Employees and contractors do same work? Be prepared to justify classifications

Here’s a warning for employers that have regular employees and independent contractors who perform the same kind of work: If you pay the employees overtime when they work more than 40 hours in a workweek while contractors only receive straight time, you may end up facing a Fair Labor Standards Act class-action lawsuit.

Make absolutely certain that contractors actually meet the requirements for independence and aren’t just labeled differently than employees doing the same job.

Recent case: A company that supplied litigation support for law firms had employees who scanned documents. It paid them an hourly rate plus time-and-a-half for hours in excess of 40 per week. It also used independent contractors to scan documents, but paid them straight time for all hours worked.

Some of the independent contractors sued, alleging that since they did the same work under the same circumstances, they should not have been classified as independent contractors and should also have been paid overtime. They requested certification to file a class-action suit.

The court granted their request based largely on the premise that the employer had a policy that made everyone who worked in scanning on a periodic basis an independent contractor rather than an employee. The workers did the same job, though.

The court said the employer could later present evidence that the workers were true independent contractors. However, at the early stages, the workers were entitled to class certification. (Vaughn v. Document Group, SD TX, 2017)