Benefits & Compensation News

What the DOL wants you to know about misclassification

When it comes to misclassification, the DOL is known for detailed investigations and steep fines and penalties. But recently the agency tried a different approach. 

As Ogletree Deakins reported, the agency just issued what it is describing as a “user-friendly webpage where workers, employers, and government agencies can find information and resources about misclassification of workers as independent contractors.

For employers that are struggling to get the distinction right — and avoid the feds’ ire — this is an invaluable tool. The new and up-to-date resource can be used for everything from a self-audit to a checklist to ensure all classifications would pass muster with the feds.

The site directs visitors to a portal titled “Where can I get more information.” That portal is broken down into the following eight major sections:

  1. Pay and Misclassification
  2. Health and Safety Concerns on the Job
  3. Unemployment Insurance and Misclassification
  4. Anti-Retaliation/Anti-Discrimination Rights for Workers
  5. Federal Taxes and Misclassification
  6. Health Care and Retirement Benefits-Information on Employer Sponsored Benefit Plans
  7. Resources for State and Federal Government, and
  8. Other Resources/Information.

From there, each section brings users to a host of charts, legal info, outlines and other info on the section they selected. Example: the section Pay and Misclassification includes links to the following DOL resources:

  • Myths About Misclassification
  • Get the Facts on Misclassification Under the FLSA
  • Know Your Rights Video: Employee v. Independent Contractor
  • Employment Relationship Under the FLSA
  • Elaws: Independent Contractors
  • Am I an Employee: Employment Relationships Under the Fair Labor Standards Act
  • Coverage Under the Fair Labor Standards Act
  • Wage-Hour Division Administrator’s Interpreation, The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees who are Misclassified as Independent Contractors
  • WHD Press Releases About Employee Misclassification as Independent Contractors.

‘Economic Realities’

According to the DOL, employers should always use its “economic realities” test to determine a worker’s classification. This test is designed to determine whether:

  • an employee is economically dependent on the employer, which would make him/her an employee, or
  • the person is in business for himself or herself, which makes him/her an IC.

The economic realities test includes the following six factors that employers can use on a case-by-case basis to pinpoint the correct way to classify an individual:

  1. the extent to which the work performed is an integral part of the employer’s business
  2. the worker’s opportunity for profit or loss depending on his or her managerial skill
  3. the extent of the relative investments of the employer and the worker
  4. whether the work performed requires special skills and initiative
  5. the permanency of the relationship, and
  6. the degree of control exercised or retained by the employer.


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