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Key factors to consider regarding employee classifications

Employers are expected to treat their employees with fairness, respect and dignity. One of the regulations in place to ensure this is the Fair Labor Standards Act.

This act, along with other laws, helps to regulate the relationship between an employer and employee. One of the most crucial aspects is payment, which tends to be a catalyst for a growing number of lawsuits. To help avoid such instances, it is important that employers understand a few key factors regarding employee classifications.

Determining aspects

It is completely legal for an employer to hire an individual as a contractor; however, the classification must be befitting of the duties the person holds. In determining if a party is an employee or a contractor, the courts consider several aspects, including:

  • Skills required for the job
  • Length of employment
  • Level of control the employer holds in the relationship
  • Importance of the work to the employer's business
  • Amount of investment from the employee vs. the employer
  • Effect of employees' skills on their profit or loss

These are a few of the main elements; however, the court may consider several others. Having a clear contract in accordance with the labor laws may help in supporting an employer's classification decision.

New regulations

In 2016, the Pennsylvania Department of Labor joined other states in partnership with the U.S. Department of Labor and the Bureau of Labor Law Compliance by signing the Memorandum of Understanding. In short, the departments are working together to limit employee misclassification. In part, they strive to accomplish this through education; employers and employees have access to resources that can help to bring clarity in regard to any employment classification inquiries. Also, the departments are investigating and monitoring employers more closely to avoid any issues from occurring.

Keeping these factors in mind may help employers to keep employee classifications claims to a minimum. The best way to fight employee classification issues is to avoid them from the start. A knowledgeable attorney can help to answer any questions and ensure that the employee structure is in agreement with current law.

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