Independent Contractor Versus Employee

Legislation recently introduced in both the House and Senate contemplates an amendment to the Fair Labor Standards Act ("FLSA") that would impose more stringent regulations regarding employee, and more specifically, driver classification.  The Employee Misclassification Prevention Act seeks to deter employers from improperly classifying a driver as an independent contractor versus employee by:

• Ensuring that employers keep records that reflect the accurate status of each worker as an employee or non-employee and clarifying that employers violate the Fair Labor Standards Act when they misclassify workers.

• Increasing penalties on employers who misclassify their employees and are found to have violated employees' overtime or minimum wage rights.

• Requiring employers to notify workers of their classification as an employee or non-employee.
• Creating an "employee rights web site" to inform workers about their federal and state wage and hour rights.

• Providing protections to workers who are discriminated against because they have sought to be accurately classified.

According to proponents of the legislation, employee misclassification denies workers the benefits that they would otherwise be entitled to including minimum wage and overtime, workers' compensation, and unemployment insurance.  The legislation would task the Department of Labor with monitoring the states' efforts in auditing and imposing penalties against employers that misclassify employees.

UPS Supply Chain Solutions settled a wage and hour class action lawsuit filed in California for $12.8 million.  At issue in the case was whether UPS had properly classified the drivers as independent contractors versus employees.  The case includes claims under the Fair Labor Standards Act ("FLSA") and California state law claims.  The average recovery for each member of the class under the FLSA claims was $9,500, and the average recovery for each member of the class under the California claims was in excess of $30,000.  No dispositive motions were filed in the case, so it is not clear how the court intended to rule on governing misclassification law.