Recent Highlights on the Use of Independent Contractors

North Carolina passes a new law effective July 1, 2018 known as-the Employee Fair Classification Act and creates a new Section called the Employee Misclassification Section. What does this mean?

  • Once a violation becomes known, all North Carolina government agencies are notified as are federal agencies where they are legally bound to do so.
  • All employers must hang a Poster that advises any independent contractor of what they should do if they believe they have been misclassified; one being to inform the Employee Misclassification Section of employer names, naming key violators with the employer physical address, phone numbers and email addresses.

New Secretary of Labor In Trump Administration Reverses Prior administration Secretary of Labor Position on enforcing the Economic Reality Test in determining employment vs independent contractor status under FLSA

  • Under the six (6) part test the prior administration’s focus was for enforcement to consider one factor greater over the other five (5) and that was if the workers’ economic reliance was from a single employer such factor would be given more weight than the other five (5).
  • Under the new administrative Secretary of Labor directive, enforcement should weigh ALL six (6) factors and not naming any one factor to be conclusive in determining independent contractor status from employment status.

Ride sharing gets a boost with the rise in the gig economy and some states are jumping on board

  • A challenge under the California wage and hour went to Arbitration and the ruling by the Arbitrator ruled that the use of the Uber App. was persuasive to support a ruling in favor of Uber drivers being considered and properly classified as independent contractors.
  • Florida passed a law that lists four factors to support rendering a decision in favor of independent contractor status. All four factors can be easily met.

National Labor Relations Board (NLRB) vs. United States Court of Appeals

  • Prior decisions by the NLRB ruled that Fed Ex drivers who possessed a single route could not be considered employees. The US Court of Appeals overruled the NLRB on this notion.

Compliance and Advice:*

  • Treat independent contractors with dignity and respect.
  • Pay your independent contractors timely.
  • In a multi-cultural society, be mindful that independent contractors should understand their status
  • Train supervisors and managers on the proper treatment of independent contractors
  • Disgruntled independent contractors lead to claims which leads to audits-Avoid contract termination, if possible
  • Pay logoed independent contractors a marketing fee
  • Do not pay the same compensation rates to ALL the independent contractors
  • Involve independent contractors in resolving customer complaints
  • Do not contract or engage an independent contractor who is unwilling to sign an Arbitration Agreement and Waiver.
  • Make sure the form (written Agreements) most closely resemble the substance of your IC relationship.

These are but a few that will assist companies in avoiding legal challenges to Independent Contractor business model.

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