Employee Misclassification as Independent Contractors

Under the Fair Labor Standards Act (FLSA), employers have obligations to their employees, like paying the minimum wage, providing breaks under certain circumstances, and other benefits guaranteed by the law. However, a process called employee misclassification could be a way employers break these laws to cut financial corners.

One type of employee misclassification is misclassifying an employee as an independent contractor. Under many wage and hour laws like the FLSA, independent contractors fly under the radar, and employers are not required to provide them with the same benefits as regular employees.

It’s somewhat complex to determine if an employee is a true independent contractor, and it may require a lawyer to sort out the details in the case of a dispute. As a generalization, independent contractors have a much greater degree of autonomy than regular employees, and employers of general contractors generally have very little control over independent contractors’ time and provide much less direction.

For example, an independent contractor might look like a person writing legal articles from their home or favorite coffee shop with few restrictions on their time beyond deadlines. A person working 9-to-5 in an office under a manager’s supervision is unlikely to be an independent contractor.

Another form of employee misclassification involves paying an unfair salary instead of a wage. In wages, employees are paid by the hour, while employees who are paid a set amount per month may be paid salaries.

In general, salaried employees work more irregular hours, and generally work on projects per the needs of the employer rather than a strict schedule. Unlike independent contractors, salaried employees tend to work on-site and with direct supervision of their own.

However, it is a requirement of the FLSA and other wage and hour laws that a salary comes out to a least minimum wage. For example, if salaried employees stay late working on their projects, all of their hours added up divided by their pay must be at least minimum wage. Managers are often salaried employees.

Many companies seek to cut corners financially. However, wage and hours laws like the FLSA protect the rights of employees against practices like employee misclassification.

For example, if an employee is wrongly classed as an independent contractor or classed as a salaried employee and worked so much that they’re making less than minimum wage, they may have grounds for a wage and hours lawsuit. Wage and hours lawsuits have been filed—sometimes successfully— against major companies.

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