Independent Contractor v. Employee and Joint Employer Status: How to Differentiate and Avoid Legal Traps

Presentation Slides or Recording, Multimedia

Author(s) ,

Please join us for a virtual webinar addressing worker classification issues, including independent contractor v. employee, and how to manage temporary or seasonal workers and avoid common legal traps. Misclassification of workers is a costly mistake and can lead to exposure for unpaid taxes, unpaid overtime, penalties and punitive damages. We will discuss how to properly work with and manage independent contractors to make sure they are not classified as employees. We will also address the Department of Labor’s recent final rule regarding Joint Employer Status under the Fair Labor Standards Act and when you might be jointly and severally liable for the payment of an employee’s wages. Specific topics to be covered include:

  • Differentiating between different types of workers, including employees, independent contractors, temporary workers and seasonal workers
  • Independent contractor factors in the Fifth Circuit (the federal courts with jurisdiction over Texas)
  • Do’s and don’ts to preserve independent contractor status
  • The Department of Labor’s final rule on the Joint Employer Doctrine under the Fair Labor Standards Act

Webinar Recording

Key Takeaways

  • Misclassification of an employee as an independent contractor can be costly and expose an employer to liability for failure to pay overtime under the FLSA, IRS tax liability and exposure for Title VII harassment and discrimination claims
  • Damages in failure to pay overtime cases include unpaid wages, liquidated damages, attorney’s fees and costs
  • There are many tests for evaluating independent contractor status, but they all examine the level of control the individual/company exerts over the worker
  • If you intend to maintain an independent contractor relationship, don’t control the manner and means of the work, only the desired end result
  • Examine your workforce on a position-by-position basis and consider all factors of the economic realities and IRS tests; remember no single factor is determinative
  • Managing risks and avoiding unintended consequences:
    • Allow independent contractors (IC) to determine their own schedules and start/stop times
    • Require ICs to provide their own tools and equipment to the extent possible
    • Allow ICs to turn down jobs, projects, or work without penalty
    • Consider hiring a corporation or legal business entity as opposed to an individual
    • Have a written agreement and make your intent clear in the agreement
    • Require ICs to pay their own taxes and carry their own insurance
    • Don’t pay ICs by the hour; pay by the project or upon completion of work
    • Don’t reimburse ICs for expenses that are incidental to the job
    • Don’t require ICs to wear company uniforms, put company logos on their personal vehicles, and don’t issue them company business cards
    • Evaluate who really has control, your or the contractor
    • Seek out legal counsel to preserve the defense you made a good faith effort to determine your obligations under the FLSA