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News | Jan 01, 2011

It’s Time to Take a Stand Against the Misclassification of Employees as “Independent Contractors”

This edition of the Wage and Hour Quarterly is dedicated entirely to an illegal practice that costs America’s taxpayers and working families billions of dollars every year: The misclassification of employees as “independent contractors.”

Tens of millions of workers are classified as “independent contractors.”  So it’s no surprise that Trial Lawyers and workplace justice advocates regularly encounter this huge segment of the American workforce.  Unfortunately, we often fail to evaluate whether these purported “independent contractors” have been misclassified.

For example, a workers compensation lawyer might end her case evaluation upon determining than an independent contractor’s injury was not work related.  This is unfortunate, since the individual might be entitled to thousands of dollars in unpaid wages and benefits due to the Boss’s misclassification of her employment status.

Regardless of your practice area, common sense enables you to identify potential independent contractor misclassification cases.  In a nutshell, if it seems like the Boss is exerting significant control over the worker’s day-to-day work activities, the potential for misclassification exists.  At this point, you can either: (i) analyze the worker’s circumstances in more detail (applying some of the principles described in this Newsletter) or (ii) refer the client to The Winebrake Law Firm, knowing that we always treat workers with dignity and respect and always pay a fair referral fee.

As explained below, the Boss has many reasons to misclassify his workers as independent contractors.  One of the most significant reasons is to avoid paying time-and-one-half overtime compensation for work performed in excess of 40 hours during the workweek.  The Fair Labor Standards Act (“FLSA”), which is the federal overtime law, does not cover independent contractors.  However, a worker does not lose his overtime rights just because the Boss labels him an “independent contractor.  The FLSA is a law of “striking breadth,” and company labels mean almost nothing.  As one appellate court has observed, the FLSA contains “the broadest definition [of employment] that has ever been included in any one act.”

Whether an employer truly is an independent contractor under the FLSA depends on the “economic realities” of her work experience, not the language of her employment contract.  The Third Circuit Court of Appeals has instructed Pennsylvania district courts to apply a six-factor test to determine whether a worker has been properly classified as an independent contractor.  The six factors include:

  1. the extent of the company’s control over performance of the work;
  2. the worker’s opportunity for profit or loss depending upon her managerial skill;
  3. the worker’s investment in equipment or materials required for her task and her employment of helpers;
  4. whether the service rendered requires a special skill;
  5. the permanence of the working relationship; and
  6. whether the service rendered is an integral part of the company’s business.

Applying factors such as those listed above, federal courts frequently invalidate the Boss’s abuse of the “independent contractor” classification.  For example, in one recent case, New Orleans workers who repaired telecommunications and cable lines in the wake of the Hurricane Katrina disaster alleged that they were misclassified as independent contractors.  The Fifth Circuit Court of Appeals held that the workers were employees entitled to FLSA overtime benefits.  The Court emphasized that the workers were employed full-time and exclusively for the defendant employer, were economically dependent on the defendant employer, and did not have any meaningful opportunity to operate their own businesses.  This is just one of the hundreds of independent contractor misclassification cases that have been successfully litigated in the federal courts.

The Winebrake Law Firm has successfully litigated FLSA independent contractor cases.  For example, we recently obtained a settlement on behalf of 13 satellite dish installers who sought overtime pay, alleging that they were misclassified as independent contractors.  In another case, we obtained a settlement for over 20 janitors who were classified as contractors.  We currently are pursuing a lawsuit in a Texas federal court on behalf of over 25 medical product sales representatives who were classified as independent contractors.  And we represent over 30 allegedly misclassified delivery drivers in another case pending in a Pennsylvania federal court.

If you represent workers who you believe may have been misclassified as independent contractors, don’t hesitate to give is a call.

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