Perkins Coie

In a follow-up to the U.S. Department of Labor’s (DOL) release of 12 questions and answers in a publication called “Misclassification Mythbusters,” the DOL has now released a new website called “What is ‘misclassification’?” In the release, the DOL states that it “created a user-friendly webpage where workers, employers, and government agencies can find information and resources.” The release featured two stories about individuals—a taxi driver and a masonry contractor—who allegedly were “victim[s] of misclassification.” The taxi driver is quoted as saying “It was just like modern day slavery.”

The website asserts that “[m]isclassification affects everyone” and then lists eight “resources” for more information, including the following:

  • Pay and Misclassification
  • Health and Safety Concerns on the Job
  • Unemployment Insurance and Misclassification
  • Anti-Retaliation/Anti-Discrimination Rights for Workers
  • Federal Taxes and Misclassification
  • Health Care and Retirement Benefits—Information on Employer-Sponsored Benefit Plans
  • Resources for State and Federal Governments
  • Other Resources/Information

Included in the “Pay and Misclassification” section is a link to a “Myths About Misclassification” webpage, a video called “Know Your Rights Video: Employee vs. Independent Contractor” as well as a link to an infographic called “Get the Facts on Misclassification Under the FLSA [Fair Labor Standards Act],” among other resources.

The Myths About Misclassification webpage seems to suggest that the test for independent contractor status under the FLSA is a single factor test. For example, the website links to “Myth # 5: I am an independent contractor because I signed an independent contractor agreement” and states “you are an employee if, as a matter of economic reality, your work indicates that you are economically dependent on an employer . . .” Yet, courts have held that no one factor is determinative of independent contractor status. Even the DOL has recognized a six-factor “economic realities” test in determining if a worker is truly an independent business, as detailed in Administrator’s Interpretation No. 2015-1.

It appears that the purpose of the website is to persuade contractors to challenge their service recipient on contractor status. Indeed, the DOL’s press release states that “[m]isclassifying employees as independent contractors is a huge problem for workers, employers who play by the rules and our economy.” The potential result could be an increase in complaints and legal actions related to alleged “misclassification.”

Businesses should continue to take note of DOL activity related to independent contractors as the DOL, in addition to other state and federal agencies, continues its focus on targeting businesses using independent contractors. For example, Arizona has a new state law that attempts to define the independent contractor relationship, which should be taken into consideration with independent contractors in Arizona.  And, in California, the state’s Department of Industrial Relations has published a similarly biased “explanation” of contractor status apparently intended to disrupt contractor relationships.

Of course, no one knows what will happen at the DOL after the upcoming presidential administration change. Businesses that utilize independent contractors should contact experienced counsel to ensure that their engagements are compliant with federal, state and local laws. 

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