The Real Benefit of Employee Classifications

The Real Benefit of Employee Classifications

The number one reason to conduct employee classification reviews is to assure compliance with the Fair Labor Standards Act (FLSA) enforced by the Wage and Hour Division of the Department of Labor (DOL).  The FLSA generally requires employers to pay overtime to non-exempt employees who work more than 40 hours in a workweek.  Employees are presumed to be non-exempt if they do not qualify for the executive, professional or administrative exemption under the law. 

Another reason for companies to comply with the law is to avoid the large settlements that can result from misclassification.  Recently several lawsuits have resulted in multi-million dollar settlements for plaintiffs.  Just one FLSA lawsuit can bankrupt a small or medium sized company.  The Secretary of Labor has added hundreds of investigators intent on assuring that non-exempt employees receive the overtime pay to which they are entitled.  With greater emphasis being placed on the issue, the plaintiff’s bar is actively seeking clients, and employees themselves are filing complaints with the DOL.

In addition to the compliance and monetary reasons, there are some practical business reasons for conducting a classification review.  During the course of the review, employers may discover that some employees previously classified as exempt will need to be re-classified as non-exempt.  Generally speaking, this discovery, viewed in the proper perspective, can lead to better management, leading to greater efficiency in the workplace.  Employers can put rules in place for granting or denying overtime and for disciplining employees who violate the rules.  The process can also be used to look at each employee and the job they are performing.  The employer may find that the company will benefit from reassigning some employees.  Unfortunately, it may also be necessary to terminate employees whose skills are no longer needed.  With the right attitude, a process that could be viewed as negative can be converted into a positive activity that leads to greater efficiency in and increased for profits the business.  

Your Fellow Virtuoso,

Wanda E. Flowers, Esq.

Disclaimer:  Nothing in this blog is to be taken as legal advice.  For legal advice, please consult with a licensed attorney regarding your specific circumstances.  Want to learn more?  Contact us at www.bizvirtuoso.com!