It has become fairly common to take an outgoing employee and rebrand the employee as a consultant / independent contractor — either as part of a severance plan or to phase the employee into a retirement status. Continue reading
Category Archives: Independent Contractor
Lessons from Bob Seger’s “Against the Wind”: 5 Clues Your Independent Contractor May Be Misclassified
The all-time best song lyric is Bob Seger’s “I wish I didn’t know now what I didn’t know then,” from Against the Wind. This is based on a comprehensive survey of 1 registered voter, but good enough.
Too many companies assume they don’t have an independent contractor misclassification problem because they have not yet been sued, audited, or investigated.
Remember how you could cover the eyes of small children and convince them you’ve disappeared? 
You didn’t disappear, though, did you? (Or, did you?!!) This is a fun little game but bad risk management strategy.
The better strategy is Continue reading
Strippers Have No Class, Judge Rules
We’ve seen lots of exotic dancer cases lately (clarification for my wife: seen lots of cases, not dancers) where the dancers — apparently this is the preferred legal term for strippers — claim they have been misclassified as independent contractors.
Many of these claims have succeeded, but here’s an unusual way to lose class action status. This judge refused to certify the proposed class because of lack of experience of counsel. Thanks to my colleague, Greg Mersol (experienced counsel), for this post. Class dismissed!
Unlikely Lessons in Legal History, Edition 1.
Why lawyers use the term “exotic dancer” instead of stripper:
Lawyer’s Wife: Were you out cavorting with strippers again?
Lawyer: No.
© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.
Can You Pay a Contractor Overtime? Should You?
Let’s talk about good old-fashioned 1099 Independent Contractors — you know, those individuals who are happy to be called contractors until they’re released and then decide they should have been treated as employees.
When retaining a contractor, one of the goals, of course, is to ensure that the contractor is properly classified and is not really (factually) an employee. A secondary goal, however, is to limit liability if the contractor is misclassified.
Today’s question sits at the intersection of these two goals. Continue reading
What is the Economic Realities Test?
The Economic Realities Test seeks to determine whether, as a matter of economic reality, the worker is reliant on the hiring party, or is in business for him/herself.
[UPDATED 10/9/2021, 3/15/22: See Notes in red, below.]
The Fair Labor Standards Act (FLSA) uses an Economic Realities Test to determine whether a worker is a contractor or an employee. If the worker is an employee under this test, then the federal minimum wage and overtime rules apply, subject to any exemptions. This test is also used to determine who is an employee under the Family and Medical Leave Act (FMLA). Continue reading
How Does the IRS Determine Who is an Employee?
The IRS uses a Right to Control Test to determine whether a worker is an employee for tax purposes.
If the employer has the right to control the worker, that individual is deemed an employee and the company is subject to employment tax obligations. If the company does not exercise control over the worker but instead gives that worker significant independence, then the worker is generally viewed as an independent contractor. The more control and supervision by the employer, the more likely the worker will be deemed an employee.
What are Right to Control Tests?
Let’s start with some basics. Although there are many tests for determining whether a worker is an employee, the most common types of tests are Right to Control Tests.
These tests seek to determine who has the right to control the means and manner by which work is performed. If the company has more control, the worker is generally an employee. If the worker has more control, the worker is more likely an independent contractor. That’s an overstatement, but it captures the gist of the issue.
Why Misclassification Matters
Uh Oh!
With a finding of worker misclassification, the workers you thought were not your employees are suddenly deemed your employees. What does that mean practically? It means that you have not been complying with all of the laws that apply to employees.
Welcome
Once upon a time, it was easy for companies to know who their employees were. Not so much anymore.
With the rise of the gig economy and other creative workforce arrangements, the lines between employee and non-employee have blurred.
Companies often prefer the flexibility of retaining non-employee workers. These relationships come in many varieties — independent contractors, consultants, staffing agency workers, outsourced vendors, etc. Many workers prefer these flexible relationships too. But a growing chorus of government agencies and class action plaintiffs have begun to cry foul. Continue reading
Who Is My Employee? 