The 2012 Department of Labor budget includes a new multi-agency Misclassification Initiative that will strengthen and coordinate Federal and State efforts to enforce labor violations that result from the misclassification of employees as “independent contractors” and to deter such violations in the future.
In FY 2012, the Department of Labor will redouble its efforts to combat worker misclassification by investing $46 million for a multi-agency initiative of OFFCP, the Wage and Hour Division, OSHA, the Office of the Solicitor, and the Employment and Training Administration, which will fund state grants that address worker misclassification within the context of the unemployment insurance program. This initiative will help level the playing field for employers who abide by the law and provide employees with their rightful pay and benefits
For WHD, the request of $15,223,000 and 107 FTE will support field investigator training activities and an additional 3,250 investigations. These investigations will be directed to industries that have higher rates of violations, such as construction, child care, home health care, grocery stores, janitorial, business services, poultry and meat processing, and landscaping.
Classification of Independent Contractors is far from “cut and dry”. The Supreme Court has said that there is no definition that solves all problems relating to the employer-employee relationship under the Fair Labor Standards Act (FLSA). The Court has also said that determination of the relation cannot be based on isolated factors or upon a single characteristic, but depends upon the circumstances of the whole activity. The goal of the analysis is to determine the underlying economic reality of the situation and whether the individual is economically dependent on the supposed employer. In general, an employee, as distinguished from an independent contractor who is engaged in a business of his own, is one who "follows the usual path of an employee" and is dependent on the business that he serves.
Further guidance on making Independent Contractor determinations may be found at the following websites:
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