Overview: Determining if an employee should be classified as an independent contractor or an employee under the FLSA and IRS is a perennial issue that continues to confound many workplaces; misclassification is surprisingly common and results in costly litigation.
To further complicate matters, properly classifying an employee regarding their exempt or non-exempt status befuddles many HR professionals; employee misclassification similarly results in a long list of costly litigation, many resulting in companies owing years of back pay for overtime due to having improperly classified employees as exempt when the proper employee classification should have been non-exempt (and thereby eligible for overtime).
Other FLSA regulations and state compliance challenges pertaining to employee compensation laws include deciding whether employees must be paid for certain activities, such as meal and rest breaks or training. minimum wage laws, overtime laws, child labor, and recordkeeping are additional aspects of FLSA compliance, most of which have variations by state.
Trends: Of concern to employers, not only are employees continuing to file FLSA lawsuits at a rapid pace but also the U.S. Department of Labor has stepped up its enforcement of employee compensation laws. So it's more important than ever to ensure compliance with this law.
Author: Michael Cardman, Legal Editor
Updated to reflect forthcoming minimum wage requirements, which will raise the minimum wage to $15 over the next four years.
Updated to reflect forthcoming laws that will provide for a declaration establishing a rebuttable presumption of an independent contractor relationship and establish independent contractor criteria for certain sharing economy workers.
The Arizona Declaration of Independent Business Status can be used to establish a rebuttable presumption of the existence of an independent contractor relationship under the state's labor code.
In Encino Motorcars, LLC v. Navarro, the Supreme Court held that courts do not have to follow a 2011 regulation from the US Department of Labor that excludes auto dealership "service advisors" from an exemption from the overtime requirements of the Fair Labor Standards Act (FLSA).
Enhanced to improve the comprehensiveness, organization and scope of coverage.
HR and legal considerations for employers regarding employee compensation laws. Support on following rules and regulations regarding this topic.