Learn how to classify the employees correctly and penalties and consequences for non-compliance

1. Fair Labor Standards Act:
Classifying Employees
Correctly

2. What is FLSA?
Fair Labor Standards Act (FLSA) :
• Sets standards for minimum wage and overtime pay
• Establishes record keeping standards
• Prescribes child labor standards
FLSA does not regulate:
• vacation, holiday, severance, or sick pay
• meal or rest periods, holidays off, or vacations
• premium pay for weekend or holiday work
• pay raises or fringe benefits
• discharge, termination, or final payment procedures

3. Exempt and Non-exempt Employees
• Exempt employees- Employees who meet one of
the FLSA exemption tests and who are paid on
fixed salary basis, not entitled to overtime.
• Non-exempt employees- Employees who do not
meet any of the FLSA exemption tests and are
paid on hourly basis and are covered by wage
and hour laws regarding minimum wage,
overtime pay and hours worked.

4. Test for Exemption
To qualify for exemption, employees must meet certain
tests regarding their:
• Salary Level:
o minimum salary level required for exemption is $455 per
week
o Must be paid ‘free and clear’
• Job Duties: Categories of Exemption
o Executive Employees
o Administrative Employees
o Professional Employees
o Outside Sales Employees
o Computer Employees

5. Independent Contractors
FLSA does not cover independent contractors. Therefore, its important to
learn to distinguish between an independent contractor and an employee.
The Supreme Court considers the following factors significant in determining
an employee’s role versus that of an independent contractor:
• the extent to which the worker's services are an integral part of the
employer's business.
• the permanency of the relationship.
• the amount of the worker's investment in facilities and equipment.
• the nature and degree of control by the principal.
• the worker's opportunities for profit and loss.
• the level of skill required in performing the job and the amount of
initiative, judgment, or foresight in open market competition with others
required for the success of the enterprise.

6. Penalties for Wrongly Classifying
Employees
Employers that do not comply with FLSA’s
exemption provisions are subject to following
penalties:
• fines up to $1,000 per violation.
• criminal penalties including up to $10,000 in
fines for a first conviction and/or imprisoned
up to six months for second conviction.
• back pay, liquidated damages and attorney’s
fees.

7. Want to learn more about FLSA, its requirements
and best practices to comply with them?
ComplianceOnline webinars and seminars are a
great training resource. Check out the following
links:
• Fair Labor Standards Act: Are Your Employees
Classified Correctly?
• The In's and Out's of FLSA
• How to Conduct FLSA Classification Self-Audit
• Avoiding Costly Wage and Hour Problems
• How to Pay Overtime Correctly under FLSA
• Handling Supplemental Pay Under the FLSA