Consumer Fraud

Will the great recession mean more FLSA lawsuits?

An attorney representing a healthcare worker who is suing his employer for denied overtime says that lawsuits filed under the Fair Labor Standards Act may become more common during the economic recession. The plaintiff alleges that his employer, Delta-T Group and Delta-T Group Social Service Staffing, Inc. denied him overtime compensation by wrongly classifying him as an independent contractor. Because he is not appropriately classified as an employee of the company, the plaintiff cannot receive the same benefits that regular employees of the company received.

“As corporate budgets continue to tighten, more employers are looking to classify workers as independent contractors in an effort to reduce costs, such as overtime compensation, employee benefits, payroll taxes, unemployment compensation, and workers compensation,” the plaintiff’s attorney said. “The law is clear, however, that many of these workers do not qualify as independent contractors.”

A number of cases involving disputes over independent contractor classification have made it to the U.S. Supreme Court. The court has maintained there is no single test to determine the proper classification of a worker as an employee or independent contractor under FLSA regulations. “The total activity or situation” must be considered.

To determine the legal classification of a worker as an employee or independent contractor, the following factors must be considered:

  • The extent to which the services rendered are an integral part of the principal’s business
  • The permanency of the relationship
  • The amount of the alleged contractor’s investment in facilities and equipment
  • The nature and degree of control by the principal
  • The alleged contractor’s opportunities for profit and loss
  • The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor
  • The degree of independent business organization and operation

A bill called the “Independent Contractor Proper Classification Act of 2007” was proposed to Congress but never became law.