{"id":1717,"date":"2018-03-06T18:15:57","date_gmt":"2018-03-06T18:15:57","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/az-labor-employment-law\/?page_id=1717"},"modified":"2023-05-24T17:17:25","modified_gmt":"2023-05-24T17:17:25","slug":"do-independent-contractors-get-overtime","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/az-labor-employment-law\/blog\/do-independent-contractors-get-overtime\/","title":{"rendered":"Do Independent Contractors Get Overtime?"},"content":{"rendered":"
While there is a lot of gray area regarding the difference between employees<\/a> and independent contractors<\/a>, the law is quite clear in this regard\u2014independent contractors are not entitled to overtime pay<\/a>. In fact, employers aren\u2019t required to pay wages or provide benefits to an independent contractor because they aren\u2019t a W-2 employee on payroll. Where the gray area comes into play is with the distinction between an independent contractor and an employee. Unfortunately, it\u2019s not uncommon to see employers deliberately misclassify employees as independent contractors to save money in wages and benefits.<\/p>\n The Fair Labor Standards Act (FLSA<\/a>) was passed in 1938 to put a floor under wages and a ceiling over work hours. This is the federal law that establishes the minimum wage, requires time-and-a-half pay for overtime wages, and imposes recordkeeping requirements that hold employers accountable for tracking their employees\u2019 wages and time worked. In contrast to many other federal employment laws that only apply to employers with 15 or more employees, the FLSA covers any business that engages in inter-state commerce. That includes any business that deals with customers or prospective customers in multiple states, or that order product or materials from out-of-state.<\/p>\n The important thing to remember with the FLSA is that it only applies to employees, not independent contractors. According to the FLSA, an employee is one who follows the \u201cusual path of an employee and is dependent on the business which he or she serves\u201d (WHD Fact Sheet 13<\/a>). In contrast, an independent contractor is someone who is engaged in their own business and works with the employer on a contractual basis. As such, the employer-employee relationship applicable under the FLSA is defined by \u201ceconomic reality,\u201d not by any technical concepts or common law standards.<\/p>\n There are a number of problems that can arise from the ambiguity of the employee-employer relationship under the FLSA:<\/p>\n As is often the case with ambiguous legislation, the courts have had to step in and provide direction on the matter. While the US Supreme Court has indicated that there isn\u2019t a single rule or test for distinguishing between independent contractors and employees, the court has held that the total activity and\/or situation controls the distinction. In that regard, some of the important factors that can influence the distinction include:<\/p>\n The courts have also determined that there are certain factors which are immaterial in defining the employer-employee relationship. Such factors include whether the individual is a licensed contractor, the absence of a formal employment agreement, where the individual performs their work, the mode of payment, and the timing of payment.<\/p>\n The IRS test is usually referred to as the \u201cright-to-control\u201d test because each question is designed to assess who controls the work performed. Generally speaking, independent contractors will have more control over how, where, when, and by whom the work is performed. That said, an individual doesn\u2019t need to satisfy all 20 questions to qualify as an employee. Every case is different and will need to be analyzed on a case-by-case basis.<\/p>\n The 20 factors proposed by the IRS to evaluate independent contractors versus employees include:<\/p>\n The state of Arizona is a great place to live and work, but knowing the employment laws will help you a lot. Whether you are a newcomer to the state or a lifelong resident, understanding your workplace protections is good for your career, and the more you know, the better.<\/p>\n Employment law issues can cause extreme distress and can affect productivity on the job. If you are being harassed at work, or dealing with any other employment issue, consider talking to our AZ employment law<\/a> team to help you settle your case.<\/p>\nThe basis of federal wage law\u2014the Fair Labor Standards Act<\/h2>\n
Common problems with the FLSA<\/h2>\n
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The economic reality test<\/h2>\n
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The IRS 20-factor test<\/h2>\n
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Need Help With An Employment Law Issue?<\/h3>\n