Fundamental Payroll Worker Status and FLSA Questions and Answers

Question 1

Under the Fair Labor Standards Act (FLSA), which of the following is the primary consideration when determining if a worker is an employee or an independent contractor?

Accepted Answer

The economic reality of the working relationship, indicating economic dependence or independence.

Answer

The degree of control exerted by the employer over the worker.

Answer

Whether the worker has signed an independent contractor agreement.

Answer

The worker's preference for their classification status.

Question 2

A non-exempt employee works 45 hours in a single workweek. According to the FLSA, how must the employer calculate the employee's pay for that week?

Accepted Answer

Pay 40 hours at the regular rate and 5 hours at 1.5 times the regular rate.

Answer

Pay the employee their regular rate for all 45 hours.

Answer

Provide 5 hours of compensatory time off in a future week.

Answer

Pay 40 hours at the regular rate and 5 hours at a rate negotiated with the employee.

Question 3

A company hires a graphic designer to create a new company logo. The designer uses their own computer and software, sets their own work hours, and is paid a flat fee for the completed project. The designer is also free to work for other clients simultaneously. Under the FLSA's economic reality test, which factor most strongly suggests the designer is an independent contractor?

Accepted Answer

The designer's opportunity for profit or loss based on their managerial skill.

Answer

The work performed is integral to the company's marketing efforts.

Answer

The relationship is for a single, short-term project.

Answer

The company provides a detailed brief of what the logo should look like.

Question 4

Which of the following tests is used by the IRS to help determine worker status for federal tax purposes, focusing on behavioral control, financial control, and the relationship of the parties?

Accepted Answer

The Common Law Test

Answer

The Economic Reality Test

Answer

The ABC Test

Answer

The Salary Basis Test

Question 5

To qualify for the administrative exemption under the FLSA, an employee must meet all of the following criteria EXCEPT:

Accepted Answer

Hold a degree in business administration.

Answer

Be paid on a salary basis at or above the required minimum.

Answer

Have a primary duty of performing office or non-manual work directly related to business operations.

Answer

Exercise discretion and independent judgment with respect to matters of significance.

Question 6

An employer misclassifies a non-exempt employee as an independent contractor and pays them a flat weekly amount without overtime for a 50-hour workweek. What is a potential liability for the employer under the FLSA?

Accepted Answer

Responsibility for paying back wages, including unpaid overtime, and potentially liquidated damages.

Answer

A formal warning from the Department of Labor.

Answer

A requirement to provide the worker with paid time off for the hours worked.

Answer

The option to reclassify the worker correctly for future pay periods without penalty.