News & Insights

New Department of Labor Guidance on Employee Classification
July 15, 2015
by Brett Hummer


South Bend / Mishawaka, IN – “Are they an employee or independent contractor?” This question routinely comes up in the employment setting and properly answering the question is crucial for employers to fulfill their legal obligations under the Fair Labor Standards Act (“FLSA”).

On July 15, 2015, the U.S. Department of Labor weighed in with a published “administrator’s interpretation” on the issue in an ongoing attempt to prevent misclassification of employees as independent contractors. Today’s guidance from the DOL does not change the existing law and the balancing tests employers should undertake in determining whether to classify an individual as an employee or independent contractor. But today’s guidance leaves little doubt as to how the DOL wants employers to answer the question.

The DOL’s stance is that “most workers are employees under the FLSA’s broad definitions”. The DOL is naturally bent toward protecting employees’ rights under the FLSA, and today’s guidance echoes the government’s concern that improperly classifying individuals as independent contractors as opposed to employees may cause those individuals to lose out on minimum wage and overtime benefits found in the FLSA. According to the DOL’s guidance, “[t]he very broad definition of employment under the FLSA as ‘to suffer or permit to work’ and the act’s intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor.”

The question of whether an individual is an employee or an independent contractor is a legal one, the determination of which involves weighing several factors – none more or less important than the other. An important factor to consider, but one that by itself is not dispositive of the issue, is the degree of control the employer has over the person in the work setting. The more control the employer has over the person, the more likely that person should be classified as an employee. Employers should continue to weigh all of the applicable factors in determining how to classify an individual for FLSA purposes, but today’s DOL guidance should give pause to employers who utilize a significant number of independent contractors.

Employers should take today’s guidance from the DOL – which comes only two weeks after the government’s proposed new overtime regulations – as a further reminder to make sure they are making wage and hour compliance issues a priority.

Employers with questions concerning the FLSA and proper employee classification should always consult with experienced legal counsel. The content of this article is for information purposes only, and neither contains nor should be considered legal advice.


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