Wage and hour claims continue to be the biggest source of liability for employers under the Fair Labor Standards Act (FLSA). This trend may be set to continue due to a number of factors including the current focus on minimum wage increases on the federal, state, and local level and tightening of the federal standards for class certification. Most recently, in fact, the Department of Labor (DOL) issued guidance suggesting more businesses should be designating workers as employees instead of independent contractors.
The DOL’s guidance generally calls for businesses to factor in several so-called “economic realities” when determining how to classify a worker. This includes the company’s degree of control over the person, whether the work is an integral part of the employer’s business, and whether the relationship between the worker and the employer is permanent or indefinite. These factors are supposed to be used collectively to determine whether the worker is economically dependent on the employer, and therefore an employee, or truly in business for himself or herself as an independent contractor.
Many industry groups have blasted the new guidance while the DOL says that the new interpretation isn’t a change in policy but instead attempts to provide a more detailed interpretation of how the agency assesses employer compliance with existing law and a long-used “economic realities” test under the FLSA.
What is clear is that any business that uses independent contractors extensively or to receive services that are important to its success should review the DOL’s interpretation and consider carefully how its Wage and Hour Division (WHD) and courts applying the economic realities test would view its independent contractor relationships.
In addition to misclassification issues that result in FLSA lawsuits, failure to pay employees for hours worked is another concern. This has become more prevalent as mobile phones, tablets, iPads, laptops, etc. provide employees with valued flexibility to work outside of the traditional workplace. However, employees may not capture all time worked when using mobile devices, especially if they use devices to work remotely outside of business hours. What’s important is for employers to establish clear policies regarding employee reporting of all time worked to help ensure that workers are fully and appropriately compensated. This will help reduce the risk of violating wage and hour regulations.
All companies should also review their Employment Practices Liability Insurance (EPLI) policies to determine if wage and hour claims are covered. Some policies only provide defense coverage while others exclude coverage. As a wholesaler with key market relationships, Caitlin Morgan can assist you in securing the appropriate EPLI policy for your clients. Just give us a call at 877.226.1027.