Recent activity by the U.S. Department of Labor (DOL) suggests that it may make moves to push forward changes to the recordkeeping requirements under the Fair Labor Standards Act (FLSA) regulations that were first proposed in fall 2010. These changes would bring to the forefront issues related to misclassification of workers as independent contractors when they are actually employees, potentially spurring an increase in costly wage and hour litigation. On January 11, 2013, the DOL requested comments on a public survey designed to look at worker classification and gain a better understanding of workers’ knowledge of employment laws and the rules regarding classification of workers as employees or independent contractors. This is the first time such a DOL survey would examine issues related to worker classification.
The purpose for this survey may very well be connected to the proposed recordkeeping rule referenced above. In fall 2010, the DOL proposed a change to the regulations regarding recordkeeping designed to “enhance the transparency and disclosure to workers of their status as the employer’s employee or some other status, such as an independent contractor… .” In essence, if adopted, the change would require employers to inform workers of whether they are employees, independent contractors, or some other status. The law does not currently require employers to do this.
During President Obama’s first term, the DOL did not press forward with the proposed new rule because of concerns raised regarding the burden and cost this new rule would place on employers. It appears, however, that the DOL may press forward on the new rule during President Obama’s second term.
Improper classification of workers as independent contractors can be a huge loss of revenue for the government. Hence, the DOL has directed a laser-like focus on worker misclassification issues in the past few years, and this latest action by the DOL may be another example of such focus. In light of these developing issues, employers would be well served to take a close look at how they classify workers to make sure they are doing so correctly (and our authors have previously reported on employee versus independent contractor issues and proper employee classification. Given the DOL’s apparent renewed and invigorated focus, now is an excellent time to take a closer look at how you classify your own workers.