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How to Classify Employees and Contractors

The distinction between an employee and an independent contractor could make a world of difference for a worker. Official employees are subject to numerous labor laws that protect their right to fair wages and working conditions, among others, while independent contractors are not.

Unfortunately, employers can sometimes try to take advantage of this distinction to cut corners. 

Overtime pay, tipped wages, minimum wage, employee benefits, and unused vacation or personal time are just a few of the numerous ways that employers can skirt labor laws. As a worker, you are entitled to certain standards when it comes to your employment. You should familiarize yourself with these important wage and hour facts, and place a call to an experienced attorney if you believe any of these rules are being violated.

The Role of the Labor Department

The Department of Labor is the federal government agency that oversees various aspects of employment. One of the most important roles of this agency is ensuring that companies adhere to the Fair Labor Standards Act (FLSA). The FLSA requires companies to give employees at least a minimum wage for every hour worked, and overtime pay for hours worked over 40, among other things.

employees and contractors

What Are Interpretive Bulletins?

The Department of Labor has the capacity to issue interpretive bulletins that are intended to give guidance to employers. These bulletins describe how to handle various wage and hour issues. These issues may include anything from when an employee’s travel time must be compensated, to whether an employer must recognize lunches and breaks as time worked. Bulletins do not necessarily have the force of law.

However, an attorney could present it as an official guideline of employment for a court to consider when hearing a case. In a Ohio misclassification case, a court may use a bulletin as evidence to determine if a worker is a contractor or an employee.

How Does a Court Classify a Worker?

There are rules about how much deference the court has to give to the Department of Labor’s interpretation about what constitutes a contractor versus an employee. Thus, the bulletins are typically given a significant amount of weight.

Fact Sheet 13 issued by the Department of Labor talks about the employment relationship under the FLSA. In this bulletin, there are many factors a court will look at to determine the employment status of a worker. No single factor determines the decision but rather it is a totality of these factors. If most factors indicate that someone is an employee, the court will likely declare them an employee. Additionally, the Department of Labor has the power to sue an employer for misclassifying workers as contractors when they are employees, if necessary.

An employer could write into the Department of Labor asking to get a clarification as to whether they are properly classifying their workers. An official response from the Labor Department will carry a lot of weight when a court issues a decision.

Factors That Determine When a Worker is an Employee

A major factor that determines employee classification is the extent to which the work performed is an integral part of the employer’s business. For example, a delivery driver is an integral part to a delivery business. In this situation, the driver would likely have the classification of a full employee.

If the employer is providing most of the tools that the worker uses for their job, this also allows these individuals to be classified as employees. Alternatively, a contractor might use their own delivery truck instead of a truck that is company-owned.

A factor that is more difficult to determine is how much structure the company puts in place over a worker. Contractors tend to have few requirements or rules to follow. Companies sometimes misclassify employees as independent contractors even though that person has to follow specific policies and procedures, including clocking their time, working a set schedule, and being assigned duties to complete. If an employer tells an individual what their schedule is, what their assignments are, and monitors the way they do their job, the worker should probably be classified as an employee.

Classifying a Worker is a Contractor

If the worker profits more by having the ability to manage their own duties, that may indicate they are a contractor.

Contractors also tend to have the discretion to do whatever they want within the confines of the job, including exercising independent business judgment.

The permanency of the worker’s relationship at the company is another major consideration when classifying someone as a contractor in Ohio. If an individual is scheduled to only work for a set period of time, and their duties are radically different than the line of business the company deals with, then that lends credence to the argument that this person is a contractor. This definition can even include those who work a job for a full day.