The US Labor Dept. issued guidelines on independent contractors that defines “most workers” as employees entitled to protections such as minimum wage and overtime compensation.
“Misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers, and the entire economy,” the department’s Wage and Hour Division said July 15.
Employees who are misclassified as independent often are denied access to benefits and protections to which they are entitled, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces. Misclassification also generates substantial losses to the federal and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds.
“WHD supports the use of legitimate independent contractors, who play an important role in our economy, but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses,” the WHD said.
As misclassification has spread, providing workers and employers a clear understanding of what makes a worker an employee has become more urgent, it said.
The Administrator’s Interpretation 2015-1 analyzes how the Fair Labor Standards Act’s definition of “employ” guides the determination of whether workers are employees or independent contractors under the law. It addresses the breadth of the FLSA’s definition of “employ,” as well as provides guidance on the “economic realities” factors applied by courts in determining if a worker is indeed an employee, the WHD said.
Additional guidance on misclassification is available on the division’s webpage: Misclassification of Employees as Independent Contractors. It also has a blog post: Employee or Independent Contractor?
