U.S. DOL Issues Guidance Narrowing Opportunities for Use of Independent Contractors
Employers likely to suffer from clarification of ‘suffer or permit’ to work standard
On July 15, 2015, the U.S. Department of Labor’s Wage and Hour Division issued Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors, which analyzes how the Fair Labor Standards Act’s definition of “employ” guides the determination of whether workers are employees or independent contractors under the law. It discusses the breadth of the FLSA’s definition of “employ,” and provides guidance on the “economic realities” factors applied by courts in determining if a worker is indeed an employee.
Additional guidance on misclassification is available on the WHD’s webpage: Misclassification of Employees as Independent Contractors.
To further highlight how serious the feds take this, they have a web page titled “Misclassification Newsroom” on which they’ve posted a list of national and regional enforcement actions addressing employer violations and fines for improper use of contractors.
Besides these efforts by the U.S. DOL, the Connecticut Department of Labor, in coordination with the IRS, has for years worked to prevent and hold businesses accountable for misclassifying workers as contractors when they do not meet the legal standards for contractor status.
Their ongoing effort, titled the Joint Enforcement Commission for Worker Misclassification includes documents and a process for workers and employers to report use of contractors that don’t meet the legal standards under state law, which can lead to underreporting and collection of payroll and unemployment taxes, lack of medical and workers’ compensation insurance, as well as an unfair business advantage when a company does not comply with these requirements.
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