Worker Classification

Worker Classification

Course Length: 35 minutes

This course explains what managers and HR personnel need to know about correctly classifying workers under federal and state laws. It details the differences between (1) "independent contractors" and "employees" and (2) "exempt" and "non-exempt" employees, as well as the hazards that worker misclassification pose to organizations.

In tough economic times, governments look for ways to secure additional tax revenue. The U.S. Government Accountability Office (GAO) recently found that the federal government stands to lose $7 billion in payroll-tax revenue over the next decade because employees are often misclassified as Independent Contractors (ICs). As a result, both federal and state tax- and labor-enforcement agencies are ramping up efforts to audit businesses to recapture tax dollars from employers who misclassify employees. Meanwhile, wage-and-hour lawsuits are becoming one of the fastest-growing areas of class-action litigation. These disputes often involve accusations that "non-exempt" employees have been misclassified as "exempt," which can mean claims for two or three years' worth of back-pay and benefits for large groups of employees. Worker-classification audits and lawsuits have led to some staggering costs for employers. In 2009, the ten biggest private wage-and-hour settlements totaled almost $364 million, a 44% increase from the year before. Wise employers are training their managers on worker-classification issues to avoid contributing to these grim statistics. This 35-minute course explains the differences between employees and ICs and between exempt and non-exempt employees in simple, understandable terms. It includes pop quizzes, news clippings and a final quiz highlighting real-world worker-classification issues, so that managers can help their organizations avoid the hazards of misclassification.

The topics covered in this course include:

• Distinguishing employees from ICs
• Distinguishing exempt employees from non-exempt employees
• Consequences of misclassification
• Federal and state tests for worker classification
• Characteristics of ICs
• Independence and autonomy
• Nature of IC services
• Established businesses
• Categories of exempt employees

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