Fair Labor Standards Act

Independent Contractor Misclassification Two Metro-Detroit employers have recently agreed to settle wage and hour violations under the Fair Labor Standards Act (FLSA) involving overtime compensation and misclassification issues.

Specifically, Belle Tire agreed to pay over $340,000.00 for violations under the FLSA. Payments will be made to employees in approximately hundred stores in Michigan, Indiana, and Ohio.

According to

Reviewing FLSA Exemptions Michigan employers recently received a favorable Fair Labor Standards Act (“FLSA”) ruling. This decision also provides guidance when it comes to evaluating whether particular categories of employees may be administratively exempt from the FLSA’s overtime requirements.

Procedural Background Leading up to the FLSA Ruling

The decision arose out of the case Lutz v. Huntington Bancshares

Targeting Employers President Ronald Reagan famously noted that the “most terrifying words in the English language are: I’m from the government, and I’m here to help.”

Well, the Department of Labor (DOL) announced on 1/20/2015 that they were here to help clarify when a joint employment relationship exist under the Fair Labor Standards Act (FLSA) and the

Shark_AboveAt a time when companies are increasingly using “independent contractors” rather than W-2 employees, the risks and liabilities for misclassification have never been higher. And it just got harder for Michigan and other Midwest employers who are accused of improperly classifying their workforce after a 3/26/2015 ruling from the Sixth Circuit Court of Appeals.

Specifically,

Young and Old Hands.jpgMichigan home health care companies and the home health care industry are facing significant changes under the U.S. Department of Labor’s (DOL) proposed rule change to the Fair Labor Standards Act’s (FLSA) 1975 “companionship exemption.”   

Proposed FLSA Revision 

On December 27, 2011 the DOL published a notice of proposed rulemaking to revise the companionship

Facebook.jpgOn June 24, 2011, a Florida federal district court dismissed a claim that an employer violated the Fair Labor Standards Act’s (FLSA) anti-retaliation provision by allegedly firing an employee who expressed her disagreement over the employer’s payment practices on Facebook.

The Plaintiff, Lilli Morse, filed suit against her former employer, J.P. Morgan Chase & Co.

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.
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