How to Properly Classify Your Workers

Wage and hour cases filed under the Fair Labor Standards Act are growing.

May 19, 2023

ALEXANDRIA, Va.—The NACS webinar “The Importance of Properly Classifying Your Workers” is now available on demand. The free webinar took place earlier this week, and two subject area experts from the renowned labor and employment law firm of Fisher Phillips discussed how and why it is vital to classify your workers correctly.

The Biden Administration is seeking to change rules around the proper classification of workers in the United States. There are already pending rules around the National Labor Relations Board’s (NLRB) Joint Employer Rule and the U.S. Department of Labor’s (DOL) Independent Contractor Rules, which are tentatively set to be finalized later this year. The DOL also intends to release a new Notice of Proposed Rulemaking (NPRM) updating the Overtime Rules, possibly as soon as this summer.

According to Marty Heller, partner, Fisher Phillips Atlanta, wage and hour cases filed under the Fair Labor Standards Act are one of the fastest growing lawsuit types in the country.

“It's top five of any type of claim that we're seeing filed in federal courts,” he said.

The most anticipated wage-and-hour rule is a change to what's known commonly as the overtime rule, meaning the threshold which establishes whether or not someone is entitled to overtime under the Fair Labor Standards Act. Right now, the salary threshold is $684 a week, which is roughly $35,500 a year.

“We know that they are going to propose an increase to the salary basis. Currently, prognosticators are estimating low-forties, mid-forties,” he said. “If you think back to the last time this was done, the number in the high forties was struck down by a federal court. So we think they're going to try to stay below that level.”

What we don't know is if the DOL is going to alter the duties test, he said.

“I think personally it's more likely that any changes to the duties tests are very minor because I think significant changes open up the potential for a lot of legal challenges,” said Heller.

Another question is if the DOL is going to build in automatic increases to the salary level threshold.

“We could see a proposal that says the minimum salary level should move to $42,000, and it should increase every two years or every three years on a certain basis,” he said. “We have to be sort of aware of that, and we need to know how we should be responding as employers to this type of change.”

Heller advises retailers look at their payroll and see which employee make above and below that salary threshold. For workers who make below the threshold, retailers should know how much they work by tracking their hours before the rule becomes final. Employers should know how frequently they work overtime. Is it every week? Is it very infrequent? What's the basis of the potential overtime liability? And then from there, retailers will need to make the decision of either increasing pay to ensure that those workers can meet the new minimum salary threshold or reclassifying them to overtime and allowing them to receive overtime for hours over 40.

“One thing to keep in mind on making that decision is there are plenty of times when there's a morale issue caused by that declassification from exempt to non-exempt,” he said. “People typically view themselves when they are exempt as exempt for a reason and they don't enjoy the reclassification to non-exempt.”

This webinar is full of critical information on these complex labor standards, and it’s not to be missed. After watching the full webinar, you’ll have a better understanding of:

  • What we know about the pending rulemaking on Joint Employer & Independent Contractor.
  • Where the Biden Administration is likely to go with the Overtime Rule.
  • How important it truly is to properly classify all of your workers.
  • What tools and resources are available to help you ensure it is done right.
Attendees will be eligible for one SHRM and/or HRCI credit for participating.

Watch this free webinar now.