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Exemption Checkup: Tips on Finding and Fixing Pay Practice Problems in 2012 (03/29/12)

Employers must properly classify workers under the Fair Labor Standards Act, especially given the potential for expensive class-action lawsuits. The U.S. Department of Labor has beefed up its FLSA enforcement with the P3 Initiative, which calls on employers covered by the Wage and Hour Division to create written plans for identifying wage and hour violations (plan), develop an implementation process (prevent), and test the process for compliance (protect). The DOL is expected to propose a rule forcing covered employers to inform exempt employees of their status and conduct classification analyses on these exempt workers.

Experts stress the need for proper worker classification, as “employers” are jointly liable for FLSA damages. Given that the definition of “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee,” human resource professionals and others could be held liable. However, courts typically take into account an individual’s financial control over the work force and role in creating pay policies and classifying workers when determining personal liability.