DOL Issued New Independent Contractor Misclassification Guidance
The US Department of Labor has issued an interpretation relating to independent contractors. It relates to the Fair Labor Standard Act’s identification of workers who are not properly classified. It explains that:
Misclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations. 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. Misclassification also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers. Although independent contracting relationships can be advantageous for workers and businesses, some employees may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws.
Many employers have relied upon independent contractor agreements to establish this standard. However, the interpretation has reject this by stating that “an agreement between an employer and a worker designating or labeling the worker as an independent contractor is not indicative of the economic realities of the working relationship and is not relevant to the analysis of the worker’s status.”
This Interpretation takes a broad view and shows the DOL’s reluctance to allow misclassification.