Are you classifying your employees incorrectly? The risks of doing so are too high to ignore.
Misclassifying employees as exempt or non-exempt under the Fair Labor Standards Act (FLSA) is a costly mistake that too many employers make. Whether it’s a misunderstanding of the law or an attempt to cut costs, the consequences can be severe – ranging from hefty fines to expensive lawsuits, as well as damage to your company’s reputation.
Exempt vs. Non-Exempt: What’s the Difference?
The FLSA mandates that employees be classified as either exempt or non-exempt based on their job duties and salary.
- Non-exempt employees are entitled to overtime pay for hours worked beyond 40 in a work week. They must also be paid at least the federal or state minimum wage.
- Exempt employees are not entitled to overtime pay, but they must meet strict criteria, including being paid on a salary basis at a minimum threshold and performing specific job duties outlined by the FLSA.
Failing to properly classify employees can result in back wages, penalties, and legal fees – not to mention the operational disruption that comes with an audit or lawsuit.
The Cost of Getting It Wrong
Misclassification can trigger investigations from the U.S. Department of Labor (DOL) and state agencies, leading to:
- Back pay for unpaid overtime and minimum wage violations
- Liquidated damages equal to unpaid wages
- Civil penalties per violation
- Employee lawsuits and class-action litigation
- Loss of trust among employees, and damage to your brand
These financial and reputational risks make compliance a critical priority for any employer.
Don’t Wait Until It’s Too Late
Misclassification issues often go unnoticed until an employee files a complaint or a DOL audit is initiated. By then, it’s too late to avoid costly repercussions. Get ahead of the risk today. Reach out to KMA for guidance.