Provided by: Judge Ruth B. Kraft
I have blogged previously about this issue because I consider it the most significant one facing employers. The U.S. Department of Labor has targeted industries for alleged misclassification of employees as independent contractors. Last week, a cable TV installation company agreed to a consent judgment in federal court to pay over $1,000,000 in back wages and liquidated damages. Based on misclassification as independent contractors, the employer did not pay overtime at time-and-a-half. Additionally, the employer and its leadership consented to a permanent injunction barring them from failing to pay overtime and minimum wages and violating recording provision of the Fair Labor Standards Act.
One key element of the facts in this case, Harris v. Bowlin Group, LLC, is that it may have used both employees and independent contractors interchangeably.
Do you have the same job description, whether as a physician, technician, installer, etc., performed by individuals classified as both employees and independent contractors? If you do not properly structure, document and implement relationships to demonstrate important differences between them, you may be tantamount to creating a misclassification.
One thing I see repeatedly is that employers interpret the definitions of employee and independent contractor in ways that are favorable to them, without seeking legal guidance. Do not delude yourselves into thinking that your opinions on the subject are consistent with the interpretations placed by administrative agencies? The costs of misclassification are enormous and go beyond settlement of individual cases. You may also face liabilities for unpaid unemployment tax payments and workers compensation premiums.
Finally, an adverse determination does not constitute a permanent obligation to treat the workers as employees, in the absence of a permanent injunction going forward. You can and should seek consultation on the creation of an independent contractor model that will survive future scrutiny. Restructuring, reframing and redocumenting the relationship is the essential next step in the process.
Have a question or comment?
Contact Jennifer at Jennifer@Kirschenbaumesq.com or at (516) 747-6700 x. 302.