Employee or Independent Contractor?

Compliance Outlook: Avoiding Common Wage-Hour Violations 

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From Bloomberg BNA, Jesse Butler shares guidance offered by Eric Magnus on a webinar on how to avoid potential lawsuits.  While the Deparment of Labor may not be as zealous about pursuing independent contractor misclassification cases, individuals are still able to file lawsuits. Jesse writes:

Independent contractor misclassification claims remain “a real hot area of the law.” It may come as a surprise that these cases typically arise when workers try to claim unemployment benefits following completion of a job and discover that the employment office has no record of them as employees because the company had classified them as independent contractors.

Despite a 2015 DOL administrative interpretation simplifying the test to determine whether a worker is an employee or independent contractor, Magnus cautioned. “No one has any idea what the DOL’s view is under the Trump administration. It wouldn’t surprise anybody if everything I’m about to say is reversed within the next four years.”

For now, Magnus said he provides to clients an independent contractor agreement that has all the terms currently required by the DOL. “If you can’t meet all of the elements that are in this contract, you’re putting yourself at risk for a finding the person is an employee, not an independent contractor,” he tells clients.

He also stressed that an employee can’t “waive” employee status, so the parties’ intent as to whether the worker is an independent contractor is “essentially irrelevant” when the government gets involved. Magnus cautioned that in most states the burden of proving an independent contractor relationship is on the employer because the state DOL has a tax interest in finding that the worker is an employee.

Limit Your Misclassification Exposure

One of the primary problems with misclassification cases, according to Magnus, is that the vast majority of employers don’t keep records of the hours worked by their exempt employees. This can leave an employer in a bind when someone challenges their exempt status and the employer has no time records.

To best position yourself to rebut misclassification challenges, Magnus recommended the following:

  • Audit your positions – take a look at “close” positions to ensure they’re properly classified.
  • If you decide to classify a position as exempt, but you aren’t 100 percent sold on it, have the person accurately record their hours anyway.
  • Using employee “badge” records creates a more defensible position, even if they’re not 100 percent accurate for all hours worked.
  • Keep accurate records of exempt employees’ days not worked to prevent inaccurate claims down the road.

Read the full story at Compliance Outlook: Avoiding Common Wage-Hour Violations | Bloomberg BNA

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