Atlanta Employment Attorneys Blog
Action taken earlier this year by federal regulators has cost two related companies several hundred thousand dollars due to misclassifying dozens of workers as independent contractors when they were employees. The government’s action against the companies is a reminder of how costly misclassification can be for both workers and employers. If you have questions about whether a worker (or a group of workers) should be classified as employees or independent contractors, do not guess, assume, or take the easy way out and simply classify them all as independent contractors. Instead, get reliable legal advice by speaking with an experienced Atlanta worker classification lawyer.
The federal Wage and Hour Division’s action against two interconnected Louisiana companies, detailed in a news release, highlighted a critical problem in that state and across the country: the misclassification of home care industry workers as independent contractors.
The division’s investigation revealed that a pair of connected companies misclassified more than 150 home care workers as independent contractors when they really were employees. The workers “typically worked long hours” but received only “straight time” for all hours they worked rather than straight time for the first 40 hours and time-and-a-half for all hours in excess of 40.
This can result in a significant loss of pay. Consider Jane Doe, a home care worker, who earns $20 per hour at her job. If she works 55 hours in a week but is misclassified as an independent contractor, she will receive only $1,100 that week. By contrast, if she is correctly classified as an employee, she would receive $1,250 ($800 for the first 40 hours at $20 per hour and $450 for the final 15 hours at 1.5 times $20 per hour).
Over the course of months… or longer… these losses add up to substantial amounts. The home care workers in Louisiana numbered 158, and their employer improperly failed to pay them more than $422,000 in overtime wages.
The U.S. Department of Labor’s regulations contain the test for classifying workers as employees or independent contractors. The rules apply the “Economic Realities Test.” That test includes six factors. They are: (1) the worker’s opportunity for profit or loss depending on managerial skill, (2) the investments by the worker versus those of the employer, (3) the permanence of the work relationship, (4) the nature and degree of control, (5) whether the work performed is integral to the employer’s business, and (6) the worker’s skill and initiative. As the department has explained in a fact sheet, the “goal of the test is to decide if the worker is economically dependent on the employer for work or is instead in business for themself.” Those receiving the independent contractor classification should only be those who genuinely are “working for themselves.”
For all your questions and legal advice regarding independent contractor versus employee classifications (or exempt versus non-exempt classifications), turn to the team of knowledgeable Atlanta worker classification attorneys at the law firm of Parks, Chesin & Walbert. Instead of making a costly mistake, call us and let us guide you through the process of proper classification. Contact us through this website or at 404-873-8048 to schedule a consultation today.