Mistakenly classifying an employee as “exempt” from the requirements of the Fair Labor Standards Act where that employee should be treated as an hourly employee may have the consequence of denying that employee overtime 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 strippers 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.
Construction workers and owners of construction companies in New York should be aware of the New York State Construction Industry Fair Play Act, which took effect on October 26, 2010. The law creates a new standard for determining whether a worker is an employee or 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 as defined below, 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 an independently established trade, occupation, or business that is similar to the service they perform.
Lou Pechman is one of the leading litigators in this hotly contested area of wage and hour law. From being on both sides of this critical issue, Pechman Law Group is able to give clients a perspective and advantage which helps drive cases to successful resolution.
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