Boo! This Halloween, Watch Out For Ghosts, Goblins, and Misclassified Employees

-Submitted by: Leni Plimpton

Misclassification: what is it, and what does it mean for your company?  The term “misclassification” can be confusing because it is used in a few ways: first, employers can misclassify a worker as an “independent contractor” who is really an employee. While a serious issue in its own right (and a very common problem) today we are going to talk about the other kind of misclassification: misclassification of employees as exempt vs. non-exempt. 

In short: non-exempt workers get overtime, exempt workers do not.  Many people think of this difference as being the same as the difference between being “salaried” vs. “hourly”—but this is not quite accurate: simply paying a salary vs. by the hour is not the deciding factor as to whether someone must be paid overtime. 

The Fair Labor Standards Act is the primary federal law that governs overtime and minimum wage, and this law covers almost every employer in the nation.  The FLSA requires that most employees earn at least minimum wage for all hours worked, and “time and a half” for all hours worked over 40 in a workweek. This seems simple but it can get complicated quickly.

How you calculate time, how accurate the time records are, what you include in the pay stub, and how you set the workweek are all areas where employers can stumble.  Did you know that you must pay a non-exempt employee overtime even if the employee was instructed not to work overtime but did anyway? It’s true. What if the employee works off the clock, and you know about it?

Same answer: you must pay the wages.  All hours worked by your employees must be paid, but you can address the violation of policies through the use of discipline, which can include termination. And as for deciding whether someone qualifies as exempt or not—the definitions can be confusing and many employers have come to the wrong conclusion and paid a steep price.

On a state level, the Colorado Wage Act applies to Colorado employers, and more specifically, the Colorado Minimum Wage Order governs the payment of minimum wage and overtime in Colorado.  The order applies to employers in four specific industries: retail and service, commercial support service, food and beverage, and health and medical. 

If you would like to ensure that your company is compliant with federal and state law regarding payment of wages, if you realize you have misclassified an employee, or if you have been served a demand letter or a lawsuit alleging wage payment issues, don’t hesitate to contact one of the knowledgeable employment attorneys at Fortis Law Partners and we would be happy to help.