We’ve posted before on a burgeoning issue of employment law — so-called independent contractor litigation. In essence, the cases claim that in some circumstances workers are treated by their employers as independent contractors are in fact employees of the company. The issue is not just a matter of definition, but has important consequences in the real world of business. Employees are entitled, for instance, to the overtime protections of the Fair Labor Standards Act and similar state laws. Independent contractors are not.
There is an obvious business reason for employers to want to classify as workers as contractors: it’s cheaper and allows them to control their costs. But it’s not a low-risk strategy, as employers invite the scrutiny not only of the affected workers, but also of the IRS.
Here’s a story from Lawyers USA involving such a claim against Federal Express. We won’t take your time with the facts. They’re well-explained in the story. The important thing is that this kind of story is increasingly common, reminding employers — all employers, large and small — that they need to make their classification decisions carefully. Failure to do so invites trouble.