Employee Or Freelancer? Govt. Issues Opinion

WASHINGTON DC (AP) – Employee or freelancer? It may become harder for businesses to classify workers as freelancers rather than employees following a Labor Department opinion issued last month.

         The opinion written by David Weil, administrator of the department's Wage and Hour Division, broadened the definition of what an employee is, and concluded that most workers are employees under the Fair Labor Standards Act. Workers cannot be classified as freelancers, or independent contractors, unless the circumstances of a job show they're economically independent of an employer, Weil said.

         Unless circumstances show workers are truly in business for themselves, they're employees, he said.

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         Previously, the Labor Department, the IRS and courts have focused on who has control over a worker — whether the work takes place on the employer's premises, the hours the worker spends on the job, who supplies tools the worker uses. Weil's opinion said control shouldn't be over-emphasized in analyzing the circumstances of a job. Factors like permanence of a job and whether a worker also is employed by others must also be considered, he said.

         A worker's classification matters for several reasons. If the worker is an employee, a business must comply with federal and state laws regulating pay and hours. It also must pay Social Security and Medicare taxes. Weil's opinion indicates that the government is becoming increasingly aggressive about enforcing those laws, said Ted Boehm, a labor law attorney with Fisher & Phillips in Atlanta.

         Boehm cautioned that Weil's opinion doesn't have the force of law. But the government is hoping courts will rely on the opinion in deciding lawsuits brought by workers who contend they've been misclassified as freelancers.

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         "I think a good number of courts would consider it persuasive," Boehm said.

         Many businesses particularly small and medium-size companies, have used freelancers rather than hire employees since the recession. Some owners haven't wanted to take on new employees when they were unsure about the health of their companies, or didn't feel they had enough work to justify a hire. Others have said they find it easier, and cheaper, to use freelancers rather than employees.


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         A majority of small business owners support gradually raising the federal minimum wage to $12 an hour from the current $7.25, according to a survey by the advocacy group Small Business Majority.

         Sixty percent of the nearly 800 owners surveyed said they're in favor of a higher minimum. Fifty-eight percent of owners who pay $12 an hour and under said they support a higher minimum, which would raise their labor costs.

         The survey was taken as more states and cities consider raising their minimum wages. President Barack Obama has called on Congress to raise the federal minimum, which has been at $7.25 since 2009.

         The survey was conducted last month.

         – by AP Reporter Joyce M. Rosenberg




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