Employee or Independent Contractor?

fair wages

Folks, trust me when I say wage and hour claims aren’t going anywhere.  In fact, I’d wager they will continue to rise as an ever-increasing number of employees pursue legal action for wages rightfully owed to them.  This area of the law is a minefield for businesses, particularly when it comes to classifying employees and determining which employees entitled to overtime.  What does this mean to you, Virginia employee?  Your employer may not be paying you all the wages you’re entitled to.

I Don’t Bill By the Hour So I’ll Keep This Brief

First, a brief legal lesson.  The Fair Labor Standards Act (FLSA) is the body of federal law that determines the rights and obligations of workers and businesses.  An important part of the FLSA is the language that defines which workers are “employees” and which are “independent contractors.”  The difference between the two classifications is incredibly important. For example, employees (with certain limitations—but that’s the subject of another blog) are entitled to overtime, and independent contractors are not.

As you may know, employees who are entitled to overtime are paid one and a half times their normal wage for time worked in excess of 40 hours a week. (Again, there are exceptions, but I promised I’d be brief.) Because independent contractors don’t receive overtime, whether your employer designates you as an independent contractor or an employee can have a huge impact on your income if you’re regularly working in excess of 40 hours a week.

Businesses—even very sophisticated companies—get this determination wrong all the time.  In their defense, the classification of an “independent contractor” is tough to pin down and constantly changing.  Just a few weeks ago in mid-July, the Department of Labor issued guidance that most commentators agree raises the burden for employers to prove that their independent contractors are truly “independent contractors.” Not convinced?  The guidance itself states that “most workers are employees under the FLSA.”

Why Should You Care?

If you’re working as an independent contractor, take a minute to consider this question. If you were to describe the work you do, would you say that you are operating a business of your own for another business? Or are you, instead, economically dependent on an employer? Of course, this is an oversimplification, but if you tend to choose the second answer, you should consider looking at whether you are receiving all the wages owed to you.

We’ll continue to report on this developing area of the law, so make sure to check back.

Questions? Concerns?  As always, we’re here to help, so please don’t hesitate to contact us. And don’t forget to share with friends and family.

By Frank Hupfl, Esquire, Geoff McDonald & Associates
Photo: 401(k) 2012

 

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