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A Better Partnership


Dec 2015
December 09, 2015

Times They Are A-Changin' for Independent Contractors

So, I read this great article on Forbes online today. The article was written by Dan Schawbel who bills himself as a “millennial expert and workplace futurist,” a cool title by the way, and is titled “10 Workplace Trends You’ll See in 2016.”1  I’ve got to tell you, I like this guy’s style. They’re not workplace trends you may see – they’re trends you will see. You have to admire his confidence. I liked the article so much I thought I would do the same thing. Only, I’m going to predict labor and employment law trends for 2016. And, because I’m not nearly as creative as Mr. Schawbel and I only get 800 words for this article, I’m only going to tell you about one trend you will see in 2016. How’s that for confidence? So without further ado, that trend is . . . I need a drum roll . . .

Independent Contractors are About to Become as Common as the Dinosaur

In July of 2015, the Administrator for the Wage and Hour Division of the Department of Labor issued Administrator’s Interpretation No. 2015-1. It was titled “The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors.”  Snoozer, right? But it’s really important. It’s 15 pages long and it clarifies the standards for when a worker is considered an independent contractor. Basically, in a highly simplified way, the Guidance says that if the worker is economically dependent on an employer, that worker is an employee. The Guidance gives a bunch of tests and examples, but it boils down to this: “Is that worker really in business for him or herself?” The Guidance concludes with, “In sum, most workers are employees under the FLSA’s broad definitions.” This doesn’t look good for businesses that use a lot of independent contractors, does it? And that’s not all.

Uber, that uber cool ridesharing company, is being sued in California for misclassifying its drivers as independent contractors. In O’Connor v. Uber Technologies Inc., the judge recently certified a class action alleging that Uber drivers are employees whom Uber has improperly classified as independent contractors. And, in another California lawsuit, Uber competitor Lyft was recently denied summary judgment in a suit alleging similar misclassification issues.

The state of California is weighing in, too. In Uber Tech., Inc. v. Berwick, the California Labor Commission determined that Uber driver Barbra Berwick was an employee and not an independent contractor.

But all that is in California, and you are in the Midwest (at least you probably are if you are reading this). But, don’t forget, the Guidance is from the Department of Labor, a federal agency, and two of the California cases are applying the FLSA, a federal statute, and that statute probably applies to you too (even if your business is not as hipster chic as Uber).

“So what do I do, Steve?” I can hear you saying. Here are a few golden nuggets of advice:

First, you have to get a handle on the scope of the problem. How many independent contractors do you use? What do you use them for? Where do you source them? And who are they?

Second, once you know who they are and what they are doing for you, let’s look at whether or not you have a problem. Are they properly classified? Do they only work for you? Have they been working for you for a long time? Are they just handling a project and moving on, or are they in your building day in and day out?

And finally, if you do have a problem, how do you fix it? Luckily, you have some options: hire them as employees or send them to a temp agency.
So, here is a piece of advice. Before you do this analysis by yourself (or worse yet, hire a contractor to do it for you), any documents you or your consultant create will be discoverable if you get sued. On the other hand, communications between you and your lawyer, for the purpose of securing legal advice, are covered by the attorney-client privilege and documents produced by your lawyer may be covered by the work product doctrine. Please keep that in mind when you decide who to call. 

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