Please note that no matter what the DOL states as a definition of an employee/independent contractor, the main thing to remember is that we have more ways for more individuals to earn money (legally) here in this country, than ever before… there is a method of earning money that can suit each and every person as long as all of the conditions are researched ahead of time. For the time being, a growing number of lawsuits allege companies should be classifying individuals as employees and not independent workers (free agents).
In June, a California commission ruled that an Uber driver is really an employee and not a contractor. Hillary Clinton (the Democratic Presidential frontrunner) recently promised to ‘crack down on bosses who exploit employees by misclassifying them as contractors.’ With the new directive, the Department of Labor pretty much considers most workers to be employees under the Fair Labor Standards Act and the agency will apply a very broad definition when investigating a company’s practices. In light of the DOL announcement in July and the final ruling on the overtime wages, employers should be much more cautious at this time because it appears that the DOL has declared war on the independent contractor relationship.
Put simply, Uber would not be making the money that it is making if their ‘contractors’ were ‘employees’. Independent contractors are cheaper for companies to hire. Employers don’t have to pay them benefits or offer 401(k) plans, pay them overtime or give them paid days off….and they certainly don’t have to pay unemployment insurance or worker’s compensation funds on the contractors’ behalf (the contractors have to pay their own workers’ compensation premiums)….and the best for the employers (of which I have mounds of personal experience), the employer does not have to cover the employer share of their payroll taxes or withhold income taxes (the responsibility is for the independent contractor)….however, we know that there are those employers who don’t care what the DOL states or has stated….they only pay their portion of the payroll taxes or income taxes after accountants/attorneys/IRS/State Departments of Revenue, etc. require them….
Now, in return for the limited obligations that are thrown the way of the employer, the independent contractor should have autonomy deciding when, where and how to do the work assigned. They’re free to take on projects with other companies. They essentially run their own business, and may even have their own employees, office space and equipment. That is how it is suppose to be. However, the lines seem to blur when a company hires someone to do work that might be considered integral to the core of the business….that a full time employee normally does…or when it dictates where, when or how the work should be done…..or when it restricts the worker’s ability to work for other clients.
If a company has found to have misclassified workers as independent contractors, it may be required to pay legal fees, back wages, back taxes, penalties and damages. The DOL, together with the IRS and 22 states cracked down on misclassification, resulting in employers having to pay $79 million in back wages for more than 100,000 workers in various industries in 2014 alone. The Labor Department’s missions is to be vigilant in protecting workers whose rights are being violated….which it has done in industries as varied as construction, meat processing, landscaping and personnel/staffing services.
What if someone really wants to work for Uber or Lyft as an independent contractor? In the ‘guidance’ or 'directive' that the DOL published in July of 2015, the Labor Department explicitly said that the ‘economic realities’ of the working relationship determine whether a worker is an employee, and those would override any agreement that may have been made between the employer and the worker. This may pose a problem for some individuals….
The reality is that the courts have a good deal to say about who is violating labor standards and who is really an independent worker. It’s not clear whether they will view the definition of employee as broadly as the Department of Labor in all cases. I personally feel, as stated at the beginning of this writing, that each and every individual needs to evaluate the situation from their own perspective. First of all…the really important factor is needing an income and what can one do to insure an income….sometimes we do not have a choice and neither the courts, the DOL or the White House should have any say over it….many times it is in the hands of a small employer needing to build a business and a worker with the skills needed by that particular employer….the bottom line is getting the work done as legally as possible….in the long run, temporary workers ‘employed’ by a business as independent contractors does not seem to be the best situation in the long run….in order for a situation to work…and this ‘theme’ runs through all of my BLOGs….the situation has to serve and help both/all parties….
Independent Workers, Freelance Workers, Contracts Workers have been around for a very, very long time and are here to stay. I understand what the DOL is attempting to do by this directive just as I understood why the White House pushed the DOL to evaluate the overtime pay as part of the FLSA (Fair Labor Standards Act)…we have a huge amount of corrupt employers in this country who would like to get away with whatever they can to service and safeguard their own needs while putting the push to ‘workers’ all over this country. We also have a huge number of decent employers that need clarification in order to continue to follow the rules….no matter how much it may cost them in the long run….and since it does not look like there is going to be a Federal minimum wage increase anytime soon, this was a 'legal' and 'legitimate' way to get around the minimum wage issue...Employers come in all sizes and types of businesses and from all ‘walks of life’, it is in the DOL’s best interest to attempt to protect those of us that need protecting with a few more regulations that will make it just a little more difficult for those that seem to want to thwart the efforts of workers over and over again.
So, the Uber’s and the Lyft’s of the world should thrive….they are pretty much transparent with their hiring model….the independent workers know up front what they is expected of them and in most instances, it is a win/win situation for all concerned. In the California situation where the action was brought against Uber, the ‘worker’ is a woman who has been litigious in a number of instances and has prevailed in many. She, of course, just as all the Uber/Lyft drivers, knew the ‘rules’ ahead of time….if there was a situation when Uber changed its policy during her term of contract, then that should be evaluated….but many individuals are paying their bills by driving for Uber or Lyft….and providing a service that is unparalleled.
If you have any questions regarding independent contractors and employees, please contact me, Rosanne Bennett, at 484-798-1236 or at email@example.com.