempt and non-exempt classifications current and compliant?

As the Department of Labor increases its efforts to enforce the Fair Labor Standards Act (FLSA) and wage and hour claims become more prevalent, ensuring your employee classifications are correct is extremely important.

Misclassifications under the FLSA can cost you in regular back wages, overtime back wages and penalties, all which can add up to a significant sum of money.

With all the demands on your time, it is often difficult to keep up with employment laws and how they apply to your company. One acronym that is a current hot topic with the Department of Labor (DOL) is the FLSA (aka the Fair Labor Standards Act) and how it applies to employee classifications.

We can help you determine the correct exempt and non-exempt classifications. As part of our services we will:

  • Review your job descriptions (if already written) or interview you to document the job’s duties.
  • Meet with you by phone or in-person to ensure we understand the depth of responsibility related to each position and request any additional information needed to make accurate and thorough recommendations.
  • Conduct a salary basis test (how is the employee paid?) and a duties test (what are the employee’s responsibilities and how much independent decision-making does h/she have?).
  • Recommend exemption classifications and give you direction on when to seek the assistance of an attorney if there is a gray area that needs to be addressed.
  • Work with you to effectively communicate with employees when there is a classification change if requested.
  • Assist you with a process to document and obtain a release of liability from affected employees.

For more information about Fair Labor Standards and recent changes in legislation, read these 3 blog posts and check out the FAQ’s below: (Just click the question to see the answer)

Independent Contractor vs. Employee: New IRS & FLSA Crackdown
When Is the Best Time to Introduce an Employee Handbook?
Health Care Reform Act: Nursing Mother Accommodations

Click question below to reveal the response

What is the Fair Labors Standards Act?

The Fair Labor Standards Act offers protection to employees by guaranteeing a minimum wage, time-and-a-half pay for overtime, and limiting the employment of minors. It applies to all employees unless the employer can claim an exemption from coverage.

Why it is important to ensure our employee classifications are correct and current?

The Department of Labor (DOL) has made it a priority to bring action against employers who are misclassifying protected employees as exempt and thus denying them their rights under the FLSA.  Misclassifications under the FLSA can cost the employer in regular back wages, overtime back wages and penalties, all which can add up to a significant sum of money.

What makes an employee exempt?

Limited exemptions to overtime obligations are sometimes provided for “white-collar employees” (e.g., executives, administrators and professionals) and employees in particular industries and occupations, such as highly skilled computer professionals. In order to be exempt from payment of overtime, an employee must be exempt under both state and federal law. In general, for an employee to qualify as an exempt employee under the executive, administrative or professional exemptions, he or she must satisfy two tests:

1.     The salary basis test (how is the employee paid?); and

2.     The duties test (what are the employee’s responsibilities and how much independent decision-making does h/she have?).

Each exemption category has its own specific criteria. To be exempt an employer must prove that the employee fits “plainly and unmistakably” within the exemption’s terms. The Department of Labor Wage and Hour Division is responsible for investigating to ensure that exempt status is applied appropriately.

Do the FLSA requirements apply to independent contractors?

FLSA applies exclusively to employees, not independent contractors.

Does it make more sense to hire an independent contractor rather than a full-time employee?

In some cases it may but it depends on your overall organization’s goals and the structure of your relationship with the independent contractor. Employers, particularly those that are small, have long been attracted to independent contractors to make up part of their workforce for good reasons:

·         Reduced overhead – Independent contractors are not “employees” so overtime pay does not apply. The company saves money in wages and does not have to pay employment taxes including FICA, FUTA and worker’s compensation. In addition, the company does not provide independent contractors with benefits such as health or life insurance, paid time off, profit share plans or any other employee perks.

·         The contractor works at the company’s request – Small companies often do not need a full-time employee to perform a specific task so hiring an independent contractor who can do the task as needed makes more sense. Since overtime does not apply and the employer is not responsible for scheduling regular breaks, the independent contractor can work more than 40 hours in a week without the company incurring overtime expenses.