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This week, Jenny and Sarah tackle the HR landmines small businesses step on all the time.

They break down three compliance issues that quietly turn into very loud, very expensive problems: employee misclassification, messy PTO policies, and unpaid interns who legally aren’t interns.

First: employee misclassification. Paying someone a salary does not make them exempt. Titles don’t matter. Good intentions don’t matter. If someone should’ve been earning overtime and wasn’t, the Department of Labor is not interested in your logic. They’re interested in back pay and penalties.

Then: PTO policies. That “use it or lose it” language still floating around in Colorado? Illegal. Accrued PTO is earned wages. You cannot wipe it out at year-end. They also break down accrual vs. lump sum, payout rules, and why negative PTO feels generous until someone quits and payroll gets messy.

Finally: unpaid interns. The “it’s for experience” kind. The “my friend’s kid needs exposure” kind. The rules are stricter than people think. If the company is benefiting more than the intern, you likely have an employee. And that risk adds up fast.

If you think “we’ve always done it this way” is a solid strategy, this episode might stress you out a little. In a good way.

What’s inside this episode:

[03:12] Why paying someone a salary does not automatically make them exempt
[06:45] The real difference between exempt and non-exempt under FLSA
[10:18] How misclassification turns into back wages, penalties, and audits
[15:02] Why independent contractor status isn’t a “mutual agreement” situation
[19:37] What the Department of Labor actually looks at
[24:11] Why “use it or lose it” PTO policies are illegal in Colorado
[28:26] Accrued vs. lump-sum PTO and where companies get into trouble
[32:54] The negative PTO trap no one thinks through
[36:40] The strict rules around unpaid internships
[41:12] How to structure internships so they’re actually compliant

Hit play. Fix what needs fixing. Then send it to the friend who still thinks titles determine exemption status.

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