(US guest employment law blog post) There are many businesses that rely on cheap labor for “sales” jobs. It is not uncommon for employers to structure their employment contracts as a contract for an “independent contractor” in these type of “sales positions” . The distinction of drafting an employment contract as an “independent contractor”, as opposed to a w-2 wage earner position can vary from state to state although most states are starting to recognize facts and circumstances and judicial reasoning that treats these types of contracts in a certain manner. Most states have minimum wage laws and other protections for wage earners such as requirements to pay for overtime that are not afforded to “independent contractors”.
Employers need to be made aware that structuring a contract as an relationship between the employer and an “independent
contractor” may not be sufficient if the courts determine that the relationship is actually disguised as a relationship between employer and employee. There have been a plethora of cases brought against banks and mortgage companies that employed “loan officers” under the guise of the person being an “independent contractor” that has not withstood a slight scrutiny by the court.In several states, courts oftentimes find that a person may be an employee, notwithstanding a contract that says otherwise, if there are certain criteria that make the relationship seem like an employer-employee relationship. For example, if the so called “independent contractor” works at the behest of the employer, then this may be evidence of a wage earner. Other factors that courts look at are if the employee works in the physical office where the employer is doing business. Some courts will also look at whether an employer provides sales “leads” and “training” to the so called “independent contractor”. All of these factors may cause a court to determine that there is an employer/employee relationship, notwithstanding an “independent contractor” contract that says otherwise. The employer should keep accurate time records and absent accurate time records, the courts may allow an employee to make a good faith estimate of overtime hours if there is no proof the employee has that he was not compensated with overtime and minimum wage hours due.
Employers that try to circumvent labor laws by structuring employment contracts based on performance of an “independent contractor” may find themselves on the wrong side of the law and will incur treble damages. Telemarketing centers and other type of call centers for “sales” persons in all types of industries are open to scrutiny. Individuals that believe that they have been taken advantage by an employer that has not properly compensated an individual for “sales” work should seek free legal advice via a consultation with an attorney. Most labor lawyers will reviews these types of cases for free and it is not uncommon to have a class action in these types of matters.