Dive Brief:
- Christian Home Healthcare Corp. and its owner have agreed to pay $1.6 million, equally divided into back wages and liquidated damages, to 546 home health aides to settle allegations that it improperly classified workers as independent contractors.
- The misclassification by the Pittsburgh-based home health care agency violated the Fair Labor Standards Act (FLSA), according to a statement from the U.S. Department of Labor. The federal agency said the company failed to pay the workers overtime and continued to pay some aides straight-time rates for overtime hours even after it classified them as employees and failed to keep a record of the number of hours worked by office staff.
- Because the company's actions were viewed as "willful," it also was ordered to pay $20,000 in civil penalties.
Dive Insight:
Employers may need to stay on top of the applicable laws concerning independent contractor status, including recent changes on both the state and federal levels.
DOL published a rule revising its interpretation of independent contractor status under the Fair Labor Standards Act during the final days of the Trump Administration. The employer-friendly rule used an "economic reality" test that examined the nature and degree of workers' control over their work and the opportunity for profit or loss based on investment, initiative, or both.
The Biden administration, however, delayed the rule's effective date to May 7, 2021, to give the agency a chance "to review any questions of fact, law, and policy that the rules may raise."
In general, there are a number of different tests used by government agencies and courts to determine whether a worker is an employee or an independent contractor. The common factor in many of the tests is that they revolve around control — the more control the employer exercises over the worker, the harder it will be to make a successful argument that the worker is an independent contractor.
A factor that rarely helps determine a worker's status is the preference of the employer or the worker. Employer and worker preference does not affect the worker classification even if both agree that the worker is an independent contractor. Two cases illustrate this point. In one instance, an appeals court decided that the actual amount of control 7-Eleven exerted over its franchisees carried more weight than a signed agreement specifying that workers were independent contractors. In another, an Alabama federal court ruled that a delivery driver was an employee even though he had signed a form stating he was an independent contractor.