Ask the Experts: Be compliant when classifying employees

For many North Carolina employers, the process of hiring is not limited to simply finding the right person. It begins behind the scenes, by first determining how the position will be classified in order to comply with both the Federal Fair Labor Standards Act and the N.C. Wage and Hour Act.

Employment attorney Mimi Soule, owner of Raleigh-based Soule Employment Law Firm, has seen an uptick in business owners who have sought her advice on potential lawsuits related to wage, hour and overtime pay issues.

Soule’s advice to owners is to review employee job descriptions with respect to exempt and nonexempt status and promptly correct misclassification issues.

“There is an exemption for executive employees under N.C. and Federal law that requires an exempt executive to regularly and customarily direct the work of two or more full-time or equivalent employees,” Soule wrote in an email. “Most exemptions require paying an employee a salary of at least $455 per work week.”

If the position does not meet the “executive” requirement, then it is unlikely the position should be classified as exempt.

Nonexempt employees – part-time and full-time – are entitled to overtime pay if they work more than 40 hours in a work week, and overtime is generally paid as time and a half. Exempt employees are not entitled to overtime pay, even if they work more than 40 hours.

“Part-time and full-time status does not impact the exempt/nonexempt classification issue,” Soule wrote. “If a part-time, nonexempt employee works more than 40 hours in a work week, that employee is entitled to overtime pay just like a full-time, nonexempt employee would be.”

One of the biggest mistakes employers make is believing that if they pay an employee on a salaried basis they don’t have to pay that employee overtime, Soule wrote. Owners should classify all employees as nonexempt unless they are exempt under both state and federal wage and hour laws.

“Paying a salary is only one element of several state and federal exemptions,” Soule wrote. “In addition to being salaried, the employee’s position must also meet all of the other requirements of an exemption.”