Jan. 20, 2016 – For a number of years, the U.S. Department of Labor (DOL) has discussed the classification of employees as independent contractors. Now, the DOL is determined to ensure that employees are not “misclassified.”

“It’s one of its initiatives, to make sure that employees and workers are properly classified, and not misclassified as independent contractors,” said Laurie Petersen, attorney at Lindner and Marsack S.C., a labor and employment law firm in Milwaukee.

Petersen spoke on employment law and the classification of workers at the State Bar of Wisconsin’s Health, Labor, and Employment Law Institute in August.

At the heart of the matter is the payment of overtime.

The DOL issued proposed regulations to raise the salary exemption for overtime-exempt individuals from $455 to a 2016 adjusted rate of $970 weekly. “The salary threshold has not been raised for a decade or more,” Petersen said.

Peterson says employers with overtime-exempt employees should prepare for any upcoming changes by reviewing the current salary levels of their exempt workers.

“Under the rules, the DOL will allow an employer to take credit up to 10 percent of the weekly salary for the payment of nondiscretionary bonuses and incentive pay,” Petersen said. “The important point there is that they have to be nondiscretionary payments.”

In addition, the DOL recently issued a memorandum to explain how it determines whether an employee is really an independent contractor under the Fair Labor Standards Act.

“The significance of the memorandum is not that it changes the law, but that it tells employers that one of the DOL’s initiatives is to make sure that employees and workers are properly classified and not misclassified as independent contractors,” Petersen said.

When employees are misclassified as an independent contractor, the employer does not contribute to unemployment compensation, and does not contribute to workers' compensation, and even if the employee is eligible, they do not receive overtime pay.

“So it’s important for the Department of Labor to make sure that employers are classifying employees appropriately,” Petersen said.