Misclassification Costs Will Mount For Unprepared Employers

The federal Fair Labor Standards Act ("FLSA") and its state law counterparts' minimum wage and overtime requirements do not apply to employers with respect to "independent contractors" or "1099 workers;" that is, those workers who provide services to an employer under a contract but are not "employed" by the employer. This can incentivize employers to misclassify employees as independent contractors because of the up-front cost savings.

However, federal and state governments have ramped-up enforcement and systematized information sharing between the federal and state levels and among states. Moreover, the various labor and employment agencies, including those charged with collecting payroll and unemployment taxes, providing workers' compensation, and enforcing wage and hour compliance, have prioritized the investigation of misclassification complaints and are imposing heavy penalties on violators. Finally, wage and hour misclassification, whether as 1099 workers