DOL Issues Guidelines to Clarify Worker Classifications

The U.S. Department of Labor issued a set of guidelines (pdf) on July 15 clarifying the circumstances under which employers can classify their workers as independent contractors or full-fledged employees.

Written by David Weil, the head of the DOL Wage and Hour Division, the new guidelines argue that an increasing number of workers are being classified as independent contractors (i.e. “in business for him or herself”), when they should rightfully be considered employees (i.e. “economically dependent on the employer”).

This distinction, writes Jason Oliva of Home Health Care News, “carries implications for home health agencies and the caregivers they ’employ.’

“Because a worker’s classification determines the benefits and protections they may receive from employers, proper distinction is critical,” Oliva writes.

Compared to independent contractors, employees are entitled to far more wage protections and benefits, including overtime pay, unemployment insurance, and workers’ compensation, the guidelines note. (Home care workers, however, are currently not entitled to overtime or minimum wage protections under federal law.)

“For home care aides, these compensation protections afforded ’employees’ are critically important for an occupation with so many work-related injuries,” said PHI Michigan Manager Hollis Turnham.

“And,” Turnham added, “an employer manages for their employees the payment of state and federal income taxes, Social Security, and other items that an ‘independent contractor’ is required to manage herself.”

In the DOL guidelines, Weil writes that in some cases, independent contracting relationships may have benefits for workers. But too often, workers “may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws.” Low-wage workers are particularly vulnerable to such intentional misclassifications, Weil writes.

Weil concludes that, under the “broad definitions” of the Fair Labor Standards Act, “most workers are employees.”

The DOL Wage and Hour Division website allows workers who have been improperly classified or denied minimum wage or overtime to file a complaint for investigation.

— by Matthew Ozga