Independent Contractor/FLSA Exempt Status/Overtime and Youth Rules
Calling a worker an Independent Contractor, Intern or Volunteer without appropriate justification or paying a W-2 employee a salary (without overtime) are decisions which could result in serious liability for organizations that do not understand the regulations and guidance related to these areas. Misclassifying someone as an independent contractor or exempt employee can result in a requirement to backpay overtime for years, and in some cases to compensate for benefits which a worker should have been entitled to. The DOL could even choose to refuse to allow a company to categorize certain jobs or groups of jobs as exempt and overtime would have to be paid for all employees going forward. This toolkit will support your decision-making process and prevent excess risk.- Catapults’s FLSA Status/Overtime and Youth Rules FAQ includes the following information:
- Overview of Fair Labor Standards and Minimum Wage Guidelines
- Youth Employment Rules
- Classifying Workers and Overtime Pay Rules
- Overtime Pay Calculation and Comp Time Rules
- Catapult’s Employment Classification FAQ includes the following information:
- Independent Contractor Versus W-2 Employee
- What is a Volunteer?
- What is an Intern?
- Catapult’s A&R Insight: Allowed Deductions from an Exempt Employee’s Salary includes the following information:
- Overview of FLSAÂ
- Reasons for Exempt Pay Deductions
It is the employer’s responsibility to classify a worker as an employee or a contractor. It is not the employee’s option to choose to work independently. There are multiple factors to be reviewed to determine a worker’s status, and to therefore prevent liability for back benefits or taxes. These factors are outlined in the US DOL Wage & Hour Division Fact Sheet #13
These links may be helpful in calculating overtime, developing policies related to FLSA, and in ensuring appropriate wage deductions:
- Catapult’s Non-Exempt Travel Tool
- The DOL’s Overtime Calculator and FLSA Resources can help you understand the rules related to figuring out overtime payment for your employees.
- The DOL’s Overtime Security Advisor is designed to help establish which positions may be exempt from minimum wage and overtime pay requirements.
- Catapult’s State Law Tool – click here – (each state has unique wage deduction and hours worked rules)
To qualify for an exemption, an employee must meet specific duties tests (for “any employee employed in a bona fide executive, administrative, or professional capacity or in the capacity of outside salesman.”) and, in most cases, minimum compensation requirements.
It is important to understand how exempt pay rules impact many areas of your organization, to include when to compensate non-exempt employees, and when you may deduct from the salary of an exempt employee. Remember, each state has different rules
- The DOL’s Hours Worked FAQ provides guidance on when to compensate non-exempt employees for:
- Training Time
- Travel Time
- Breaks and Lunches
- Waiting/On-Call Time
- DOL’s FAQ on Salary Basis/Exempt Pay Deductions
- North Carolina DOL guidance on NC specific rules related to pay deductions.
- The DOL’s Independent Contractor Guidance and IRS Independent Contractor Guidance (Remember that this is an area of ongoing rulemaking and that laws are different from state to state. It is always best to call Catapult if you have concerns.)
- Catapult’s State Law Tool – click here – (each state has unique wage deduction and hours worked rules)
- Concerned about your level of compliance? Talk to a Catapult Consultant for an FLSA Audit. Contact us at (866) 440-0302
