As President Franklin D. Roosevelt once said, all Americans deserve and are entitled to a fair day’s pay for a fair day’s work. U.S. labor laws like the Fair Labor Standards Act help ensure that U.S. workers earn at least minimum wage and are compensated for overtime hours. Additionally, several other laws help protect the rights of workers with regard to pay, time off and other benefits. However, in order to reap the benefits of most of these employment and labor laws, a worker must be designated as a full or part-time employee.
Recently, there have been many questions and much debate about when a worker should be classified as an employee versus an independent contractor. The distinction is important from both an employer’s and employee’s standpoint as the potential costs and benefits are significant.
While employers are required by law to pay payroll taxes, overtime wages and workers’ compensation and unemployment insurance on each employee; these costs don’t apply to independent contractors. Consequently, workers who are classified as independent contractors aren’t afforded the same protections or privileges as employees in cases of job loss, overtime pay, workplace injuries and employment discrimination or harassment.
Recently FedEx settled a $228 million class-action lawsuit with its drivers in California who argued they had been misclassified as independent contractors. Similar lawsuits are currently pending against the ride-share service provider Uber and the e-commerce company Groupon. In an effort to provide employers with more clarity and guidance about employment classifications, the U.S. Labor Department recently weighed in.
In a 15-page document, Labor Department officials remind employers that “most workers are employees” and that employers should rely on the “economic realities test” when determining how to classify workers. For example, in cases where an employer has control over how and when a worker completes assigned duties, he or she is and should be classified as an employee.
Workers in Wisconsin, who have questions or concerns about employee designations, can benefit from the advice and assistance of an employment attorney. In cases where an employee has been misclassified as an independent contractor, he or she may be able to recover back wages.
Source: Chicago Tribune, “Labor Department issues guidance on classifying workers,” Alejandra Cancino, July 15, 2015
Forbes, “FedEx Settles Independent Contractor Mislabeling Case For $228 Million,” Robert W. Wood, June 16, 2015