Making the employee-or-independent-contractor decision should always be a well-researched and documented choice. One main reason: While most lawsuits claiming misclassification of independent contractors are brought against corporate entities, many federal and state laws also allow workers to sue company execs directly for personality liability in such cases.

In fact, the Fair Labor Standards Act allows plaintiffs to sue any company decision-makers who play a role in the organization’s improper designation of a group of workers as independent contractors. That could even include HR professionals.

Recent case: A call center company in Las Vegas decided to classify 1,300 workers as independent contractors. It required them to sign agreements that set their contractor status, waived their FLSA rights and paid them only when they made sales, causing some workers to receive little pay for long hours.

The U.S. Department of Labor sued. A federal court came down hard on the company and its two owners for willfully misclassifying these people as independent contractors. It said the owners were personally liable for the FLSA violations, and they were ordered to repay $728,000 in damages.

Final tip: Cite this case as a message to execs who want to classify workers without doing the research.

Source: HR Employment Law December 2021