Ain’t Misclassifyin’: Independent Contractor Designations Now Subject to Tougher Wage/Hour Analysis

Recent changes in Washington law have made it even more difficult for employers to establish that a worker is properly classified as an independent contractor.  If your workforce includes individuals classified as independent contractors, now is the time to take a fresh look at these workers and your company’s classification practices.

The New Test:  “Economic Dependence”

In the past, the independent contractor test focused on “control” – that is, whether and to what degree the business exercises control over the method and means of the individual’s work.  Not so anymore!  Like under federal law, the test in our state now focuses on “economic dependence.”[1]  Under this test, a worker will be presumed to be an employee if, as a matter of economic reality, the worker is dependent on the business to which he or she renders services.  Key considerations include:

  • Does the worker work solely or primarily for the business in question?
  • Is the worker restricted from competing with the business  in question?
  • Does the business control where the work is performed, who performs the work, and how it is performed?
  • Is the employee paid on an hourly or a salary basis, as opposed to on a project or other basis?
  • Is the worker required to work a set number of hours, or can he or she choose how much to work?
  • Does the business provide the equipment necessary for the employee to perform the work?
  • Is the worker “hired” for a continuous engagement, as opposed to a fixed period or specific job?
  • Does the worker’s contract automatically renew?
  • Does the worker provide services that are integral to the business, as opposed to only ancillary services?

A “yes” to one or more of these questions can tip the scale in favor of the presumption that the worker is an employee, not an independent contractor.

Best Practice Tip:

Do not assume that a worker is properly classified because the individual has an independent contractor agreement or has agreed that he or she is a “contractor.”  Employees cannot waive their right to be correctly classified under the law, and the cost of misclassification can be significant.  Consult with workforce management counsel to conduct an audit and ensure that your workers are correctly classified.

If you have any questions on this, or any other employment law issue, please contact our Employment team; we’re happy to help.

 [1] The Washington State Supreme Court threw out the “control test” in favor of the “economic dependence test” in July 2012, in the Anfinson v. FedEx Ground Package System Inc. case.  This decision brings Washington law in line with the test used by federal courts in misclassification cases under the Fair Labor Standards Act.