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, and even 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.
For example, Assistant Managers are generally entitled to overtime pay, but it depends on the specific facts. The Fair Labor Standards Act provides that “executive workers” paid on a salary are not eligible to receive overtime wages. However, in order to qualify as an “executive,” the employee’s primary duty must include managerial tasks such as hiring, firing, disciplining or directing the work of other employees. Assistant managers are often primarily performing “non- exempt” work but are misclassified as exempt to avoid paying them overtime pay. That type of misclassification has resulted in many lawsuits where assistant managers have recovered millions of dollars.
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.
In regard to the construction industry, the New York State Construction Industry Fair Play Act created a new standard for determining whether a worker is an employee or an independent contractor in the construction industry. It provides new penalties for employers who fail to properly classify their employees. The law presumes that any person performing services for a contractor shall be classified as an employee unless the person is a separate business entity, or all of the following criteria are met, in which case the person will be considered an independent contractor: the individual is: (1) free from control and direction in performing the job, both under contract; (2) in fact performing services outside of the usual course of business for the company; and (3) engaged in any independently established trade, occupation, or business that is similar to the service they perform.
Pechman Law Group is one of the leading firms in this hotly contested area of wage and hour law. With experience on both sides of this critical issue, Pechman Law Group is able to provide clients a perspective and advantage which helps drive cases to successful resolution.