Employment Group
Employment classifications – including "exempt" versus "non-exempt" status – must align with the Fair Labor Standards Act
Owners of Chester County businesses, and those throughout the region, might believe that they can save money on employee benefits by classifying workers as temporary employees. However, that belief can be costly if the classification is incorrect.
Recently, GlaxoSmithKline agreed to pay $5.2 million to settle a class-action lawsuit that had been filed against the company by almost 1,300 of its employees. Those employees alleged that the company had improperly classified them as temporary employees. Had these individuals instead been designated as regular employees, as they believed they should have been, they would have been eligible to participate in GlaxoSmithKline's employee benefit plans.
The Four Standard Classifications
While Federal and State laws do not generally differentiate between types of employees, the ramifications of misclassifying workers can be significant solely by virtue of improperly applying company-created benefits and policies. It is, accordingly, essential that employers clearly distinguish between the types of employees they retain. Employers should be aware of the following standard classifications:
- Full-time regular employees. Employees hired to work the employer's normal, full-time workweek on a regular basis.
- Part-time regular employees . Employees hired to work fewer hours than the employer's full-time workweek on a regular basis.
- Temporary employees. Employees engaged to work full-time or part-time on the employer's payroll, whose employment will be terminated no later than on completion of a specific assignment.
- Leased employees. Workers assigned to work at the employer through a leasing organization. Leased workers are employees of the leasing organization.
In addition to utilizing these classifications, employers must determine whether their employees are "exempt" or "non-exempt" under the Fair Labor Standards Act (FLSA). The FLSA sets minimum wage, overtime pay, equal pay, record-keeping, and child labor standards for workers who are covered by the Act. The statute defines the term "employee" as any person who is employed by an employer, and requires, among other things, that non-exempt employees be paid overtime at the rate of time and one half their regular rate of pay for all hours worked beyond 40 hours in a workweek. In contrast, exempt employees are not required to be paid overtime for work performed beyond 40 hours in a workweek.
Employers should familiarize themselves with the 2004 FLSA regulations in order to ensure that they have properly classified their employees. It is also recommended that employers conduct periodic classification reviews pursuant to which they check salary levels, guard against improper deductions, and review and revise job descriptions to accurately reflect the duties related to particular jobs. Taking such preventative action is warranted in light of the penalties that may be imposed upon an employer who has misclassified an employee. Damages available to prevailing plaintiffs under the FLSA include back pay, liquidated damages, attorneys' fees, and costs.MacElree Harvey
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West Chester, PA 19381–0660
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