How to determine an employment relationship
Lawsuits over worker misclassifications are popping up all over the country. When an employee is wrongly labeled an independent contractor by his or her employer, they are being denied due payroll. Businesses will get in big trouble if they're caught mislabeling workers, so companies should be sure to consider these points when determining someone's classification:
- To what extent are the worker's services an integral part of your business?
- How much does he or she have invested in your facilities and equipment?
- How much control do you have over the work he or she performs?
- Does the worker have a large opportunity for profit or loss from your business?
- How permanent is your relationship?
The more invested the worker, the more likely it is that he or she has an employee relationship with the company. Also, if an employer's control over the person's work is extensive, that is another sign of employment. Finally, if the relationship is not on a short-term, contract basis, the employee is probably not an independent contractor.
Some things the Fair Labor Standards Act does not consider to be pertinent in classifications are the location of the work being performed and the presence (or absence) of a formal employment agreement.
If a worker is determined to be an employee, he or she is legally due at least minimum wage and overtime pay.
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