Employees vs. Independent Contractors

Employees vs. Independent Contractors: FLSA Misclassification Concerns

We know the risks and benefits involved in FLSA classification decisions. We know what type of review is necessary to make such determination. We know when companies run real risks with their classifications, and we know when individuals are getting deprived of pay to which they are entitled. And, we know this because we have in-depth knowledge of the law and extensive experience litigating such disputes in many different industries and forums in Missouri and across the country.

FLSA Classification Considerations

The modern day "gig economy" and widespread use and development of new technology has raised many questions about the traditional distinction between employees and independent contractors. In wage and hour disputes, this distinction is key. Many overtime lawsuits under the FLSA are based upon a claim by an employee or group of employees that their employer misclassified them as "independent contractors" to avoid paying overtime wages (and, perhaps, to avoid paying employer payroll taxes). These lawsuits involve fact-intensive questions regarding the "economic realities" of the relationship between the parties, including but not limited to the extent to which the company exercises control over the worker and his or her work and, ultimately, whether the worker "is in business for himself or is dependent upon finding employment in the business of others." See Thornton v. Mainline Comm., LLC, 157 F. Supp. 3d 844, 847-48 (E.D. Mo. 2016).

Proof of misclassification may come in different forms. Sometimes, companies restructure their business by laying off employees and then entering into agreements with these former employees as "subcontractors." We have seen some companies go to great lengths to try to avoid any express or implied employment relationship in these scenarios by, among other things, requiring that their former employees set up separate LLC's and sign agreements that disclaim any employment relationship and contain promises to indemnify the company in the event of any such dispute. We have seen other companies simply start to pay individuals with Form 1099's instead of Form W-2's, without any substantial or meaningful change in job duties or the employment relationship.

No matter how clever a company is in implementing such changes, the law remains the same. Questions about how to classify workers hinge upon consideration and weighing of many factors related to the economic realities between the parties. The law is not concerned about what companies name or call their workers; an individual's rights under the FLSA cannot be waived by carefully crafted agreements that disclaim an employment relationship.

Contact Knowledgeable FLSA Wage and Hour Counsel

To discuss a wage and hour issue in further detail, please do not hesitate to contact our firm directly.

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