When I meet with business owners and talk about the HR services their company may need, I generally find out that they have a lot of misconceptions about employee classification. Misclassifying employees can land a business in a lot of trouble with the enforcement agencies. Some estimates say that 40% of employers unknowingly are violating the FLSA law. How to prepare? What do in these circumstances? Be proactive!
Classify workers appropriately: In general, if you have exempt (salaried) employees, make sure you paid them by the job they do and not the hours they keep. You need to provide them a guaranteed salary and cannot be reduced if they work for less than 40 hours. You cannot dock their pay for a partial day absence or as part of a disciplinary matter unless this employee has committed a serious safety infraction. You will be walking a fine line, so make sure you have job descriptions in place in which, if appropriate, you classify your employees as exempt.
Burden of proof: Your small business has the burden of proof when it comes to determine whether or not the employee is exempt (salaried) from the overtime requirements in the FLSA law. The FLSA is not very clear; thus, the exempt status will depend on the particular individual duties of the employee. Your company has to be extremely cautious when making, documenting and proving affirmatively (“affirmanti incumbit probatio”) that employees fit the exemptions. This burden is met with substantial evidence on each and every element.
Investigation: If you get a visit from the government enforcement agencies, they will investigate and gather data concerning wages, hours and other employment practices; they can enter your business premises and inspect your records; they can question employees to determine whether any person has violated any provisions of the FLSA. Be ready and have all your necessary documents in place.
Be proactive! Review periodically if your workers are appropriately classified. You need to have all the documents to prove your employees are exempt; keep the employees’ time cards and, payroll records, any other relevant documents. It is a good idea to create an employee manual and job descriptions. Listen to employees complaints and determine whether o not those complaints have any validity; post notices informing employees of their rights under the FLSA. Stay alert!