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Friday, October 24, 2014

Worker Misclassification: AL Department of Labor Tag Teams with Feds

By: Tommy Eden

Earlier this month the U.S. Department of Labor’s Wage and Hour Division and the Alabama Department of Labor signed a memorandum of understanding covering misclassification as something other than employees, such as independent contractors. The agencies committed to work together to cross report possible violations when discovered.

This Misclassification Initiative, with the stated goal of preventing, detecting and remedying employee misclassification, has already been signed with state agencies in California, Colorado, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New York, Utah and Washington.

The DOL Wage and Hour Division reports on its website that in Fiscal Year 2013, investigations resulted in more than $83,051,159 in back wages for more than 108,050 workers in industries, such as janitorial, food, construction, day care, hospitality and garment.

Common Sense Counsel: Next time you are trying to decide how to properly classify someone, as an employee or an independent contractor, understand that the right to control the means and manner of performance is a key factor-with about 20 other factors to boot.  So ask yourself the following questions before you hire that person as a 1099 contractor and not an employee.

Does the business want to hire this individual as an employee to provide the same or similar services following a “test period” as an Independent Contractor?
Will the individual be required to devote essentially full-time hours to perform services for the business, making the individual unable to perform services for other customers during the performance period?
Will the individual be expected or required to perform essentially full-time work hours at the business or at facilities operated by the business?
Will the individual be required to comply with instructions from a business supervisor, as to where, how, and when the work is to be performed?
Will the business be responsible for hiring, supervising, and paying workers who will substantially assist the individual in performing the requested services?
Will the individual be paid on a recurring basis for a fixed amount?  (For example, will the individual be paid every month for several months for a fixed amount, instead of on a per project basis?)
Will the individual work as part of a team of regular employees and will the individual’s day-to-day participation be essential to the successful performance of the employee team?
Is the individual expected/required to perform work during hours that are set by a business supervisor?
Will the individual perform services for which the business is concerned with the methods used to obtain the results (and not just with the results)?
Will the business provide a significant amount of tools, equipment, or other materials needed by the individual to perform the agreed-upon work?

(Click here for an expanded checklist.)

Tommy Eden is a partner working out of the Constangy, Brooks & Smith, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901 and follow on twitter tommyeden3