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Misclassification Mishaps

6 Ways Employers Can Protect Themselves from Employee Misclassification

Summary

Independent contractors offer employers flexibility and cost savings—big benefits in any economy. But the Department of Labor is cracking down heavily on noncompliance, including employers that incorrectly classify employees as contractors. Organizations found misclassifying employees can face steep federal and state government fines and potential lawsuits from misclassified workers for back pay and benefits.

Although there are no objective criteria to differentiate an independent contractor from an employee, employers can protect themselves against misclassification. Examining existing contractor relationships, auditing employee classifications, reviewing pay policies, maintaining Fair Labor Standards Act (FLSA) records on both non-exempt and exempt employees, and ensuring youth labor provisions are followed are just a few ways to help avoid misclassification mishaps.

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