The Epidemic Of Employer Misclassification Of Employees As Independent Contractors Under The Fair Labor Standards Act, And The Courts’ Response

Justin M. Swartz, and Mariko Hirose, and contributions by Piper Hoffman, 2009

The Fair Labor Standards Act (FLSA)’s compensation requirements, such as minimum wages and overtime pay, apply only to “employees.” Chao v. Mid-Atl. Installation Servs., Inc., 16 F. App’x 104, 105 (4th Cir. 2001). Employers can get around these requirements and lower their tax bills at the same time by classifying workers as “independent contractors” instead of “employees.” Employers classify as independent contractors many workers who do not meet the legal definition: the Department of Labor estimates that up to 30% of U.S. employers misclassify workers. Courts have found rampant violations across certain industries.