Hey Employers! The DOL is Watching—Are Your Workers Properly Classified?

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July 27, 2015

On July 15, 2015, the U.S. Department of Labor (“DOL”) released an administrative interpretation that addresses the standard under the Fair Labor Standards Act (“FLSA”) for properly classifying workers as employees or independent contractors.  While there has been a great deal of buzz surrounding this release, specifically over the DOL’s statement that “most workers are employees under the FLSA’s broad definitions,” it is important to note that the release does not change the standard for classifying workers under the FLSA.  Rather, the DOL’s administrative interpretation is simply a restatement of how the DOL classifies workers under the FLSA and provides practical examples for employers to model.

All workers fall into one of two categories: independent contractor or employee. Because an independent contractor avoids many of the wage/hour, tax and other employment law requirements of an employment relationship, the IRS, DOL, and multiple state government agencies construe independent contractor status narrowly and impose large penalties for improper classification.  Specifically, the DOL is interested in whether a worker is properly classified as an employee so as to receive the benefit of overtime and minimum wage.

Over the last several years, the DOL has published numerous releases about the issue of worker misclassification within the U.S., which the DOL views as “one of the most serious problems facing affected workers, employers, and the entire economy.”  Due to this belief, the DOL has made it a priority to educate employers on proper worker classification as well as to aggressively pursue violators.

Bottom Line for Wisconsin Employers: The recent DOL release should be taken as a warning.  The DOL takes worker misclassification seriously and will actively pursue employers who incorrectly classify workers.  Employers that utilize independent contractors should conduct an internal audit to make sure they are classified properly.  For assistance with independent contractor agreements, determining proper classification, and handling a misclassified worker, contact your favorite employment law attorney.

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