One of the first actions by the Department of Labor (DOL) under President Trump’s administration was to withdraw the prior administration’s interpretation that “most workers are employees” and not independent contractors. For more information, see Independent Contractors—Another BUT Welcome Change, at The Law, The Floor, and You (June 12, 2017)
Many thought this was a signal that the new administration would be not be pursing claims that employers were misclassifying employees as workers and would ease up on challenging whether a worker was misclassified as an independent contractor. While the earlier interpretation was withdrawn, DOL continues to challenge independent contractor misclassifications.
Just this month, DOL required a small direct mail company in Virginia, Planet Direct Mail, to pay almost $750,000 for allegedly misclassifying 73 employees as independent contractors. While Planet Direct paid overtime to workers it classified as employees, the Wage and Hour division of DOL claimed that Planet Direct Mail misclassified production employees as independent contractors. Once identified as employees, DOL alleged that Planet Direct failed to pay them overtime. The company also failed to maintain records of the hours worked as required for all employees.
Following an investigation by the DOL’s Wage and Hour Division, Planet Direct settled by paying $355,672 in back wages and an additional $355,672 in liquidated damages. DOL also assessed $32,099 in penalties. The settlement covers only the overtime due. Planet Direct may still be subject to other obligations, such as unpaid taxes, Social Security and Medicare contributions, and unemployment insurance payments.
What is flooring retailer and contractor to do? Here are a few suggestions:
- Use the term “subcontractor” not “independent contractor;”
- Have a contract with your subcontractors;
- Require the contractor to have a federal tax identification number and insurance;
- Make sure the contractor works for others and does not work only for your company;
- Not supervise the contractors (it is okay to inspect work after completed or to ensure contactor is on the job site);
- Have the contractor supply its own tools and equipment; and
- Have your legal counsel review your independent contractor arrangements.
For more information, please request a copy of the World Floor Covering Association’s book, “The Independent Contractor: Understanding The Rules And a Model Contract.” The book provides a model independent contractor contract and explains the various issues regarding independent contractors. In addition, see Independent Contractor Misclassification: A Practical Solution to a Potentially Costly Problem Premier Flooring Retailer (March/April 2015). Association members can order this book and access the articles at: www.wfca-pro.org.
Notice: The purpose of this blog is to review the latest developments that are of interest to clients of Mr. King. The information contained is abridged from legislation, court decisions, and administrative rulings and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.