Clarification of Independent Contractor Definition May Be Imminent

Legal news site Law360 reported earlier this month that U.S. Wage and Hour Division (WHD) Administrator Dr. David Weil intends to release an Administrator Interpretation clarifying the criteria for who is and is not a “legitimate independent contractor” under the federal Fair Labor Standards Act.

Misclassification of employees as independent contractors has been an area of focus not just for the WHD, but for the IRS and state governments. The independent contractor designation deprives government of unemployment insurance taxes, workers’ compensation premiums, and the employer’s portion of Social Security and Medicare taxes for workers so classified. In addition, independent contractors don’t enjoy the protections of certain labor laws, such as the Fair Labor Standards Act. Hence, these workers are not eligible for overtime wages or protection from discrimination afforded to “employees.”

Weil stated that the forthcoming guidance will incorporate existing tests with an eye toward eliminating vagueness while still providing a “holistic process of assessment.”

The guidance, which could be released as early as this summer, will impact the independent contractor definition under the Fair Labor Standards Act. Beyond that, its reach is uncertain.