Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors‏

The Wage and Hour Division (WHD) of the U.S. Department of Labor has today issued Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors.

The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers, employers, and the entire economy.

Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as minimum wage, overtime compensation, family and medical leave, unemployment insurance, and safe workplaces. Employee misclassification generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds. It hurts taxpayers and undermines the economy.

WHD supports the use of legitimate independent contractors, who play an important role in our economy, but when employers deliberately misclassify employees in an attempt to cut costs, everyone loses.

As misclassification has spread, providing workers and employers a clear understanding of what makes a worker an employee becomes even more important. Administrator's Interpretation 2015-1 analyzes how the Fair Labor Standards Act’s definition of “employ” guides the determination of whether workers are employees or independent contractors under the law. It discusses the breadth of the FLSA's definition of "employ," as well as provides guidance on the "economic realities" factors applied by courts in determining if a worker is indeed an employee. 

WHD wants to give employers all the information they need to comply with the law, and we believe that this document, with its discussion of the relevant law and inclusion of numerous examples, will be helpful to both employers and employees. Additional guidance on misclassification is available on the WHD’s webpage: Misclassification of Employees as Independent Contractors. Please also see our blog post: Employee or Independent Contractor? 

Our goal is always to strive toward workplaces with decreased misclassification, increased compliance, and more workers securing a fair day’s pay for a fair day’s work.