Misclassification is the practice of incorrectly labeling workers as independent contractors rather than employees. Because independent contractors are by definition are self-employed, their employers often escape many of their responsibilities under employment, labor, and related tax laws and deprive workers of the protections of those laws.
In recent years, the US DOL has been combating the practice of misclassification by entering into partnerships with state labor agencies to share information and enforcement responsibilities to reduce misclassification of workers. Alabama is the most recent state to join the US DOL’s misclassification initiative. It is estimated that Alabama employers misclassified more than 1,500 employees as independent contractors in 2013.
The US DOL has added more than 300 new investigators and continues to expand compliance measures. The result has been an increase in litigation, penalties for violations and back wages owed since the initiative began in 2011. For that reason, employers should periodically review their current workforce in light of classification guidelines. The US DOL has two Fact Sheets to help employers perform that evaluation:
- Fact Sheet #13: Am I an Employee? Employment Relationship Under the Fair Labor Standards Act (FLSA)
- Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA)
Employers can also try the FLSA Coverage and Employment Status eLaws Advisor for guided instruction. More information about the US DOL’s misclassification initiative can be found here.