Are Independent Contractors Being Misclassified?

Posted By Katz Leidman Grossman Wolfe & Freund || 15-Jul-2015

When should a worker be classified as an employee? When are they an independent contractor? These are questions being posed by the Labor Department.

According to The New York Times, on July 15, the Labor Department issued new guidance that could limit many companies' ability to designate their workers as independent contractors. This could change the landscape for companies such as Uber and Lyft that rely on independent contractors for business.

Recently, there has been a wave of lawsuits against companies, such as FedEx, Lyft, and online cleaning service provider, Handy, brought by workers who argue that they are more like employees than contractors, and they should be treated as such.

For years labor unions and workers have argued that companies from a variety of industries – construction, ride-hailing services, janitorial, hotels, and others have intentionally reduced labor costs by classifying workers as independent contractors.

Independent contractors aren't eligible for workers' compensation, unemployment pay, vacation pay or overtime. Independent contractors pay 100% of their Social Security taxes, compared to employees who split them with their employers.

Helping Companies 'Clarify the Rules'

Wednesday's guidance was issued by the Labor Department's wage and hour division, and headed by David Weil. While it doesn't represent new regulation and it's not backed by the law, it's meant to clarify how employers and courts should interpret the rules.

Weil said that they very much believe that misclassification is a growing problem. He said that it undermines the legitimate employers who are doing the right thing, and it's putting them at a competitive disadvantage.

This misclassification issue has made its way to the presidential campaign. Earlier this week, Hillary Clinton promised to "crack down" on companies that wrongfully classified their workers as contractors.

Wednesday's move came a year after the Labor Department forced companies to pay $79 million in back wages to nearly 110,000 workers in food services, day care, hotel, janitorial and temporary help industries.

If you believe that you're a misclassified worker who needs to file a workers' compensation claim, contact Katz, Leidman, Grossman, Wolfe & Freund to discuss your case with a New York workers' comp attorney!