In August, we discussed tougher new standards in Georgia for classifying a worker as an independent contractor. The law intends to prevent companies from categorizing someone as a contractor when they’re really an employee who should receive the protections of federal and state employment laws.
Misclassifying an employee as exempt is one of the latest ways that companies are trying to get around labor laws. It’s hard to believe that business owners would do this, but some are creating fake job titles to skirt minimum wage and overtime pay protections.
‘Strategic’ Use of Titles to Avoid Overtime Payments
The National Bureau of Economic Research recently released a report detailing how some firms are inflating job titles to avoid having to pay overtime. One common practice is to give a managerial title to someone who isn’t managerial. Whether it’s ‘Director of First Impressions’ instead of front desk assistant or ‘price scanning coordinator’ instead of cashier, bogus job titles seem to be commonplace across industries, even though companies face the prospect of stiff penalties for violating federal overtime rules.
Not only is it a legal issue; it’s also a matter of fairness to other workers. Restaurants that are short-staffed may require their cooking staff to work more than 50 hours in a week. For a restaurant that is paying the proper amount for hourly work, the cooks will make lots of overtime. But, another restaurant may decide to call the cook a ‘sous chef’ and put him on a salary. Even though he’s still working 50+ hour weeks, suddenly he’s earning significantly less per hour than the cook who’s getting overtime.
Correct Employee Classification is the Law
Business owners don’t get to decide for themselves which jobs are hourly and which are salaried. There are established standards regarding wages and job duties for how to correctly classify an employee. There are also consequences for not following the law, ranging from payment of back wages to fines to even imprisonment.
MarathonHR has long advocated that employers make as many workers as possible hourly employees. This is the surest way to avoid running afoul of Wage and Hour Division rules.
MarathonHR is here to help guide you on correctly classifying employees as exempt or nonexempt, or if you have questions about wage and hour compliance.