This spring, the US Department of Labor is expected to tighten the classifications of employees. Small businesses that have been using loopholes to designate their workers as “gig workers,” or workers who do temporary or freelance work, such as independent contractors who are engaged on an informal or on-demand basis rather than regular employees, could face stricter scrutiny.
The Fair Labor Standards Act requires overtime be paid to employees who work more than 40 hours each week. Despite this, some employees are exempt from receiving overtime pay, including administrative employees, computer employees, executives, outside sales personnel, and professional employees. On the other hand, businesses who employ maids, janitors, retail workers, restaurant workers, and limo drivers may be subject to stricter scrutiny requiring overtime pay.
In Illinois, the Illinois Department of Employment Security (IDES) is the agency that is tasked with enforcement of proper worker classifications. Specifically, IDES collects premiums for each regular employee so that workers are able collect unemployment benefits if they are laid off or fired.
Consequences
The consequences of misclassifying workers can be devastating. If one gig worker attempts to collect unemployment insurance and IDES asserts that they should have been classified as a regular employee, a business could be audited. If the audit confirms multiple violations, the business owners who made the decisions can face individual liability on top of severe fines and penalties.
These fines and penalties for misclassification can be significant. For example, failing to pay someone $20,000 in overtime over three years can wind up costing a business $250,000 by the time the back wages, fines, penalties, and attorney’s fees are paid. As a result, employers need to be cautious of their classification of employees.
Preventive Measures
To ensure that businesses do not face these fines, penalties, and liabilities, businesses should obtain a solid legal opinion before making classifications. The qualified attorneys at Rock Fusco & Connelly, LLC are here to assist employers to ensure proper classifications are made.