Reminder for Classifying your Employees
Claims initiated by employees against their employers claiming non-payment of overtime have increased exponentially over the last year. This article is a reminder to you as an employer to ensure your employees are classified correctly in order to prevent lawsuits against you.
Federal and State laws generally do not define the terms of full-time, part-time or temporary employees. This leaves the employer with the flexibility to categorize their employees. Most often, these classifications are based on the number of hours worked and the duties performed. Typically the classification determines eligibility for benefits.
Basis for Classification
Employees usually fall into three major categories: (1) Full-time; (2) Part-time; and (3) Temporary
You may want to use the eligibility requirements under your insurance benefit plans (many health care plans exclude part-time employees who work less than a specific number of hours per week)
However, the definition chosen will not affect the employee's eligibility for legally mandated benefits, such as workers' compensation, unemployment compensation, unpaid family and medical leave and military leave.
Also note that the Fair Labor Standards Act (FLSA) further classifies employees as eligible or ineligible for overtime pay and refers to them as being either exempt or non-exempt from the Act's provisions.
A full-time employee is generally defined as one who works a normal workweek for an indefinite period of time. Since the FSLA sets 40 hours as the maximum number of hours worked before employers must pay overtime to non-exempt employees, you may use that number as their normal work week. (You can also use 37.5 hours or even 35 hours, depending on business hours and meal schedules.) Full-time employment could also be defined according to part-time employment hours. For example, if part-time employment is defined as 30 hours a week, then someone who works more than 30 hours per week could be classified as full-time.
Part-time employees work fewer hours than the normal full-time schedule, but are employed on an ongoing basis and typically receive some benefits. Part-time employment may mean irregular hours or workdays. A common definition or part-time employment is an employee who works less than 30 hours per week.
Employers may choose to provide their part-time employees with a pro-rata share of benefits such as sick leave, vacation and other paid absences based on the number of hours worked.
Temporary employees may work full or part-time hours. What makes the employee status "temporary" is that the worker is hired for a particular project or for a finite period of time. Because of the short-term nature of employment, temporary employees generally do not receive any benefits other than those required by law.
Some practices use temporary workers as a way to screen potential full-time candidates. Because some temporary employees may have an increased expectation of advancing to regular employment and eligibility for benefits, employers should make it clear that temporary workers are being hired for a limited period of time and are not eligible for benefits.
Employers should explain the temporary nature of the job in a letter or other written document stating an approximate limit for the period that a worker is expected to be employed and give the option for the employer to extend as needed.
In addition, employers should monitor the status of temporary employees so that if a limited duration of their employees change, the employee can be reclassified and correctly offered benefits they may entitled to. Failure to do so may conclude with a misunderstanding and potential legal claims.