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Navigating the complexities of the Federal Labor Standards Act (FLSA) is essential for running a successful business. Most small business owners juggle many priorities, from growing their customer base to managing daily operations. However, failing to adhere to federal regulations regarding employee classification, record-keeping and compensation may result in costly and unnecessary expenses to a business. Proactive and informed business owners can protect their company and employees by ensuring a fair and lawful workplace.

The two most common employment violations include misclassifying employees as either independent contractors or exempt employees.

Misclassifying employees: Employee vs. independent contractor

An employee works under the supervision or control of an employer. The employer-employee relationship may be reduced to an employment contract. Employees are either part-time or full-time, are eligible for employee benefits in various degrees, and if nonexempt, must be paid for any hours over 40 per week. Employees are subject to both federal and state employment laws, including but not limited to minimum wage, overtime pay and workplace safety, and are entitled to certain benefits such as health insurance and paid leave.

An independent contractor is either an individual (a freelancer) or a company hired by a business to complete specific projects and tasks defined in an independent contractor agreement. Independent contractors generally possess...

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