Independent Contractor Status to Face More Scrutiny
Posted at Arkansas Employment Law by M. McClure on 07/19/2011

independent contractorsThe Department of Labor has released the breakdown of its $103.3 billion 2011 budget, which includes a new multi-agency "Misclassification Initiative" that will strengthen and coordinate federal and state efforts to enforce labor violations that result from the misclassification of employees as "independent contractors."  The breakdown shows that the Wage and Hour division plans on hiring 90 full time employees during the 2011 fiscal year.  The Initiative will “strengthen and coordinate federal and state efforts to enforce labor violations that result from the misclassification of employees as independent contractors and to deter such violations in the future.”  The Initiative will also focus on the industries where such violations are the most common, such as, construction, home health care and business services.  

These issues are not just important at the federal level: Arkansas' Department of Workforce services also sent a notice to Arkansas employers outlining Arkansas' law regarding classification of independent contractors, and you can find that information here.  Additionally, Arkansas Business recently published two articles discussing the growing number of wage and hour claims that are being filed, particularly focusing on the issue of employee misclassification as independent contractors, which you can find here and here.  

Employers should be concerned about these trends, if for no other reason than that wage and hour claims often present themselves as class action litigation, which is expensive to litigate.  It's my belief that wage and hour claims will continue to increase because of the complexity of the FLSA and the challenge that employers face in compliance. Employers should use the label "independent contractor" cautiously and not rely on this framework without legal review.