Revised Independent Contractor Rule Likely to Help Workers Earn Overtime and the Minimum Wage

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The lawyers at Frankel Syverson PLLC have represented numerous workers challenging their status as independent contractors.  This is important because unlike employees, workers classified as independent contractors are not entitled to overtime and the minimum wage.  However, many workers are improperly classified as independent contractors and should be getting paid overtime and the minimum wage like employees.

The Department of Labor recently revised its rule regarding whether a worker is an employee or independent contractor for purposes of paying overtime and the minimum wage under the Fair Labor Standards Act (FLSA).  This new rule went into effect March 11, 2024. The rule reinstates the “economic realities” test for determining whether a worker is an employee or independent contractor, and the worker will be considered an employee when they are economically dependent on the business they provided services for.

The rule examines whether a worker is economically dependent on the business they provide work for by examining six factors:

1. Opportunity for profit or loss depending on the worker’s managerial skill;

2. Investments by the worker and the potential employer;

3. The degree of permanence of the work relationship;

4. The nature and degree of the worker’s control over the work;

5. The extent to which the work performed is integral to the potential employer’s business; and

6. Whether the work performed requires special skills or initiative.

A worker who receives a 1099 is not necessarily an independent contractor and agreeing verbally or in writing to be classified as an independent contractor—including by signing an independent contractor agreement—does not make a worker an independent contractor for purposes of overtime and the minimum wage.

Importantly, independent contractor status is even harder for a business to prove under Arizona law, when analyzing the issue for purposes of paying workers the minimum wage.  While Arizona law will follow the factors applied under the FLSA test, it places the burden on the business to prove by clear and convincing evidence that the worker is an independent contractor and not an employee.

The lawyers at Frankel Syverson PLLC have helped workers bring claims to recover unpaid overtime and minimum wage alleging they have been misclassified as independent contractors, even when they had signed independent contractor agreements, set up S-Corporations or other business arrangements, and have been issued 1099s.  These workers include individuals hired to perform tasks like driving or distributing a company’s goods, and such workers should get paid minimum wage and overtime if their work was dependent on the business they provided services for.

If you are classified as an independent contractor, that classification could be wrong.  Contact our lawyers today to discuss whether you should be provided wage protections that employees receive, like overtime and the minimum wage.