WAGES
& HOURS
Twice in the last year, the U.S. De- By Steven A. Adelman
partment of Labor has issued important
pronouncements about the way work is
characterized and compensated. Together, these changes may have a significant effect on the way event operations
professionals are hired, insured, and paid
for their work. This article begins with the
recently heightened scrutiny of employers’ characterization of their workers as
“independent contractors,” which naturally leads into a discussion of the employee overtime rules scheduled to take
effect on December 1, 2016.
DISTINGUISHING EMPLOYEES
FROM INDEPENDENT CONTRACTORS, AND THE PERILS
OF MISCLASSIFICATION
On July 15, 2015, DOL issued new guidance regarding who qualifies as an “employee” under
the Fair Labor Standards Act (FLSA). To be clear,
the government was not making any new law,
or redefining any terms of art. Instead, it was (1)
clarifying the meaning of existing legal terms,
and (2) declaring that it intended, for the first
time, to take those legal distinctions seriously in
enforcing U.S. employment law.
Without putting too fine a point on it, DOL aims to eliminate the misclassification of
workers as independent contractors. Employers who hire independent contractors
do not pay those workers’ unemployment insurance, workers’ compensation insurance, Social Security and Medicare taxes, or minimum wages and overtime premiums, as they are required to do for employees. During a panel discussion on this
subject during LDI in October, retired IATSE counsel Jim Varga succinctly described
employer misclassification as wage theft. Another co-panelist, Paul Kush of ProSight
Specialty Insurance, noted that the insurer of an employer that mischaracterized employees could rescind its coverage in a way that denies either workers’ compensation or general liability coverage for an employee’s workplace injury. So the stakes
are high, particularly in light of the impending overtime rule changes discussed further below.
The distinction between an employee versus an independent contractor is based on
substance, not mere names. DOL is not impressed with the title of the document by
which an employer calls its hired workers “independent contractors,” or if whether
1099s are distributed at the end of the year.
Instead, when a company raises a worker’s independent contractor status as a defense, as in a workers’ compensation claim, the key is whether the company has retained the right to control the manner and means of the work. Regardless of who
writes the worker’s checks, if the right to control the manner and means is left with
the company for whom the service is performed, then an employer/employee relationship exists.