Administrator’s Interpretation Concerning Misclassification.

Benefits Insights, Fall 2015

On July 15, Dr. David Weil, administrator of the U.S. Department of Labor Wage and Hour Division, released Administrator’s Interpretation No. 2015-1 to address identification of employees who are misclassified as independent contractors under the Federal Fair Labor Standards Act (FLSA). Weil notes that the additional guidance -- regarding the application of the standards for determining who is an employee under the FLSA -- is intended to help the regulated community in classifying workers and ultimately curtailing misclassification.

The interpretation reflects the very broad definition of employment under the FLSA as “to suffer or permit to work” and emphasizes that the FLSA’s intended expansive coverage for workers must be considered when applying the economic realities factors. These factors should be used as guides to answer the ultimate question of economic dependence: Is the worker in business for him or herself (and thus is an independent contractor), or is the worker economically dependent on the employer (and thus is its employee)?

Weil stresses the importance of correctly classifying workers as employees or independent contractors because of the serious implications for the legal protections that workers receive, particularly when misclassification occurs in industries employing low-wage workers. Problems arise when employers improperly classify employees and deny them access to benefits and protections such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces.

Employers should review their approach for determining independent contractors vs. employees to ensure they are in compliance. More information concerning misclassification can be found at:
http://www.dol.gov/whd/workers/misclassification/AI-2015_1.htm

Administrator’s Interpretation Concerning Misclassification