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There is no single classification test, which is the first thing to understand. For wage and hour purposes the Department of Labor applies an economic reality test examining whether the worker is economically dependent on the employer or in business for themselves, weighing the opportunity for profit or loss from managerial skill, investments by worker and employer, the permanence of the relationship, the nature and degree of control, whether the work is integral to the employer's business, and the worker's skill and initiative. It stresses the totality of the circumstances, and that job titles, payment methods and contractual labels do not decide the question.

The IRS looks at the same relationship through its own common law rules, grouped as behavioral control, financial control and the type of relationship, including written contracts, benefits and whether the work is central to the business. It is equally clear that there is no set number of factors that settles it. Either party can ask the IRS to determine status on Form SS-8, though that determination takes months.

The consequences fall on the employer. The Department of Labor describes misclassification as occurring when an employer treats a worker who is an employee under wage and hour law as an independent contractor, with the result that the worker may not receive the minimum wage, overtime pay or other protections they are entitled to. The IRS notes that classifying an employee as a contractor without a reasonable basis makes the business liable for employment taxes, subject to limited relief provisions.

Every new hire requires a Form I-9. The USCIS handbook for employers states that within three business days of the date employment begins, the employer or an authorized representative must complete Section 2 by examining original, acceptable and unexpired documentation, and that where someone is hired for fewer than three business days it must be completed no later than the first day of employment.

E-Verify is a separate system layered on top. It is an internet-based system that compares information an employer enters from an employee's Form I-9 against records held by the Department of Homeland Security and the Social Security Administration, returning a result in seconds. Federal contractors have their own enrollment obligations and several states require it, so whether you must use it depends on who you contract with and where you operate.

An HR audit of these records is unglamorous and routinely finds problems: missing forms for long-tenured staff, sections left unsigned, and documents copied inconsistently across the workforce. Fixing them internally before anyone else looks is materially better than being asked for them during an inspection or an acquisition.

Paying someone a salary does not make them exempt from overtime. The federal white-collar exemptions each require a salary basis, a salary level set in the regulations, and a duties test that has to be met on the facts of the job. The Department of Labor's fact sheets are explicit that job titles do not determine exemption status.

The patterns that fail are predictable. An office manager or coordinator given an administrative title whose primary duty does not involve the exercise of discretion and independent judgment on matters of significance. A team lead who directs one employee rather than the two full-time employees or equivalent that the executive exemption requires. A technical worker treated as a computer professional whose actual duties are support rather than systems analysis or software engineering. An inside salesperson assumed to be covered by the outside sales exemption despite working from a desk.

The exposure compounds, because each misclassified week is unpaid overtime, and a single classification is rarely wrong for a single person. Audit by job, using the actual duties performed rather than the job description, and check the current salary level in the regulations rather than relying on a figure from memory.

The EEOC states that a charge must generally be filed within 180 calendar days from the day the discrimination took place, extended to 300 days where a state or local agency enforces a law prohibiting employment discrimination on the same basis. For age discrimination the extension applies only where a state law and a state agency are involved, not a local law alone. Equal Pay Act claims run on a different track, with two years from the last discriminatory paycheck and three in the case of willful discrimination, and may be taken straight to court. Federal employees generally must contact an agency EEO counselor within forty-five days.

When a charge lands, three things matter immediately. Preserve documents and stop any routine deletion that would touch relevant records. Do not change the employee's conditions, schedule or duties in response, because retaliation claims are frequently easier to prove than the underlying allegation. And get employment counsel involved before the position statement is written, since that document frames the entire matter.

An HR consultant can assemble the file, reconstruct the timeline and identify what the company can actually evidence. They are not a substitute for counsel, and an investigation run by someone who reports to the person complained about is not an investigation.