Hiring employees comes both with certain rights, and with certain responsibilities. Some employers are tempted to try to circumvent these responsibilities by classifying employees in a way that seems more advantageous to them.
It is important to classify your employees correctly the first time. Failing to do so can open your business up to significant problems and penalties.
There are two types of employee classification that tend to get business owners into trouble. The first is classifying non-exempt employees, that is, hourly employes, as salaried employees. The second is classifying employees as independent contractors.
Classifying Non-Exempt Employees as Exempt
Most jobs require employers to pay overtime wages if they are required to work more than 40 hours per week. The exceptions are employees who work on a salary basis, whose salary exceeds $913 a week, and who hold certain job titles and duties.
In New York, those duties include administrative professionals, IT professionals, specialty skilled workers, and executives.
An employee may also be considered exempt if they earn more than $100,000 per year, or if their job is professional, administrative, or managerial in nature.
Any employee who makes less than $47,476 a year ($913 a week) must be treated as a non-exempt employee.
If you fail to classify your non-exempt employees correctly you could be liable for paying back wages if they worked overtime, as well as penalties and fines from the New York Department of Labor and the federal Department of Labor.
Classifying Employees as Independent Contractors
If you’ve paid any attention to the employment debates surrounding Uber and Lyft then you’re already at least a little bit familiar with the issues that can arise when you misclassify an employee as an independent contractor.
There are a number of tests you can use, including the amount of time the employee spends working for you, whether or not you are the employee’s only “client,” whether or not you exercise control over the worker or the work environment, whether you are in a position to discipline the worker, and whether you provide the worker with tools to do their job.
If you misclassify an employee as an independent contractor then you may face tax consequences. If the worker failed to withhold their own taxes then you may be liable for all the taxes you should have withheld on their behalf.
You can also be held liable for on-the-job injuries and for your failure to pay workers compensation.
If the misclassified worker files for unemployment then they may indeed receive unemployment compensation, and you may be liable for penalties, interest, and unpaid premiums.
Finally, if you violated minimum wage laws or failed to pay overtime you could be liable for those monies as well.
What can you do if you’ve misclassified an employee in the past?
Contact your attorney to help you rectify the situation in a way that doesn’t create additional problems or consequences for your organization.
Not sure how to classify your employees?
Having a business attorney to talk to can help you avoid these kinds of problems and issues. Reach out to Scott Richman Law today to get the help you need.
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Meet Mr. Richman
SCOTT B. RICHMAN, ESQ.
Mr. Richman is the Managing Member and Founder of Richman Law Firm PLLC. In his role as Managing Member, Mr. Richman oversees the day-to-day operations of the firm and handles the litigation of the most complex legal matters across a vast array of practice areas and disciplines.