Congratulations, your emerging business is expanding and you’re ready to hire your first employees or add new ones to the team. Hiring staff is an exciting milestone. It means your business is growing and you are earning revenue. It can also be daunting, because employees bring a new level of responsibility to you as a business owner.
Employment law is fairly complex and covers everything from anti-discrimination to workplace safety. We will try to address as many of those topics as possible in future blogs, but let’s first discuss one issue in employment law that affects all emerging businesses that hire staff: employee classification.
The U.S. Department of Labor has identified two main classifications for employees:
Non-exempt employees are covered by the Fair Labor Standards Act (FLSA), which establishes parameters for minimum wage, overtime pay, child labor and more. The standards apply to full and part-time workers, and the act affects both established businesses and those in the pre-revenue, start-up phase.
A federal minimum wage of $7.25 and an overtime rate of at least one and one-half times their regular pay rate applies to non-exempt workers. In addition, state and local minimum wage standards may apply, so be sure to check your local laws.
The U.S. Department of Labor has laid out a detailed series of criteria for classifying exempt employees, i.e. those who are not covered under one or more of the FLSA provisions. The list of exemptions includes commissioned sales employees, some salaried and administrative professionals, seasonal workers, farmworkers and more.
It is important to note that simply classifying an employee as “salaried” does not necessarily mean that employee is exempt. As stated on the Department of Labor’s website:
“…employers and employees should always closely check the exact terms and conditions of an exemption in light of the employee’s actual duties before assuming that the exemption might apply to the employee. The ultimate burden of supporting the actual application of an exemption rests on the employer.”
The DOL offers an online tool to help employers determine which employees are covered under the FLSA. Properly classifying each employee helps protect your business from wage disputes and legal action. A skilled business attorney can help you determine the correct classifications as well as draft the accompanying policies for your business.