By Employee Benefit Research Group
The Department of Labor’s (DOL) Wage and Hour Division recently issued guidance on the classification of workers as employees or independent contractors under the Fair Labor Standards Act (FLSA) that may have implications for employer-sponsored benefit programs (in addition to an employer’s compensation and related policies and practices). Administrator’s Interpretation No. 2015-1 focuses on the FLSA’s pertinent definitions and considers the “economic realities” factors that various courts (including the U.S. Supreme Court) have applied to determine whether a worker is economically dependent on the employer (and thus an employee) or in business for himself or herself (and thus an independent contractor).
In general, the DOL concludes that “most workers” are employees under the broad definitions of the FLSA.
Employers should review the DOL’s new guidance for the effects it could have on their retirement, health, and other benefit programs (separate from but in addition to the worker classification issue), particularly in light of the DOL’s heightened enforcement and investigation activities, or as individuals file suits to claim rights to pay and benefits as employees. Misclassification of workers could raise numerous concerns, such as retirement or health plan coverage, contributions to those programs, or nondiscrimination testing issues, along with employer liability for retroactive pay and taxes as well as other penalties.
For additional information about the DOL’s guidance, please contact your Milliman consultant.