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Are your not-for-profit\u2019s staffers employees or independent contractors? It\u2019s an important question because under the Fair Labor Standards Act (FLSA), misclassifying workers can lead to penalties and other costs. If you haven\u2019t reviewed your staffers\u2019 status since the start of the pandemic, now may be a good time \u2014 particularly if you\u2019ve recently experienced staff turnover and have started relying more on temporary workers.<\/p>\n
Supreme Court factors<\/strong><\/p>\n The FLSA doesn\u2019t define the term \u201cindependent contractor.\u201d Courts, however, generally have focused on several factors related to the \u201ceconomic reality\u201d of relationships between employers and workers. In general, the Department of Labor (DOL) leans on U.S. Supreme Court rulings for guidance.<\/p>\n The Court has repeatedly stated that no single rule or test applies to determine employment status under the FLSA. It has held that the time or mode of pay isn\u2019t determinative. Rather, the totality of circumstances determines a worker\u2019s status, including\u00a0the:<\/p>\n The DOL has identified other factors it deems relevant. These include where the work is performed (remotely or on-site) and the absence of a formal written employment contract (or the existence of an \u201cindependent contractor agreement\u201d).<\/p>\n Keep in mind that some states have even more restrictive tests. Moreover, the fact that workers qualify as independent contractors under another federal law doesn\u2019t guarantee they qualify under the FLSA. The IRS, for example, applies a different\u00a0test.<\/p>\n Potential consequences<\/strong><\/p>\n Under the FLSA, you generally must pay covered, nonexempt employees at least the federal minimum wage of $7.25 an hour. When an employee\u2019s hours within a workweek exceed 40, you must pay at least 1\u00bd times the employee\u2019s regular pay rate. Also, you typically need to withhold federal, Social Security and other tax from employee paychecks.<\/p>\n If your organization doesn\u2019t properly determine worker status, it can prove costly. In addition to having to make up the unpaid wages and employment taxes for individuals reclassified as employees, you could end up on the hook for workers\u2019 compensation premiums, unpaid leave and other benefits. Fines and penalties are possible, as\u00a0well.<\/p>\n Changing tests<\/strong><\/p>\n Presidential administrations have gone back and forth on how easy or hard it should be to classify workers as contractors vs. employees. President Biden just recently proposed tests that would make it easier for workers to be classified as employees. So it\u2019s important to keep an eye out for developments.<\/p>\n If you have questions about complying with the FLSA and other applicable standards, contact\u00a0us.<\/p>\n \u00a9 2022<\/em><\/p>\n <\/body> Are your not-for-profit\u2019s staffers employees or independent contractors? It\u2019s an important question because under the Fair Labor Standards Act (FLSA), misclassifying workers can lead to penalties and other costs. If you haven\u2019t reviewed your staffers\u2019 status since the start of the pandemic, now may be a good time \u2014 particularly if you\u2019ve recently experienced staff […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,10,4],"tags":[8,11,12],"class_list":["post-16383","post","type-post","status-publish","format-standard","hentry","category-articles","category-news","category-nonprofit","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16383"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16383\/revisions"}],"predecessor-version":[{"id":16384,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16383\/revisions\/16384"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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