by Tina Vannucci, Attorney, Fitzgibbons Law
The U.S. Department of Labor has issued a rule that re-defines how Wage and Hour Division auditors will determine whether a worker is an employee or an independent contractor.
The rule went into effect March 11.
The standards are generally viewed as raising the presumption that a worker is an employee entitled to overtime, minimum wage and other Fair Labor Standards Act (FLSA) benefits.
Consequently, businesses that pay any workers as independent contractors bear a greater burden to show that the workers are not, in fact, employees covered by the FLSA.
The rule addresses six factors — some, in our view, very subjective — that provide an “economic realities test” intended to guide the analysis of a worker’s relationship with an employer:
- Worker’s opportunity for profit or loss in connection with work performed.
- Financial stake and nature of any resources a worker has invested in the work.
- Degree of permanence of the work relationship.
- Degree of control an employer has over the person’s work.
- Whether the work the person does is essential to the employer’s business.
- Worker’s skill and initiative.
A government examiner can consider any of these factors and is free to introduce factors not listed.
If an employee is misclassified as an independent contractor, the liability for unpaid overtime, minimum wages and payroll taxes could be imposed personally on owners and responsible employees.
For links to Labor Department online resources, visit
www.fitzgibbonslaw.com/flsa.
