Worker classifications matter and they go beyond merely labeling workers as either employees or contractors. The process of classifying workers may seem straightforward, but it’s more complex than many businesses realize.
So, why is the process of worker classification difficult? Because with each hire, organizations must do their due diligence and determine the classification based on the individual, the role and the responsibilities that fall within that role. Making the wrong classification exposes businesses to potential penalties, fines, taxes, interest, late fees, and legal battles by misclassified workers.
How confident are you about the classifications in place for your workplace?
Take a moment of pause and evaluate the worker classifications in your organization by answering these questions:
- How well do you understand the distinctions between the state and federal laws associated with worker classifications?
- Do you have a complete picture of how employee and contractor classifications are determined?
- Are you aware of the distinct duties and responsibilities associated with common employee exemptions?
- Do you know all of the factors that separate an exempt employee from a non-exempt employee?
We just recently hosted a webinar that dove into this exact conversation. By answering these questions, organizational leaders can have a better understanding of how to avoid the pitfalls of worker classifications.
Yes, we are a technology company, which may surprise you that we tackled this topic in our webinar series. But this is an important conversation for all businesses, of all industries.
Mimi Soule, managing partner of Soule Employement Law Firm, led our worker classification discussion. As an attorney, her firm is designed to provide business owners, managers and HR professionals with insight and guidance into employment law and HR compliance.
Is the webinar worth one-hour of your time? Absolutely, especially if it means gaining a better understanding of how to protect you business from the damages of misclassification. But whether you tuned into the webinar or not, we’ve pulled together the highlights you need to know.
Top takeaways to better understand worker classifications
- The Fair Labor Standards Act (FLSA) is a federal law that applies to specific organizations. Employers must comply with FLSA unless the state of North Carolina provides greater requirements or benefits to employees. This distinction is due to the North Carolina Wage and Hour Act.
- The IRS 21-Factor Test legally helps employers understand the behavioral, financial and relational distinctions of employees and contractors.
- The North Carolina Department of Labor conducts its own legal test, known as Economic Realities. Structured as a six-part test, Economic Realities examines the employer-employee relationship. The test evaluates job skills required, dependency on employment, the permanence of the relationship and the opportunities for profit or loss.
- Being a salaried worker does not necessarily constituent exemption from overtime. To be exempt, employees must meet the specific salary and duties requirements of an exemption.
- The exempt status requires employers to determine worker classifications on a position-by-position basis. That distinction must be made based on the individual employee working in the role itself.
- Worker classifications come with common white collar exemptions. The most common white collar exemptions are executives, professionals, administrative, outside sales, computer employees and highly-compensated employees.
There’s still one more webinar with Mimi Soule on the books
Over the last two months, we’ve covered the hiring process and worker classifications in our webinar series. But we still have one topic left: the employee exit. Join us on Tuesday, April 10 as we dive into the not-so-fun, often complicated topic surrounding the employee exit process.