Employees fit into different job classifications depending on several aspects of their work. The number of hours they work each week, job responsibilities, and total earnings are just a few things that define these classifications.
According to federal laws, some classifications must receive specific pay and benefit structures. Unfortunately, employers may intentionally misclassify employees to save themselves money. Here is a closer look at two ways employers may use this illegal tactic.
Classifying workers as independent contractors
Sometimes employers classify workers as independent contractors instead of W-2 employees. Typically, independent contractors work for themselves and have the freedom to choose what jobs they perform. When employers hire people and dictate their work and pay but classify the workers as contractors, the employees miss out on workers’ compensation, FMLA, and unemployment benefits guaranteed to W-2 employees.
Classifying employees as exempt
Exempt workers do not qualify for overtime pay when working more than 40 hours a week. The U.S. Department of Labor restricts exempt classifications to the following categories:
- Administrative positions
- Outside Sales
Employees in these positions must also earn a minimum salary of $35,568 to qualify as exempt.
Since the categories are vague and encompass many different types of jobs, employers may classify employees as exempt even when the workers do not have job responsibilities that fit into one of the above categories. In doing so, employers avoid paying workers their hard-earned overtime pay.
Knowing the exempt and contract employee classification guidelines might encourage workers to protect themselves from unfair wage tactics.