Misclassification. Costing You Your Overtime Pay?

 In Employment Law, Featured, Overtime Law, Wage Law

In accordance with the FLSA, employers are required to pay full-time employees overtime for any hours worked over the 40-hour a week threshold. To avoid this, many employers intentionally misclassify workers as independent contractors. Under the same laws that protect employees, independent contractors are deemed exempt from overtime pay.

If you work for a company and feel that you should be entitled to overtime pay despite your classification as an independent contractor, it is important to understand whether you are an “employee” or “independent contractor” by legal definition. To help you out with this, the IRS provides several factors for both employers and employees to consider.

Behavioral Control

One of the greatest distinctions between an independent contractor and an employee is the behavioral control. Employees are required to adhere to the rules and policies of the company. If one’s employer says that he or she must arrive at work at 8:00 a.m. and clock out by 4:00 p.m., he or she must do so. Independent contractors, on the other hand, are legally allowed to make their own rules. If an employer says that he or she must arrive by 8:00 a.m., an independent contractor has the freedom to say he or she will be there at 9:00 instead. Though an employer can negotiate the issue, he or she cannot force it.

Likewise, an employer has the ability to control how an employee performs his or her work, whereas an independent contractor controls the way in which he or she chooses to complete a job. For instance, an employee may be required to work in office, while an independent contractor has the freedom to perform the same job on a beach in the Bahamas. An employer may ask an employee to follow certain steps and procedures, whereas an independent contractor can adhere to whatever criteria works best for him or her so long as he or she completes the job to the employer’s satisfaction.

Financial Control

Another major difference between an independent contractor and employee is financial control. When an employer hires an employee, he or she is free to set that person’s wages as high or as low as he or she sees fit (so long as it is within FLSA minimum wage standards). An independent contractor, on the other hand, determines what his or her time is worth and bids on projects based on that amount. An employer can either accept or reject the contractor’s bid, but if he or she accepts it, he or she must pay the agreed upon amount.  

Other factors such as the equipment a person uses, where he or she is permitted to work, payment schedule, and work schedule all may come into play when determining whether or not a person is an “employee” or an “independent contractor.”

Collecting Overtime for Hours Worked While Misclassified

It happens all the time…employers hire people to work on a contract basis and classify them as independent contractors. Over time, however, said contractors become valuable members of the team, and employers begin to treat them more like employees. While this is normal, many employers fail to recognize the change by switching the contractors over to “employee” status. This is where violations occur.

Though employers are responsible for dealing with a number of legalities to recognize the switch, one of the most difficult and often most neglected is determining the number of overtime hours a person worked as an unofficial employee.

The best way to deal with unpaid overtime is to address the issue directly with the independent contractor. The employer should acknowledge the switch with the contractor, have him or her sign an employee contract, and inquire as to how many hours of overtime the contractor put in as an unofficial employee. The employer should pay the person accordingly.

If that is not what happens in your case—if your employer ignores the issue or even fails to recognize you as a full-time employee—it may be time to seek legal help.

The labor and employment lawyers at Herrmann Law are prepared to fight for your rights to overtime pay and to put a stop to unfair employment practices. If you simply want to regain what is owed to you, call our office today to schedule your free consultation.

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