How may I know if I am misclassifying employees?

On Behalf of | Apr 5, 2022 | Fair Labor Standards Act (FLSA) |

The Pennsylvania Department of Labor and Industry notes that misclassifying employees affects the Keystone State’s economy. If your workers allege you misclassified them, it may result in a federal claim under the Fair Labor Standards Act.

As noted by, Pennsylvania’s L&I Joint Task Force on Misclassification of Employees reports that the state’s companies misclassify 389,000 workers each year. Because of misclassifications, more than 11,000 employees did not qualify for workers’ compensation benefits in 2020.

What liability may employers have regarding their employees?

Most employers must carry workers’ comp insurance and cover work-related accidents. The L&I task force studies and reports on Pennsylvania workers’ comp applications denied because employers misclassified positions. Misclassification caused a combined loss of greater than $175 million worth of employee financial assistance and medical treatments in 2020.

A report published by the University of Pennsylvania explains that a determining classification factor is whether employers have oversight and control over their employees. If a supervisor or manager directs a worker’s activities, it qualifies as an employer-employee relationship. Companies must then pay at least the minimum wage for the hours they work and also cover them under a workers’ comp policy.

How may I confirm a worker’s status as an independent contractor?

The University of Pennsylvania’s Worker Classification Overview explains that the Keystone State’s laws do not define an independent contractor. You may, however, use a series of tests to determine if an individual qualifies as an independent contractor.

Factors showing that you have independent contractors include giving them control over their hours. When individuals decide the methods for completing their tasks, they are not employees. Contractors also buy and own their tools and pay expenses related to their work, which includes paying taxes.

To prevent allegations of misclassification, a detailed job description could help when recruiting. Employment or contractor agreements may also confirm each worker’s status.