Technology companies, such as Uber and Lyft, tout the benefits of the “gig economy,” in which workers are designated as independent contractors, not employees. The problem is, independent-contractor status often does not benefit workers.
Being an independent contractor is, theoretically, beneficial because workers are their own boss, working whenever and as much as they want. However, the companies are typically the real beneficiaries of the independent contractor designation. This is because independent contractors are typically exempt from the protections of the Fair Labor Standards Act (“FLSA”), the federal statute that governs the payment of wages, such as a minimum wage or overtime pay. Accordingly, companies can entice workers to work long hours, for low pay, and without overtime.
Because of the lower associated costs, companies often misclassify employees as independent contractors. The problem is so rampant that the United States Department of Labor (DOL), the federal agency that enforces the Fair Labor Standards Act, is actively working with the IRS to combat employee misclassification.Read More