Worker classification: understanding context is crucial

A half century ago, in the world depicted on the popular TV show “Mad Men,” the world was a much simpler (some would say simplistic) place.

To be sure, the rigid dichotomies were reassuring for many people. It was all too easy to stereotype and segregate people based on dichotomies: men and women, Russians and Americans, black and white, and so on.

Today, of course, we live in a much more complicated and open-ended world. Same-sex marriage, multiculturalism and other changes have greatly reshuffled the cultural deck. And yet the old dichotomy between employees and independent contractors remains.

In this post, we will consider how the distinction in status between employees and non-employees such as consultants and contractors continues to affect employers. Our point will be that there are several different contexts in which the distinction remains important.

The best known of these is perhaps the distinction between employees and contractors under federal labor law. Employees are covered by the Fair Labor Standards Act (FLSA), which contains various wage-and-hour protections.

Issues sometimes arise, however, regarding how workers are classified for FLSA purposes. For starters, there is a distinction between workers who are classified as employees and those classified as independent contractors or consultants.

For information on how the U.S. Department of Labor views this distinction, click here.

Among employees, there is also a distinction between employees classified as “exempt” (from overtime provisions) and those classified as “non-exempt.”

But labor law is by no means the only area in which the distinction between employee and contractor comes into play. In the field of tax law, for example, the IRS sometimes asserts that employers have misclassified employees as contractors in order to avoid paying employment taxes.

The distinction between contractor and employee also arises in the context of workers’ compensation law. This is because the general rule is still that employees are covered by workers’ comp but independent contractors are not.

In short, there are many different contexts in which worker classification issues can arise. If you are affected by a classification issue, it makes sense to get advice from an attorney who can explain your options.

To learn more about our practice, please visit our page on independent contractors.