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Learn how misclassifications can be a legal nightmare for employers! Recent developments at the National Labor Relations Board (NLRB) and the U.S. Department of Labor's Wage and Hour Division (DOL) could make it more difficult for businesses to classify workers as independent contractors. The NLRB and the DOL announced that they entered a Memorandum of Understanding which provides for and encourages interagency cooperation through "information sharing, joint investigations and enforcement activity, training, education, and outreach."
Businesses that use independent contractor work would do well to pay attention to the news out of Washington, D.C., because the U.S. Department of Labor (DOL) has proposed a rule on contractor classification that would impose a six-factor "economic reality test," with all the factors equally weighted, looking broadly at the "totality of the circumstances" to determine whether a worker is an independent contractor or employee under the Fair Labor Standards Act (FLSA).
These developments at the DOL and the NLRB could mean trouble for employers that misclassify workers as independent contractors. For example, an NLRB investigation of an unfair labor practice that leads to the conclusion that certain workers have been misclassified as employees could lead to the DOL finding a company is liable for unpaid overtime and minimum wages. Considering this heightened scrutiny and potential narrower legal standard, it is now more important than ever to evaluate how companies structure an independent contractor relationship.