A security services company based in California is facing accusations that it wrongly classified employees in an attempt to reduce financial obligations.

The classification of workers as independent contractors instead of hourly employees can provide a number of benefits, including limiting or eliminating payroll tax requirements and foregoing the purchasing of work-related equipment for staff, according to Lawyers and Settlements. However, stringent tests put forth under the Fair Labor Standards Act related to worker involvement, compensation and duties performed must be met for the independent contractor designation to be appropriate.

The workers participating in the suit were specifically involved in the delivery and setup of home security systems, a service their employers subcontracted from a national communications company. Attorneys representing the plaintiffs estimated that approximately 75 workers in California, and more in Texas and Illinois, may be eligible to participate.

According to the FLSA, independent contractors are defined on sliding scales that involve a number of factors. The level of independent operation, chances to both earn and lose money, amount of attendance requirements and other rules and regulations enforced by an employer are all important to the overall test.

Businesses worried about proper classification should invest in attendance tracking software and consult with a labor attorney about worker designation practices.

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