From Entrepreneur, Martin Konrad discusses discusses the challenges of properly classifying workers as independent contractors or employees in light of the Department of Labor’s administrators interpretation. Martin writes:
What does this mean for employers?
Although the DOL’s administrative memo carries no legal authority in and of itself, courts tend to lean heavily on their interpretation of the Fair Labor Standards Act, when making binding legal decisions. And the current legal trend is to favor DOL enforcement against companies, who hire independent contractors.
Therefore, if your business model makes use of freelancers or contractors, it would be wise to review your hiring process to ensure you are in compliance with the current interpretation of the labor laws.
Companies should update their onboarding processes to include substantiating that the worker is operating an independent business.
The worker needs to be incorporated, and ideally, they need to have a business bank account, a website, marketing materials and provide services to many other customers.
If a worker operates a business related to the services being provided to the employer, it is less likely that the worker will be misclassified as a contractor.
Employers should also avoid paying by time, reimbursing expenses or providing tools and equipment because freelancers, if they are truly operating as businesses, should have their own tools.
As freelancers and contingent workers continue to grow in importance, new freelancer management software platforms are being developed to assist with the recruitment, selection, onboarding and compliance assurance of this new segment of the workforce.
Freelance Management Systems (FMS) provide employers with a real-time reporting on their freelance and contingent workforce.
For example, at Shortlist we work with employers of all sizes to manage their contractors and freelancers. It’s not a surprise that one of the biggest issues our customers are facing is compliance, which is why our technology is designed to monitor contractor misclassification and provide our customers with reports to prevent costly missteps.
Read the full story at Think Twice Because Your Freelancer Might Legally Be an Employee