U.S. Government Report Focuses on Independant Contractor Misclassification

A report released this week by the United States’ Government Accountability Office (GAO), highlights the issues created when employers misclassify employees as independent contractors and calls for the DOL and IRS to step up enforcement measures to crack down on the abuses. A brief summary of the report is here.

Although exact figures are unknown, older studies indicate that millions of employees have been improperly classified as independent contractors by their employers. One major problem with this from a wage perspective is that independent contractors generally are exempt from the protection of federal and state wage and hour laws, including the Fair Labor Standards Act. Therefore, misclassified employees may be denied overtime and minimum wages.

Although more information can be found on this website, the basic distinction between an independent contractor and an employee is a the degree of control exercised by the employer. If your employer has significant control over your work, then you likely are an employee entitled to wage protection, even if your employer calls you a contractor.

In any event, to combat this rampant problem, the GAO report recommends a significant increase in enforcement. Specifically, the report states that, “[t]o assist in preventing and responding to employee misclassification, and to increase its detection of Fair Labor Standards Act (FLSA) and other labor law violations, the Secretary of Labor should direct the Wage and Hour Division (WHD) Administrator to increase the division’s focus on misclassification of employees as independent contractors during targeted investigations.”

If you have any questions about your classification as an independent contractor, please contact the firm.