The Department of Labor Concludes that Most Workers are Employees, Not Independent Contractors

Posted by on Nov 15, 2015 in Blog, Employers, Employment Law | 0 comments

The Wage and Hour Division of the U.S. Department of Labor (DOL) was busy this past summer.  In particular, it addressed the issue of the classification of workers as independent contractors via a formal interpretation memo.  The memo can be viewed in its entirety on the DOL’s website.

The DOL’s memo essentially expands the applicable criteria for determining whether a worker is an independent contractor or an employee entitled to the legal protections of the FLSA, including minimum wage, overtime compensation, unemployment compensation and workers’ compensation.   The memo states that employees often misclassify employees as independent contractors to cut costs and avoid complying with labor laws such as the FLSA.

The DOL’s memo clarifies that the “economic realities” of the relationship between the employer and the worker must be examined in order to properly classify the worker.  Under the economic realities test, the degree to which the employer controls the worker is just a single factor to be considered in the context of a broader inquiry into the economic relationship between the parties.  Other relevant factors include:

  • (a) the extent to which the work preformed is an integral part of the employer’s business,
  • (b) the worker’s opportunity for profit or loss depending on his or her managerial skill,
  • (c) the extent of the relative investments of the employer and the worker,
  • (d) whether the work performed requires special skills and initiative, and
  • (e) the permanency of the relationship.

The DOL emphasizes that no single factor is determinative.  Rather:

“[t]he factors should be considered in totality to determine whether a worker is economically dependent on the employer, and thus an employee.”

A worker who is in business for him or herself, and is thus economically independent from the employer, is an independent contractor.  Significantly, the DOL states that these factors should be “liberally construed” to provide broad coverage and protection for workers.  Moreover, how the employer decides to label the relationship is not relevant to determining the worker’s classification.

The DOL ultimately concludes that “most workers are employees under the FLSA’s broad definitions.”

If you have any questions about worker classification, contact my office.

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RadioShack Hit With $5.8 Million Unpaid Overtime Lawsuit On Behalf Of Pennsylvania Employees

Posted by on Aug 13, 2014 in Blog, Employers, Employment Law, Uncategorized | 0 comments


Fluctuating Workweek Method Doesn’t Cut It In PA


A judge from the United States District Court for the Eastern District of Pennsylvania recently issued a decision in Verderame v. RadioShack Corp., finding that the “fluctuating workweek” method of overtime compensation violates the Pennsylvania Minimum Wage Act (“PMWA“).


Q. What Is The Fluctuating Workweek Method?


Under this method, an employee receives a guaranteed fixed weekly salary for all straight-time earnings, regardless of the number of hours worked, and an additional one-half of the employee’s regular rate for all hours worked over forty in the workweek.

The employee’s regular rate may change from week to week, because it is based upon the employee’s actual hours worked.

The fluctuating workweek method is expressly permitted by the Fair Labor Standards Act’s regulations and used by employers to compensate non-exempt employees on a fixed salary basis while minimizing overtime costs.


Q. Why Does This Method of Determining Overtime Pay Not Hold Up In Pennsylvania?


“While this method of compensation may be lawful under the baseline federal regulation, the same cannot be said as it applies to the more employee-friendly Pennsylvania regulation,” said U.S. District Judge Mitchell Goldberg of the Eastern District of Pennsylvania.


Q. How Is The Fluctuating Workweek Method Different From How Overtime Pay Should Be Calculated In PA?


So, the judge explained, a worker making $600 per week who puts in 50 hours would be making $12 per hour. According to the fluctuating workweek method, he would be paid $12 per hour for the first 40 hours and then time-and-a-half, or $18, for the last 10 hours, which would give him a paycheck for $660.

However, the Pennsylvania Minimum Wage Act requires a different calculation, Judge Goldberg said. The state wage law requires employers to pay salaried workers at least one-and-a-half times their regular hourly rate for overtime work. Applying that calculation to the $600, 50-hour workweek example, Judge Goldberg explained that the employee would be paid at a rate of $12 per hour for 50 hours for a total of $600, then the hourly rate would be multiplied by one-and-a-half, or $18, which is to be paid as a premium for every hour worked beyond the first 40. The total would be $780.


Q. What Does This Mean For Employers?


The Verderame decision highlights the fact that the requirements of the FLSA and the PMWA are different and employers are not protected if they fail to comply with both laws.

The Verderame decision has increased the potential value of overtime misclassification cases, providing yet another reason for employers to conduct wage and hour audits and ensure that all employees are properly classified for overtime purposes. To learn more about wage and hour requirements, please contact the law office of Deborah Krull at 610-627-1010.


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Wage and Hour Compliance in 2014: What Smaller Employers Should Know, Part 2

Posted by on Mar 10, 2014 in Employees, Employers, Employment Law | 0 comments

Part 2 of Wage and Hour Compliance in 2014 addresses three final issues that small employers should understand and review:  compensation for non-exempt employees and the classification of exempt employees. Read Part 1 here


Part 2:  Compensation For Non-Exempt Employees and Classification of Exempt Employees


3.  Properly Calculating Overtime Compensation for Non-Exempt Employees

Most employers understand that non-exempt employees are entitled to overtime compensation at a rate equal to one and one-half times their regular rates for all time worked in excess of 40 in any work week. 

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