Employee Misclassification: The Price Of Getting It Wrong

Employee classification errors remain one of the most common – and costly – compliance mistakes employers make.

When employers misclassify employees as exempt from overtime, the consequences can be significant. As wage and hour litigation continues to rise, it is important for employers to understand these legal distinctions and the risks associated with misclassification.

Exempt v. Non-Exempt

Under the Fair Labor Standards Act ("FLSA"), employees are presumed to be non-exempt, meaning they are entitled to minimum wage and overtime pay, at one and a half times their regular rate for all hours worked over 40 hours in a workweek. To classify an employee as exempt, an employer must satisfy certain legal tests. More specifically, the employee must be paid a salary that meets the minimum statutory threshold (salary basis/salary level test), and the employee's primary job duties must fall into one of the recognized exemption categories (duties test). Job titles