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Avoiding Misclassification
Mishaps
How Employers Can Protect Themselves
from Employee Misclassification
Executive Summary
The independent contractor workforce offers employers significant flexibility and cost savings, a potential boon in today's tough economy. However, the U.S. Department of Labor has launched a multi-layered initiative to identify and investigate employers who incorrectly classify employees as contractors. Organizations found to be misclassifying employees face high financial stakes including state and federal fines and fees and potential litigation from misclassified workers for back pay and benefits.
Because there is no single criterion used to differentiate an independent contractor from an employee, many employers are unsure how to protect themselves against misclassification. Examining existing contractor relationships, auditing all employee classifications, reviewing pay policies, maintaining FLSA records on both non-exempt and exempt employees and ensuring youth labor provisions are followed are just a few ways organizations can help avoid costly misclassification mishaps.
