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Employee or independent contractor? Control is key issue

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in Compensation and Benefits,Human Resources

Employees are entitled to minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Independent contractors are not. That difference can save companies hundreds of thousands of dollars on their labor budgets—but only if they really are using independent contractors.

But if those “independent contractors” are actually employees, they can sue for unpaid wages and overtime. And they’ll sue as a group, potentially exposing the employer to huge back-pay awards.

The problem is that you may not know until it’s too late whether the people working for you are independent contractors or employees. To get it right, you must measure the degree of control you have over how their work is performed. As you can see in the following case, no single factor controls the determination.

Recent case: Brian Sakacsi sued Quicksilver Delivery Systems for unpaid overtime on behalf of himself and other pharmacy delivery drivers. The drivers picked up prescription drugs at headquarters and delivered them to hospitals and nursing homes over established routes.

Quicksilver said Sakacsi and the other drivers were independent contractors, and pointed out that each had signed an independent contractor agreement, provided his or her own car, paid all expenses associated with the vehicle and were free to reject driver assignments.

Sakacsi pointed out that Quicksilver provided training, told drivers exactly how to do their jobs and made them wear Quicksilver uniforms and badges.

The court ordered a trial, concluding that Quicksilver hadn’t proven the drivers were clearly independent contractors. It said the drivers had very little control over the deliveries, limited means to control their expenses and didn’t accept work from competitors. (Sakacsi, et al., v. Quicksilver Delivery Systems, No. 06-CV-1297, MD FL, 2007)

Final note: Always consult an attorney before classifying someone as an independent contractor.

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