Employees & Independent Contractors

Why the Employee / Independent Contractor Distinction Matters

The terms “employee” and “independent contractor” should be quite familiar to virtually anyone in the professional world. These terms are used frequently, across every industry, and by every type of businessperson. As it turns out, the distinction between an employee and an independent contractor has important legal implications. The Fair Labor Standards Act (or FLSA) is a federal employment law which governs business relationships in the State of Florida and the rest of the country. Among other reasons, distinguishing between employees and independent contractors is important because the FLSA applies to employees, but not independent contractors.

Both employers and employees need to be conscious of the precise definitions of these two classifications. If you’re an employer, you need to have a full understanding of these classifications so you can be in compliance with the FLSA. You do not want to misclassify an independent contractor and then be charged with a FLSA violation by the Department of Labor.

Employees are Covered by the FLSA

The Fair Labor Standards Act applies exclusively to employees, not independent contractors. The FLSA basically protects employees from unfair practices. More specifically, the FLSA protects employees with respect to pay and overtime. For instance, the FLSA provides a detailed definition for when an employee is “on the clock”; relatedly, the FLSA also states that non-exempt employees must be paid overtime when their hours exceed the typical number of hours in a standard work week. The FLSA also ensures that employees receive the federal minimum wage.

Since the FLSA only applies to employees, many workers throughout the State of Florida and the U.S. are not protected by the FLSA, because independent contractors make up a substantial portion of the overall workforce. Real estate agents, videographers, bloggers, stockbrokers – these are just a few of the types of jobs which are often classified as independent contractors.

Understanding the Test for Employee Status

In late September 2020, the Department of Labor proposed a new rule to determine who is classified as an independent contractor. This new rule requires that the DOL weigh a number of different factors in a case-by-case analysis which pays heed to the specific circumstances of each unique situation. Under the proposed rule, the DOL will apply the “economic reality test,” which attempts to analyze an independent contractor’s situation with respect to its level of economic dependence on an employer. The test will examine five separate factors; two of these factors will be considered “primary,” while the remaining three will be considered “secondary.” Predictably, the primary factors will have more weight in the case-by-case analyses under the economic reality test.

Needless to say, the economic reality test can be complex, and requires expertise in order to fully comprehend. This is precisely why Florida businesses should hire a lawyer if they have any uncertainty regarding the status of an employee.

Contact a Top Miami Law Firm for More Information

The distinction between employees and independent contractors is a fundamental concept in the world of employment. Whether a given employee is actually an employee or an IC according to the DOL has very significant implications. Rather than risk making an incorrect classification, you should consider partnering with a qualified lawyer when you have concerns about employees and ICs. The Trembly Law Firm has a team of employment lawyers who can assist you to determine the status of a worker and comply with the provisions of the FLSA. Give us a call today at (305) 985-4569 to learn more.

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