The U.S. Department of Labor has issued a new rule that re-defines how Wage and Hour Division auditors will determine whether a worker is an employee or an independent contractor.
The new rule is effective March 11.
The standards are generally viewed as raising the presumption that a worker is an employee entitled to overtime, minimum wage, and other Fair Labor Standards Act (FLSA) benefits.
Consequently, businesses that pay any workers as independent contractors bear a greater burden to show that the workers are not, in fact, employees covered by the FLSA.
The rule addresses six factors – some of which are, in our view, very subjective – that provide an “economic realities test” that is intended to guide the analysis of a worker’s relationship with an employer:
A government examiner can consider any or all of the above factors and is free to introduce factors not listed above.
The reinstatement of these standards poses potentially serious consequences for companies, their owners, and even some non-owner administrative staff. If a business or other employer is found to have misclassified an employee as an independent contractor, the liability for unpaid overtime, minimum wages, and payroll taxes could be imposed on owners and responsible employees personally.
If you have questions about how to comply with the new Labor Department rule, contact your accounting firm, payroll service, or Fitzgibbons Law employment attorney.
From the U.S. Department of Labor:
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