I have often posted on independent contractor issues and had posted about the new initiative undertaken by the federal Department of Labor to share information with the States in a concentrated effort to find instances where employers have misclassified “true” statutory employees as independent contractors.
Now, Louisiana has joined this effort and has become the thirteenth State to share information and enforcement efforts with the federal agency to find these violations and, concomitantly, increase revenues to its own State treasury, as well as ensuring that workers receive their due as statutory employees.
The DOL noted that although non-traditional, non-employee/employer relationships were not per se illegal, they were when there was an intent to avoid compliance with labor laws. The agency also (again) re-affirmed that misclassification by some employers places undue competitive pressure on other employers who are following the law. There are also significant losses for the State unemployment insurance and workers' compensation funds.
The Executive Director of the Louisiana Workforce Commission (the State DOL) stated that “initiatives like this are critical in leveling the playing field for businesses that play by the rules." He continued by asserting that these efforts are “also vital for ensuring that eligible, hardworking men and women get the coverage and benefits they earn if they are injured on the job or lose their jobs through no fault of their own."
These new efforts are starting to show some results. Last year, the US DOL was able to “redeem” more than five million dollars in back-due minimum wages/overtime monies for workers who had been misclassified as independent contractors. The payment of “wages” also triggers and guarantees the protections of the federal Family and Medical Leave Act as well as unemployment insurance for these misclassified workers.
The two key elements in any independent contractor analysis are the degree of putative control exercised by the “employer” and showing that the entity/person is in an independently established business. There are proactive measures that companies can take to facilitate their possible need to make these showings, especially on the independent business prong, which is usually the element that independent contractor defenses founder on.