Total Articles: 3
Corp Officers May Face the “Economic Reality" of Individual Liability for Misclassifying Workers
In recent years, the U.S. Department of Labor has
increasingly prosecuted businesses for
misclassifying their workers under the Fair Labor
Standards Act (FLSA), a trend that is likely to
continue and possibly expand as the federal
government maximizes its efforts to increase tax
revenues in the current economic climate. In a
recent decision out of the Northern District of Illinois,
Solis v. International Detective & Protective Service,
Ltd. (N.D. Ill. May 24, 2011), the court made clear
that damage awards for FLSA violations are not
limited to businesses, but that corporate offi cers
can also be held individually liable for misclassifying
members of their workforce.
WHO IS AN “EMPLOYER” FOR WAGE-HOUR PURPOSES?
Who is an employer? Despite the seeming simplicity of the question, courts have struggled with the concept in various contexts. For example, courts have defined the term for purposes of establishing the responsibility to provide leave under the Family and Medical Leave Act (FMLA), to prohibit workplace discrimination, and most recently in Martinez v. Combs, to comply with wage and hour laws.
Worker Reclassification: Potentially Dire Consequences When Converting to Employee Status.
In prior Alerts, we have addressed both the IRS' employment tax audit initiative that is currently underway and the worker classification issues that will play a key role in those audits. Because any company having service providers (regardless of size or industry) is an audit candidate, every such company should consider conducting a self-examination regarding worker classification. If classification issues are identified in the self-examination, the company should consider taking certain steps, possibly including either a reclassification of the individual or a change in the facts and circumstances under which such individual provides services to the company.
