The Fair Labor Standards Act is the primary federal law governing minimum wage, overtime pay, and related record-keeping matters for private-sector employers. To determine whether you’ve properly classified someone who works for you under the FLSA, you need to answer two key questions.
1. Is the employee an independent contractor? The answer affects your obligation to pay overtime, withhold and pay taxes, and provide employee benefits. Even if a worker may be eligible for independent contractor status, you may always choose to classify the worker as an employee. But reclassifying a worker from employee to independent contractor may invite scrutiny, especially if the worker’s duties and work conditions have not changed.
Under the FLSA, an employee is defined as “any individual employed by an employer,” and to “employ” means to “suffer or permit to work.” In light of these open-ended definitions, the courts have looked at several factors when determining whether an individual qualifies as an employee or should be classified as an independent contractor. For example:
• whether the business has the right to control how the work is performed (as opposed to the completed work product)
• the extent to which the worker’s services are an integral part of the business
• whether the worker has his or her own business and, if so, the worker’s investment in it
The courts consider all relevant factors and do not view any single factor as determinative.
Read the full story at Good Counsel: Get Classification Right for Employees