With increased scrutiny and
The Fair Labor Standards Act (FLSA) requires-with two general exceptions-employees to receive no less than the current minimum wage not less than 1 1/2 times the regular rate of pay for all hours worked in excess of 40 hours per week.
Independent contractors are one of the exemptions under the FLSA.
But gaining the benefits and cost savings of using independent contractors is not without risk. This is because merely identifying an individual as an independent contractor and even further memorializing this relationship in a written agreement does not preclude a judge from later “second-guessing” an employer’s decision. Instead, determining whether an independent contractor or actual employment relationship exists under the FLSA depends upon applying what is referred to as an “economic reality test.” The focus under this test is on:
Further compounding the difficulties employers face incorrectly identifying an employee versus an independent contractor is the fact that no one factor is determinative in this test. Thus, it is not uncommon for both the employer and the individual to operate under the assumption that an independent contract relationship exists, only to have a judge later down the road second-guess both the employer and the employee and determine the actual employment relationship existed between the two.
Employers simply cannot afford to make costly decision-making pitfalls when it comes to misclassifying individuals as independent contractors rather than regular W-2 employees.
It is therefore critical to revisit your independent contract relationships. In light of this test, determining whether an individual is an employee or independent contractor will rarely be made with certainty. Especially because … But good decisions can be made by carefully reviewing all independent contract relationships with experienced legal counsel. Otherwise, employers should expect to face certain liabilities that include backpay, liquidated damages, civil damages, attorney fees, or any combination of these remedies.
Continue Reading Employers Cannot Ignore Costly Risks of Mis-classifying Independent Contractors
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