Independent Contractor Misclassification
Federal and state labor laws require all employers to compensate employees at the minimum wage and to provide overtime pay at time and a half for all hours worked over 40 hours a week. But these requirements only apply to workers defined as "employees," which does not cover independent contractors.
As a result, some employers simply label employees as "independent contractors" to avoid minimum wage and overtime laws, even when they are properly classified as employees.
Fortunately, federal and state law does not allow employers to simply label employees as "independent contractors" when the reality of their job duties shows that they were really an employee covered by federal and state labor laws.
Some employee advocacy groups report that as many as 30% of employers misclassify their workers as independent contractors.
Courts generally consider the economic reality of the position in determining whether an employee has been misclassified, including: (1) the degree of control exercised over the worker; (2) the worker's opportunity for profit or loss and investment in the business; (3) the degree of skill and initiative required to perform the work; (4) the length of the working relationship; and (5) the extent to which the worker's job is integral to the functioning of the employer's business.