The Department Of Labor Just Eliminated Most Independent Contractors

On July 15, 2015, the Wage and Hour Division of the Department of Labor (DOL) issued what will be effectively a new standard of who qualifies as an independent contractor that will likely limit significantly the number of workers that meet the criteria. While claiming this was just an “interpretation” of the current standard and not a new standard, this “interpretation will result in a finding that “most workers are employees” and independent contractor status is limited to the few individuals who are truly in business for themselves.

The potential impact is significant as the DOL oversees the minimum salary and overtime requirement under the Fair Labor Standards Act (FLSA). Accordingly, this new interpretation can potentially result in substantial liability for back overtime pay if a contractor is determined to be an employee of the company.

DOL’s interpretation ignores decades of legal precedent concerning the classification of independent contractors. For installers to remain independent contractors, they will likely will need to establish businesses, have an office or facility, invest in more than tools and a truck and may even need to have employees of their own. It may also be impossible for a single installer that shows up at a retailer with his tools and truck each day to claim to be independent.

For a more detailed explanation of DOL’s new interpretation, please see the article entitled “Independent Contractor Update: The Department of Labor Declares War on Independent Contractor Misclassification” in WFCA’s Premier Flooring Retailer (September/October 2014).

What is flooring retailer to do? Here are a few suggestions:

  1. Have a contract with your independent contracts;
  2. Require the contractor to have a federal tax identification number and insurance;
  3. Ensure the contractor has an office and telephone number;
  4. Make sure the contractor works for others and does not work most of the time for your store;
  5. Have the contractor supply own tools and equipment;
  6. Do not have employees who also do installation (you generally cannot have it both way with some employees installers and claim the rest are independent contractors); and
  7. Have your legal counsel review you independent contractor arrangements.
Friday, September 11, 2015