Step Eight Comply With The Labor Laws On Employee Classification

10 Steps to Start A New Business

Make sure you understand the difference between independent contractors and employees. Many small businesses try to cut corners and misclassify employees as independent contractors.  Big mistake. You can face fines and lawsuits that can put an end to your entreprenuerial dreams.  Want to know the difference? Click here for my post on employees vs. independent contractors.

In addition to determining whether a worker is an independent contractor or an employee, businesses must determine if a particular employee is exempt.  Most employees must be paid for overtime worked and given statutory breaks for meals and rest time. 

In California, overtime is any hours worked over 8 hours in a day or 40 hours in a week. There is an exception if your company has instituted a bona fide alternate work week in which you normally work 10 hour days, 4 days a week – in which case the overtime is after 10 hours rather than 8, but still after 40 in the week. Unless you are exempt California requires that all hours over 8 in a day or 40 in a week or worked on the 7th consecutive day of a work week be paid at 1.5 times an employee’s regular rate of pay. In addition, hours worked over 12 in a day or hours over 8 worked on the 7th consecutive day in a week are paid at 2 times an employee’s regular rate of pay.  The major exemptions are : Executive, Administrative, Professional, and the Computer Professionals.  Each exemption has specific criteria and you should educate yourself or seek a lawyer’s help when determining employee status.


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