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Why misclassification can lead to wage and hour claims

On Behalf of | Mar 11, 2024 | Wage & Hour Laws |

Employers in Florida have to balance the costs and risks of acquiring new talent with the need for consistent staffing. The company also has to invest substantially in not just the wages that the worker earns but also benefits and secondary financial obligations.

Some businesses try to minimize the costs inherent in bringing in new talent by classifying those workers as independent contractors. When a company actually hires contractors instead of employees, it can improve organizational efficiency. However, misclassifying workers who are actually employees as independent contractors could lead to civil liability for minimum wages and overtime pay.

Why do wage and hour claims often stem from misclassification allegations?

Fair pay laws don’t apply to the self-employed

There are numerous laws in Florida and at the federal level that establish minimum standards for employee compensation. For example, workers should receive pay that amounts to at least minimum wage for the total number of hours worked. If an hourly worker puts in more than 40 hours during a particular work week, then they should receive overtime pay of one and a half times their hourly rate.

There are no such protections for self-employed workers or independent contractors. Businesses can claim that since the workers set their own hours, the worker controls how long they work. Therefore, employees treated as independent contractors may discover that the wages they’ve received fall far short of minimum wage based on the number of hours that they worked. They may also determine that they should have received overtime pay in some cases.

Those allegations could lead to a complaint being made to the Department of Labor (DOL), which could then lead to a DOL investigation of the business and a determination with costly fines and payment to the workers. The workers could also file a lawsuit for wages and attempt to have the case certified as a class or collective action on behalf of all misclassified workers. The company could also face allegations of tax fraud due to not making payroll tax contributions on behalf of those employees.

It is, therefore, incumbent upon those in managerial or human resources roles to understand the difference between independent contractors, and employees. Federal regulatory authorities recently clarified that distinction with a new final rule outlining the numerous factors that influence whether someone is an employee or not.

Some companies may need to reclassify certain workers or renegotiate contracts to better protect against litigation risk. Understanding what could trigger claims of worker misclassification can help organizations to avoid expensive litigation and to more effectively uphold workers’ rights.