Don't let the misclassifications of workers risk the health of your business.

• Author: Saade, Renea
• Position: Legal Speak

The salary threshold for a worker to qualify as exempt from overtime pay under the federal law known as the Fair Labor Standards Act is currently scheduled to go from $455 per week ($23,660 per year) to $913 per week ($47,476 per year) effective December 1,2016, unless one of the pending legal challenges to the new rule stops or postpones the increase.

Given the significant change in the threshold amount, many employers that fall under the authority of the Fair Labor Standards Act are evaluating whether they should convert currently exempt employees to non-exempt or fill a position that would ordinarily be considered an employee position with an intern or independent contractor. However, reclassification of a worker or position is not always the right solution.

Some employers are also under the misconception that as long as this new salary threshold is met, a worker is automatically exempt. This is not the case. To truly be exempt, the worker must also meet certain duties and responsibilities tests. For instance, many employers classify their management staff as exempt under the "Executive" classification. To meet the duties and responsibilities test under this classification, an employee must, among other things: (1) be assigned manage tasks as his/her primary duty; (2) supervise two or more full-time employees (or the equivalent of the same); and (3) have the ability to hire and fire (or at least have significant influence on such decisions).

Minimizing Risk

Misclassification of workers can leave an employer legally vulnerable for agency audits and wage claims. Such vulnerability includes potential financial exposure for unpaid regular and/or overtime wages, interest on such wages, and statutory penalties or punitive damages. An employer may be required to pay attorneys' fees and costs if required to consult with counsel to address an audit, agency investigation, or wage claim or be ordered to pay for the fees and costs incurred by an employee in pursuit of unpaid wages.

To avoid, or at least minimize, this risk, employers, particularly those in the health care industry, which tends to have a higher rate of misclassification cases, should conduct a self-audit or evaluation of the current and, to the extent applicable, proposed classifications for their workforce.

While a human resources or legal professional should often be consulted to ensure that a company, particularly a healthcare practice, has properly classified its workers, the...