Are you really an Independent Contractor or “Exempt” from Overtime or Minimum Wage? Lawsuits for Misclassification soar in down economy.

As of July 26, 2012, there have already been 60 more lawsuits (7,064 total) filed under the Fair Labor Standards Act (FLSA) than the entire year of 2011. FLSA Lawsuits Article. The biggest increase in claims results from misclassifications. The two major problems areas exist when (1) an employer classifies an individual as an independent contractor when the individual is really and employee, and (2) classifying an employee as “exempt” from minimum and overtime. If you think you may be misclassified, check out the factors and links below.

Exemptions

The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

The FLSA, however, provides an exemption from minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional, outside sales employees and certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. For more information on whether you are actually exempt, click here.

Independent Contractor vs Employee

Employers are obligated to pay employees in accordance with the FLSA. Employers may try to circumvent these obligations by calling an employee an independent contractor.

In the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.

Among the factors which the Court has considered significant are:

1. The extent to which the services rendered are an integral part of the principal’s business.
2. The permanency of the relationship.
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor’s opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation.