Failing to classify an independent contractor as an employee
Contingent workers are becoming more and more popular and it is easy to see why. Employers are relieved of the many burdens associated with employees. Sometimes the costs of employees are well justified – moral, stability, turnover, productivity, efficiency, etc.
However, some companies find independent contractors and their benefits tempting. For example, a company does not have to pay an independent contractor’s FICA, unemployment, payroll taxes, benefits, vacation, sick time, or bereavement leave. In addition, the employer is relieved of many of the laws that protect employees.
However, employers who fail to recognize that an independent contractor relationship is in fact an employer/employee relationship may find themselves having to pay these workers back pay, taxes, and the value of unpaid benefits the employers gives to its employees.
Failure to properly classify an employee
What are the implications for failing to properly classify an employee as nonexempt? Most importantly, employers are responsible for maintaining an employee’s time records. Should an employee claim that an employer failed to pay overtime, the employee’s mere estimates of what he worked as overtime will generally be sufficient evidence of his overtime worked. If the employer doesn’t have credible evidence of what the employee actually worked, an employee may be entitled to all wages not paid. This includes liquidated damages which are the unpaid wages doubled. In addition, the employee is entitled to interest looking back to the breach up until the conclusion of the case. Finally, the employee is entitled to attorney’s fees.
Once a claim is filed, an employee and their attorney have little incentive to negotiate early. In fact, the attorney has every incentive to work the case and rack up fees that ultimately an employer pays.
The most common forms of wage and hour litigation are failure to pay overtime and off-the-clock claims. Another common form of overtime claim occurs because an employer improperly classifies an employee as exempt from overtime wage; however, in reality, the employer should have classified the employee as nonexempt. Off-the-clock claims originate when a nonexempt employee works, but does not record all of his or her hours worked.
MelderLaw can help you avoid these types of claims
Both of these claims are avoidable.
Consulting with MelderLaw can help you navigate the complexities of determining whether an employee should be classified as an independent contractor, exempt or nonexempt. We’ll assist you with the strategies to discourage off-the-clock-work as well as strategies to manage the risk of after-the-fact discoveries.