Independent Contractor / Exempt Issues

Improperly classifying an employee as “exempt” from the requirements of the Fair Labor Standards Act and New York Labor Law when the employee should really fall under the laws can result in failing to pay the employee of overtime wages owed for hours worked over 40 in a given week.  This can subject a company to payment of back wages, liquidated damages and the attorneys’ fees of the employee who has been misclassified.  Similarly, significant financial liability may result where a worker is misclassified as an independent contractor rather than as an employee.  Generally, the test for determining whether an individual who performs services is an independent contractor or an employee rests on the degree of control that an employer has over the individual’s work.

There has been a wave of misclassification litigation across the United States by employees who believe they have been misclassified either as “exempt” from the FLSA or as an independent contractor.  Brokers, bankers, assistant managers, delivery/courier workers, sales representatives, sous chefs, dancers at adult nightclubs have filed lawsuits claiming that they have been misclassified.  A common mistake that many companies make is that they assume if a worker is in a “white collar” position or is paid on a salary, overtime is not required under the law. But the determination of whether an employee is paid overtime is dependent on the actual job duties of the employee, not just on that employee’s title or how she or he is paid.

Another frequent issue involves the misclassification of delivery drivers as independent contractors.  Last mile delivery drivers are often under the direction and control of companies and therefore should be treated as employees and protected by the labor laws, including laws which mandate overtime pay after 40 hours of work in a week.