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Classification questions: an FAQ on independent contractor issues

On Behalf of | May 23, 2016 | Wage & Hour Laws |

It is of course a sign of our times for employers to contract out work rather than hire employees.

This isn’t all bad. Using subcontractors, temp agencies and other arrangements may make good economic sense for employers in some cases.

But employers also often misclassify employees as contractors, either deliberately or deliberately, seeking to save on payroll taxes and other benefits.

In this post, we will address some common questions about worker classification.

How does the law tell the difference between a contractor and an employee?

There is no easy, bright-line rule. Job title is not what determines it. Instead, the distinction comes down to analyzing the economic realities of the situation.

There are multiple factors involved in this “economic realities” analysis. Historically, under the common law, a lot depended on who controlled the work. Today, under the Fair Labor Standards Act, it comes down to whether a given worker is dependent on the employer economically.

Could you give an example of economic dependence on an employer?

Let’s say you work for a construction company as a drywaller, electrician or painter. The company may have asked you to a sign an agreement stating that you are to be treated as a contractor, not an employee.

Ultimately, that agreement must meet the economic realities test. If you are economically dependent on the employer, you are considered an employee. This is true even if your job title or your written agreement with your employer say something else.

How is the law on work classification enforced?

Texas is one of 22 states in which state and federal authorities have reached agreements to collaborate on enforcement.

But it isn’t only government agencies that have a role to play in enforcing wage-and-hour laws. As a worker, you have rights under these laws. A knowledgeable attorney can explain the situation and help you understand your options.

What about people who work for sharing-economy services such as Uber?

That is a timely but pretty complicated question. We will discuss classification issues for Uber and other such services in an  upcoming post.


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