Department of Labor Clarifies Fair Labor Standards Act

August 31, 2015
New federal guidelines could seriously shake up the new economy that classifies many workers as outside contractors exempt from US labor laws. The Department of Labor has issued new guidelines suggesting that most workers are actually employees and may be due back pay and overtime. The case in point is Uber, who is the nation’s biggest car service that doesn’t actually own a single car. Employment and Labor attorney James Boyan spoke with NJTV News Anchor Mary Alice Williams about how the new guidelines affects businesses and those working for them.

The Department of Labor’s new guidelines aim to formalize some of the guidance that’s been out there in one central place, according to Boyan. “This actual standard has been around for a long time, but courts have interpreted it differently,” he said. “The law has been on the books since 1938. Its been around for a long time, and the definition of employee in that law has remained the same throughout that whole period of time. However, our courts have kind of interpreted it in different ways and this is meant to clarify specifically how the Department of Labor will interpret that standard.”

The guidelines say that most workers are employees under the Fair Labor Standards Act. Boyan says it doesn’t just affect companies like Uber, it’s across the board in “basically any employment situation in the United States.”

“The way the law is set up is that workers are automatically deemed to be eligible for overtime unless one of the exceptions to that law apply,” he said. “There are certain exceptions based on the type of work that you’re doing. There’s also an exemption in effect if you’re not an employee, if you’re classified as an independent contractor and things. The term independent contractor is thrown around a lot in employment situations, but it has a very specific meaning in the context of the Fair Labor Standards Act. This is the broadest possible interpretation of who is an employee, and that’s what the DOL said when they said most workers are employees.”

Boyan says the DOL is clarifying how they interpret the elements of what constitutes employment versus independent contractor status under the FLSA and how it differs from other tests. “The IRS has a different test for whether someone is an independent contractor and unemployment laws has a different test that applies.”

The factors that determine the distinction between employee and independent contractor center around the idea of the economic relationship between the worker and the employer. If the worker is economically dependent on the employer, then in most cases that person would be deemed an employee, according to Boyan.

He says the guidelines could possibly encourage more lawsuits. People who thought they were independent contractors may realize they have rights as employees under this law. He says those people should seek out a professional with experience in this area. “It could be an HR professional at the company if you have questions about your employment status, or an employment lawyer would be someone also who could provide more information.”