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Business 52 November | 2022 Accurate and detailed record-keeping is especially important for retailers who invoke the Section 7(i) exemption of the FLSA. Under this exemption, retailers need not pay overtime to workers who earn at least half of their pay on a commission basis and who receive at least one-and- a-half times the applicable federal or state minimum wage. Both conditions must be supported by adequate records for retailers to avoid costly penalties. e record-keeping challenge has increased as more people work from home. "One of the most common mistakes is failing to correctly track remote workers' time," says Lambert. "In fact, employees must be compensated for all time worked, even if off -the-clock labor violates company policy." Employers who wish to discipline employees who put in extra time without permission must use nonfi nancial procedures such as verbal and written warnings; personnel fi le notations; or terminations, if appropriate. FREELANCERS AND INDEPENDENT CONTRACTORS Employers are not obligated to pay overtime to freelancers and independent contractors. Just who qualifi es for that status, however, is not always clear. "Distinguishing between employee and freelancer or independent contractor status is an ongoing challenge," says Heerde. "Because many states have diff erent standards from the federal government about where to draw the line, compliance and enforcement issues arise." Individuals classifi ed as freelancers or independent contractors will sometimes later fi le complaints claiming that they were actually employees and are due back overtime. is can lead to costly litigation. To qualify as a freelancer or an independent contractor, a person must have legally established a formal business enterprise ( federal, state and local business licenses and permits: tax registrations; DBAs; EINs; etc.). By defi nition, both freelancers and independent contractors work for organizations temporarily, with a nonemployee status, but there are some diff erences between the classifi cations. For example, most freelance jobs are generally part time and smaller or limited in scope and time frames: a day or part of a day, a week or even longer. Independent contractor projects are typically larger jobs, with longer time frames. In the eyes of the IRS, however, a freelancer and an independent contractor—also called a 1099 contractor—are the same thing. Wage-and-hour attorneys expect the federal and state governments to tighten the standards that determine who is in business for themselves. "I think the Biden administration will make it much more diffi cult to classify someone as a freelancer or an independent contractor," says Witte. " ings will probably head the way of California, which has an extremely restrictive test." In early May, the DOL withdrew a regulation introduced by the Trump administration that would have made it easier to classify someone as a freelancer or an independent contractor. Until the new regulations are fi rmed up, attorneys advise employers to play it safe. "I recommend that employers make sure that freelancers and independent contractors are operating their own businesses [legally established a formal business enterprise] and are in positions to make profi ts or losses based on their own actions," McKenzie says. " ey should also submit invoices for work done—and their payments should go through the business's accounts payable department rather than the payroll account." COMMON PITFALLS Employers can also be penalized for errors in these other scenarios: • Standby Time Employees arrive at a store location in response to a manager's directive, only to be told to stand by because they are not needed for a while. e manager incorrectly fails to record their waiting time as compensable hours. • Substitute Hours Instead of paying at least time-and-a-half to an individual due overtime, the employer grants a day off the following week as compensation. is violates the law requiring overtime for any labor of more than 40 hours in any single workweek. • Paycheck Deductions Employers deduct from employees' wages such things as cash shortages in the registers, merchandise shrinkage or uniform costs. Such deductions can't be made if the individual's compensation would fall below the minimum wage or would reduce their overtime pay. Many state laws also restrict such deductions. STAYING CURRENT With increasingly onerous regulations by the federal, state and local governments, payroll has become more complicated in recent years, and employers are likely to encounter

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