Department of Labor Cracks Down on Misclassification of Employees as Independent Contractors

Last month, the Department of Labor (DOL) issued a statement declaring that the majority of workers who are currently classified as independent contractors are better classified as employees. The DOL referred to this widespread misclassification as “one of the most serious problems” in offices and work settings across the United States. As a result, the DOL provided an “Administrator’s Interpretation,” which is intended to help employers address situations in which they are unsure of whether to classify a worker as an independent contractor or employee.

According to the document, “when employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.” Additionally, misclassifying workers also can lead to lower tax revenues for federal government entities and make it more difficult for employees to compete with other workers given full employee status.

The document suggests that one of the main reasons that employers misclassify workers is out of a desire to cut costs and save on overhead. While some employers may misclassify the employees out of an honest misunderstanding or mistake, this first group of intentional misclassifications is one of the main targets of this document.

The DOL outlines an easy method for determining whether a worker is an independent contractor or employee. Under the Fair Labor Standards Act (FLSA or “the Act”), courts use a multi-factor test to determine a worker’s status. Known as the economic realities test, this exercise focuses on “whether the worker is economically dependent on the employer or in business for him or herself.” Furthermore, a worker who is economically dependent on the employer is also “suffered or permitted to work by the employer” in accordance with the FLSA’s definition of “employ.” As a result, the FLSA casts a wide net when defining employees and classifies most workers as employees–not independent contractors. This interpretation falls in line with the FLSA’s general statutory directive to be broadly interpreted when it comes to classifying a worker as an employee rather than an independent contractor.

In determining whether the employee is financially dependent on the employer, a number of factors are considered in a general analysis. These include whether the work is an integral part of the employer’s business, whether the worker’s managerial skill affects the worker’s opportunity for profit or loss, and how the worker’s relative investment compares to the employer’s investment, among other factors.

If you believe that you have been wrongly classified as an independent contractor and that you are not receiving the benefits and protections to which an employee is entitled, the employment law lawyers at Lusk, Drasites & Tolisano can help. Bringing a claim against your employer can be an intimidating and stressful process. There’s no need for you to navigate it alone. Our experienced team of legal professionals has provided seasoned legal guidance to workers throughout Fort Myers, Cape Coral, and Naples. We offer a free consultation to help you determine the rights available to you, so you have nothing to lose. Call us now at 1-800-283-7442 or contact us online to set up your appointment today.

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