Wage and Hour Division Issues Administrator's Interpretation of Employees Who Are Misclassified as Independent Contractors

 
Thursday, July 16, 2015
 

The Wage and Hour Division (WHD) of the U.S. Department of Labor has  issued Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors.  The misclassification of employees as independent contractors presents a serious problem facing affected workers, employers, and the entire economy.

Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces. Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It hurts taxpayers and undermines the economy.

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 discusses 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.  Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor). The factors are a guide to make this ultimate determination of economic dependence or independence.

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