Just because your employer calls you an independent contractor doesn’t mean you are one. If you’ve been misclassified as an independent contractor, contact overtime lawyer, Travis Hedgpeth, today for a free consultation.
Getting paid is probably the most motivating reason we show up for work. Working past the usual job hours without receiving payment for the additional work is not an exciting experience. Fortunately, the Federal Fair Labor Standards Act (FLSA) establishes the overtime requirements that employers should follow. However, there is a long list of exemptions on overtime pay.
If you are a staffing agency dealing with independent contractors, you may wonder whether the contractors are eligible for overtime pay. Or, maybe you are a contractor seeking to know your rights. Well, independent contractors fall into a category of workers who are not covered by the FLSA. Therefore, they are not paid for the extra hours.
It is worth noting that contract employees are not independent contractors. Contract employees are included in the payroll of the W-2 employer, meaning they might qualify for the overtime wages.
Misclassification of employees as independent contractors
Misclassifying the workforce is a common problem in the employment sector. According to the Department of Labor (DOL), between 11% and 30% of employers engage in this illegal act. It is a strategy that employers use to not only save on overtime costs but also taxes. Most employers are from industries, such as real estate, trucking, construction, and janitorial.
Who qualifies as an independent contractor?
An independent contractor is a person who enters into a formal agreement to work on a specific project of another person, but they follow their procedures and processes. Several aspects help differentiate employees from independent contractors, and they include:
1. Supervision and control: Independent contractors are not subject to another person’s control. Unlike employees who are entirely directed by their employers, independent contractors follow their own set of rules, methods, and schedules.
2. Tax reporting: The contractors are responsible for paying their taxes. With employees, the company withholds income tax, Social Security, and Medicare from wages paid.
3. When paid: Contractors are paid based on the terms of the contract. It can be upon completion of the project or by periodic amounts. Employees, on the other hand, often get paid hourly, weekly, or monthly.
4. Ownership of tools, equipment, and materials: Independent contractors have their tools, whereas employees rely on what their employer provides.
5. Training: Employers may be required to train their employees before allowing them to carry out specific formal tasks. When it comes to independent contractors, clients typically need to provide only the project requirements. No training is required.
6. Level of benefits received: Independent contractors do not receive the traditional benefits available for employees, such as health insurance, pension, sick leave, stock options.
Misclassification comes with serious legal consequences, including liability for unpaid overtime wages and taxes. Qualifying workers under FLSA may be able to recover their unpaid wages and overtime pay even if they’ve signed an agreement that states they are an independent contractor.
When it comes to unpaid taxes, an employer might still avoid this obligation. There are reasonable grounds where an employer who improperly classifies workers can escape tax obligations.
For example, if there are:
You can learn more about independent contractor overtime regulations from the DOL or consult an overtime lawyer.
Are you involved in an overtime dispute?
Get in touch with an overtime lawyer, Travis Hedgpeth, to schedule a free consultation. At our law firm, we work on a contingency fee basis. You won’t have to pay anything unless we recover the unpaid overtime wages.