Business owners in California understand that a major part of their budget goes to paying employee salaries. This may not even include taxes and benefits. To ensure workers receive wages and benefits that are just, the federal government has established laws classifying workers and the compensation they should receive.
The Fair Labor Standards Act sets the federal minimum wage. It also requires employers to pay overtime to certain employees who work more than 40 hours a week as well as offering other protections for workers. Some employees are exempt from the FLSA requirements, and it is important that employers know how to apply this law.
Understanding employee classification
As most employers know, full-time workers often earn a set salary no matter how many hours they work and may also receive other benefits, like health insurance, vacation pay and bonuses. Usually, full-time workers are exempt from FLSA rules regarding overtime pay. Part-time workers typically receive an hourly rate. FSLA requires employers to pay overtime if part-time workers go over 40 hours in a week. However, some employees fall under different categories:
- Contract workers
- Independent contractors
- Temporary employees, such as those filling in for holidays or for someone on medical leave
- On-call employees
- Volunteers or interns
Employers should base the classification of their workers on the amount and method of pay as well as the duties and management of the employees. Misclassification may help an employer avoid paying overtime or benefits to a worker, but it can also lead to serious legal trouble, tax penalties and other consequences. Employers who are uncertain how to classify their workers or who are facing allegations of misclassification would do well to reach out for legal advice from an experienced and trusted business advisor.