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DOL to Target Independent Contractor Misclassification
July 16, 2015
Continuing a trend of increased scrutiny of independent contractor relationships, the U.S. Department of Labor (“DOL”) has issued new guidance to employers warning that "most workers" should be classified as employees and not independent contractors.  In an Administrator's Interpretation released on July 15, 2015, the DOL emphasizes that, while the minimum wage and overtime provisions of the Fair Labor Standards Act (“FLSA”) are applicable only to employees, the appropriate definition of "employee" under the FLSA is far broader than many employers realize. In particular, the DOL notes that, in deciding whether a worker is an employee or a contractor, courts use the multi-factorial “economic realities” test, which focuses on “whether the worker really is in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is its employee).”
If an employer is unable to establish that a worker is correctly classified as an independent contractor, liability under the FLSA and other employment, tax and benefit laws may follow. Employers who use any non-employee workers (whether called independent contractors or otherwise) should review these classification decisions with counsel to ensure compliance as soon as practicable.  Also, be on the look-out for a more detailed article on this subject from Spilman Thomas & Battle, PLLC in the near future.

Labor & Employment Law