

Misclassifying workers as being exempt from overtime pay is a common mistake you can’t afford to make as an employer. If you deny certain employees overtime pay, you could be opening up your business to big fines and penalties under the Fair Labor Standards Act (FLSA).
The legal requirements can be hard to understand, especially if you don’t have the support of an HR expert.
Under the law, employers must pay non-exempt (commonly referred to as “hourly”) employees at least the legal minimum wage, plus overtime pay at time-and-a-half.
For an employee to be considered exempt from overtime rules, he or she must be paid a salary of at least $455 per week/$23,660 annually (with limited exceptions) and satisfy one of the ‘duties tests’ defined by the Department of Labor (DOL). The salary amount cannot vary based on hours worked.
This is where things start to get tricky, as you must now determine an employee’s specific job responsibilities to establish overtime-exempt status. Compensation is only half the equation, and job titles are not relevant to the classification.
The actual job duties test for each of these classifications is quite comprehensive and complex. However, here is a general overview.
Again, you should never rely on salary levels or job titles alone to determine an employee’s overtime eligibility. For an employee to be legally exempt from overtime, he or she must meet the minimum salary requirement and meet all criteria from one of the DOL job duties tests. The actual duties being performed are what matter.
Now that you’re more familiar with the requirements of the FLSA overtime rule, what is your next move? Consider conducting a thorough audit of each employee’s payroll status. If you discover improper employee classifications, immediately correct them to avoid legal risk.
To learn more about overtime rules and exemptions (and how to correctly classify independent contractors), watch the ComplyRight on-demand webinar, “Understanding the Distinctions When Classifying Workers.”
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