Protected under FLSA?

The Fair Labor Standards Act establishes minimum wage, overtime pay, recordkeeping and youth-employment standards – although states and municipalities may have laws that impose higher standards. It was enacted to protect private-sector workers as well as federal, state and local government employees. But exactly who’s entitled to protection under the law is often difficult for employers to determine.

Nonexempt employees are protected by the FLSA, while independent contractors are not. But correctly classifying workers can be challenging. Several factors impact whether an independent contractor is “independent” – none of which is controlling – including:

n The extent to which the services the individual provides are an integral part of the company’s business.

n How permanent the relationship has been.

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n The amount the individual has invested in facilities and equipment.

n The individual’s opportunities for profit or loss.

n The degree of independent business organization and operation by the individual.

The courts have determined that the employer-employee relationship is not dependent on just one of these factors but on the circumstances of the whole activity. A good illustration of how these various considerations impact the classification is a company that has drivers who are employee chauffeurs as well as some contract chauffeurs who are independent contractors. In this example, both are called “executive chauffeurs” and for both, the company insures the cars, requires a dress code, provides credit cards and pagers and reimburses drivers for tolls, parking and car washes. However, there are key differences between these workers:

The contract chauffeurs have their own workers’ comp, unemployment and nonowner’s liability insurance.

The employee chauffeurs receive overtime, a uniform allowance and are eligible for employer-provided retirement and health benefits.

In a challenge by contract chauffeurs claiming an employment relationship, the courts will look at a number of factors, such as whether the chauffeur has his or her own vehicle, works when he or she chooses, the amount of control the company maintains over the chauffeur, such as a dress code, and more.

Those employees classified as exempt are not subject to the FLSA’s minimum wage and overtime pay requirements. And there are specific exceptions outlined in the law to determine just who is exempt, including:

White-collar employees who meet the “duties” and “salary” tests. The duties test evaluates an employee’s actual job duties, not their title or job description, such as whether they serve in an executive role or are learned professionals, such as doctors and lawyers. The salary test simply considers whether an employee is paid a salary of at least $455 per week (which may rise to $970 per week once the proposed updates to the regulations are finalized) regardless of the hours worked.

Employees in positions that are exempt from the minimum wage and overtime rules include:

n White-collar employees.

n Outside salespersons.

n Amusement or recreational employees.

n Fishing-industry employees.

n Agricultural employees.

n Switchboard operators of independently owned public telephone companies.

n Casual babysitters or companions to ill or aged persons.

Under the FLSA, employers must maintain complete documentation on employee status, wages and hours, or face fines and possible lawsuits. •

Karyn Rhodes is director of human resource consulting at the Hilb Group in Warwick.

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