The improper classification of workers as independent contractors is currently under close scrutiny by agencies and courts.  For example, the U.S. Department of Labor released an Administrator's Interpretation earlier this year explaining that the Fair Labor Standard Act's (FLSA) definition of "employ" should be broadly interpreted and focuses on the "economic realities" surrounding an individual's relationship with an organization to determine whether he or she has been properly classified as an independent contractor.  The Administrator's Interpretation identifies the six factors that the DOL uses to analyze whether a worker is economically dependent on an organization or is truly in business for him or herself.

 

While there is overlap between the DOL?s independent contractor test for wage and hour purposes and those tests applied by agencies enforcing other laws (like Prepaid Health or unemployment insurance), there are also key differences that employers should note.  To better understand and ensure compliance in this area, HEC encourages members to devote time this month to auditing their independent contractor classifications.  HEC?s Summary of Independent Contractor Laws will assist in this process by providing more information on the independent contractor tests utilized by the Department of Labor, the Internal Revenue Service, and the Hawaii Department of Labor and Industrial Relations in assessing independent contractor status.