Uber traces data hack perpetrator back to rival Lyft CTO Chris Lambert. (Photo : Reuters)
New guidelines based on the Fair Labor and Standards Act have been released via a memo by the United States Department of Labor, which will help the courts and employers understand how and when a worker can be classified as an employee or independent contractor.
The creation of new kinds of businesses such as Uber Technologies Inc has created a heated debate on the classification of workers as changes in the economy are creating a trend where traditional hiring practices are being exchanged by companies in favor of using contract workers.
The 15-page memo released by the Labor Department's Wage and Hour Division looks to explain that the definition of an employee should be far more comprehensive than what some employers think. Current regulations have not been changed; instead, the guidelines are designed to aid in the better understanding of the current laws in place.
Included in the guidelines are real world examples that differentiate the circumstances that make a worker classifiable as either an employee or a contractor.
An increase in worker misclassification in many industries is causing the US government to lose potential tax revenues and is creating an unfair advantage to some businesses according to Wage and Hour Administrator, David Weil.
Recent high profile cases have shone the spotlight on the subject of employee misclassification. One such case was story of the nearly 500 Kansas drivers who won their class action lawsuit against FedEx according to Forbes.
"Although independent contracting relationships can be advantageous for workers and businesses, some employees may be intentionally misclassified as a means to cut costs and avoid compliance with labor laws," Weil added.
