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Misclassified Independent Contractors Are Entitled to Overtime Pay and Minimum Wage

Update 10/21/2022

Misclassified Employees

Employers’ actions of misclassifying workers as independent contractors rather than employees has been increasing in recent years.  Employers often misclassify or require employees to self-classify as independent contractors under employment and tax laws for the employer’s benefit.  See David Weil, Lots of Employees Get Misclassified as Contractors. Here’s Why It Matters, Harvard Business Review, July 5, 2017 (“In one telling case, construction workers went home at the end of the week as employees only to be informed on the following Monday that, perhaps by the magic of some unknown force, they had become ‘member/owners’ of hundreds of limited liability companies, effectively stripping them of federal and state job protections”).  

Employer Benefits to Misclassifying Employees

Employees are often misclassified as independent contractors so employers can avoid liability and gain a business advantage over the competition. See David Bauer, The Misclassification of Independent Contractors: The Fifty-Four Billion Dollar Problem, 12 Rutgers J.L & Pub. Pol’y 138, 145 (2015) (“According to a study done in 2000 of nine states commissioned by the Department of Labor’s Employment Administration, ‘[t]he number one reason employers use [independent contractors] and/or misclassify employees is the savings in not paying workers’ compensation premiums and not being subject to workplace injury and disability-related disputes.'”).   In 2010, United States Deputy Labor Secretary Seth Harris testified at a Congressional Hearing on the problems created by misclassification:

Misclassification as independent contractors also increases the opportunities for tax evasion, and some take advantage of those opportunities, with a resulting loss of Federal and State revenue. Too many workers are being deprived of overtime premiums and minimum wages, forced to pay taxes their employers are legally obligated to pay and are left with no recourse if they are injured or discriminated against in the workplace. Misclassification is no mere technical violation. It is a serious threat to workers and the fair application of the laws Congress has enacted to assure workers have good, safe jobs.

United States Senate, Committee on Health, Education, Labor and Pensions, Hearing on Leveling the Playing Field: Protecting Workers and Business affected by Misclassification, Jun. 17, 2010; see also U.S. Dep’t Labor Administrator’s Interpretation No. 2015-1, 2015 WL 449086, 2015 DOLWH LEXIS 1 *1 (July 15, 2015).  

Employer Harm to Misclassification

Employee’s that are misclassified as independent contractors are denied employment benefits they are entitled to by law.  They are denied such important workplace protections as unemployment insurance and workers’ compensation benefits.    They are also denied the protections of minimum wage and overtime laws.  See U.S. Dep’t Labor Administrator’s Interpretation No. 2015-1, 2015 WL 449086, 2015 DOLWH LEXIS 1 *1 (July 15, 2015)(“When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.”). 

Entitlement to Overtime

True independent contractors are not entitled to overtime pay and minimum wages. But, many independent contractors are misclassified and are really employees. Regardless of the title placed upon the individual, someone that is economically dependent on the employer is an employee.  Conversely someone that is economically independent from the employer is operating a business of their own. To determine whether an independent contractor is economically dependent or independent depends on specific facts.

For example:

  • Does the employer closely monitor and control the work you perform?
  • Does the employer require you to wear a uniform?
  • Does the employer require you to work exclusively with it?
  • Does the employer dictate the work schedule?
  • Does the employer dictate how, when, or where the work gets done?

If you answered yes to any of these questions then you maybe an employee and not an independent contractor.

Do you have a fixed employment periods and transfer from place to place as particular work is offered? If so, you may be an independent contractor. Do you work for only one employer and is such relationship continuous and of indefinite in duration. If so, you may be an employee.

The fact that the individual signed an “independent contractor” agreement alone does not mean that the individual is not an employee. It would also depend on such inquiries as whether the employer prevents you from assigning any purported independent contractors agreement? Did you draft the alleged independent contractor’s agreement or was it drafted by the employer?

Most workers are employees for the purpose of overtime pay and minimum wage. To be sure you are properly classified and are receiving your rightful legal protections, please contact the employment lawyers at LaBar & Adams, P.A. in Orlando at 407-835-8968 or fill out the online form located on our website.

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