Wage Claims lawsuits are more prevalent now than at any other time in American history. This continuing series aims to inform the public about wage issues and how to address them.
Errors in employee classification can expose employers to potential wage claim lawsuits and rob employees of their pay. Most non-government employees fall under one of two classifications: exempt or non-exempt. Non-exempt employees should not be paid on a salary basis; they are generally entitled to hourly pay, overtime pay and other labor code requirements. Exempt employees, however, may be paid on a salary basis.
In the past, receiving a salary indicated competence and skill- now it can be a potential liability. Retail industry practices once exemplified the danger of salary pay; many retail stores faced lawsuits for misclassifying non-exempt workers as ‘managers’ in order to deny them overtime pay or other privileges.
To avoid the misclassification pitfall, remember the following:
–Classification of an employee as exempt or non-exempt is not simply a measure of an employee’s value.
–Classification is not a reflection of employee professionalism.
–Classification should not be based on how “it’s always been done” in one’s industry.
When determining proper employee classification, consult with the Industrial Wage Orders applicable to your field. The Wage Orders list the possible exemptions for different industries and the requirements for each exemption. The Division of Labor Standards and Enforcement (DLSE) website is an excellent tool for researching exemption applicability.
Keep in mind that exempt employees generally…
a) Use their own discretion and independent judgement
b) Earn more than twice minimum wage for full time employment (presently about $33,280 a year)
c) Are classified as “executives”, “administrators”, or “professionals” (the most common catagories)
Employers should be careful when classifying employees as “exempt.” Consider the following during this process:
1. Requiring employees you consider to be exempt to keep time sheets and paying them overtime is risky; if the employee is missclassified, she/he may sue for unpaid overtime.
2. Each exempt position should have a verified legal foundation.
3. When in doubt, seek counsel or consider the employee non-exempt and pay by the hour.
Michael Freeland’s Wage Claims series will continue with “Common Payment Errors.”
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