Why does FLSA classification matter?

•        Ensures employees receive all legally required wages and protections

•        Protects the company from lawsuits, audits, and financial penalties

•        Supports fair treatment and pay equity in the workplace

•        Enables accurate budgeting and workforce planning

•        Maintains compliance with federal and state labor laws

Impact on the Employer:

•        Back Wages & Overtime: Employers may owe years of unpaid overtime to misclassified employees.

•        Liquidated Damages: Employers can be liable for double the amount of back pay (liquidated damages) unless they can show they acted in good faith.

•        Civil Monetary Penalties: The Department of Labor may impose penalties for willful or repeated violations.

•        Audits & Investigations: Misclassification often triggers broader audits and increased scrutiny from regulatory bodies.

•        Legal Liability: Exposure to class action lawsuits and settlement costs can be substantial.

•        Reputational Damage: Public lawsuits or DOL press releases may harm the employer's brand and employee trust.

Impact on the Employee:

•        Lost Wages: Employees may miss out on rightful overtime pay and related benefits.

•        Workplace Morale: Discovering misclassification may erode trust in HR and management.

•        Financial Stress: Employees may incur additional expenses without compensation (e.g., working long hours without pay).

Impact on the Manager:

•        Accountability: Managers who oversee misclassified employees may be scrutinized during investigations.

•        Training Gaps Exposed: Misclassification often points to a lack of training or awareness of FLSA standards.

•        Employee Relations Issues: Managers may face damaged relationships with direct reports due to mistrust or perceived unfair treatment.

•        Operational Disruption: Reclassifications may require changes to scheduling, workload distribution, and budget management.

If you need help ensuring that your team understands the FLSA and how to use the tests to determine if jobs are exempt or nonexempt, let’s talk.

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