Employment status is the single greatest area of exposure for employers

Independent contractor, temp, regular employee, full time, part time – what does it all mean, and when do I have to pay overtime?

Employment status (also known as classification) is the single greatest area of exposure for employers, large and small. Misclassified workers have resulted in class action suits and multi million dollar pay outs for well know employers (Microsoft, Farmers Insurance, Pacific Bell, Rite Aid Corp). But it is not just the Fortune 500; emerging companies and small businesses are at significant risk as well. A simple call to the state labor board, or an unemployment insurance claim may trigger an investigation. As an employer, it is vital that your workers are correctly classified and you can justify your determination. Here is a quick primer:

Employment Status:

Regular Employee – pay subject to federal and state employee withholding and employer paid taxes; eligible for company benefits; may be full time or part time; may be exempt or non exempt

Temp – hired for a temporary assignment; pay subject to federal and state employee withholding and employer paid taxes (unless hired through a temp agency); not eligible for most company benefits; may be full time or part time; may be exempt or non exempt

Independent Contractor – pay not subject to withholding or employer paid taxes, not eligible for company benefits

Full time – usually 35 or 40 hours per week, depending on company hours

Part Time – less than 35 or 40 hours per week, depending on company hours (NOTE: benefit programs generally stipulate a 30 hour threshold for coverage)

Overtime Status:

Exempt – position not subject to overtime pay

Non Exempt – position subject to overtime pay

While you may be tempted to classify your workers as independent contractors, there are specific, mandated qualifications that must be met; such as, who has control over when, where and how the work is performed? Similarly, the designation of exempt cannot be arbitrary. The position’s responsibilities must meet specific criteria in order for the position to qualify as an exempt position. Your best bet is to consult a human resources professional to ensure you are protected.

The preceding is provided for general informational purposes only, and not intended to constitute legal advice.