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Have an Independent Contractor? This Change Could Cost You

Lucere Legal helps business owners with independent contractor misclassification issues

President Obama recently announced his intention to pursue a number of policy goals via executive agencies, included among them the National Labor Relations Board (the NLRB). Whether you agree with the changes or not, it’s vital that you are aware of what might affect you and that your business comply with modifications to existing federal regulations.

One ruling that may have wide-ranging impact concerns the difference between an employee and an independent contractor. The NLRB determined in a case brought forward about FedEx Home Delivery that the previous understanding of a worker’s right to “entrepreneurial opportunity” did not suffice to classify the worker as an independent contractor–active exercise of the entrepreneurial right is required to fully meet the standard.

As such, the NLRB reclassified all FedEx delivery drivers in the company’s Connecticut terminal as employees, contrary to the company’s claim.

Today, the NLRB makes use of eleven factors to ascertain employment status:

  1. The extent of control which, by the agreement, the employer may exercise over the details of the work;
  2. Whether or not the one employed is engaged in a distinct occupation or business;
  3. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
  4. The skill required in the particular occupation;
  5. Whether the employer or the workman supplies the instruments, tools, and the place of work for the person doing the work;
  6. The length of time for which the person is employed;
  7. The method of payment, whether by the time or by the job;
  8. Whether or not the work is part of the regular business of the employer;
  9. Whether or not the parties believe they are creating the relation of employer and employee;
  10. Whether the principal is or is not in the business;
  11. (NEW) Whether the evidence tends to show that the individual is, in fact, rendering services as an independent business.

The financial penalties for the misclassification of workers can be exceptionally burdensome–fines, interest, and penalties are not uncommon. Moreover, a willful misclassification will incur all the harsher penalties.

If you want to know more about this, see our Hiring & Firing page and download our Guide to Independent Contractors.

To learn more about good legal employment practices, call us today at 612-206-3701 or reach out via our online contact form to schedule a small business consultation session.

Image Courtesy of bplanet | FreeDigitalPhotos.net

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