Exempt Employee, Independent Contractor Definitions

Posted on: October 12, 2015 3:00 pm
Tags: May/june newsletter

- taken from MedBen e-briefs

Recently, the Department of Labor updated its position on a couple of topics relating to the Fair Labor Standards Act (FLSA).

Definition of Exempt Employee

New rules propose a revision to the minimum wage and overtime exemption rules. Currently, an employees is considered “exempt” if the employee meets certain minimum criteria pertaining to primary job duties and is paid an annual salary of at least $23,660. The new rules propose raising the salary requirement to $50,400 beginning in 2016. Any employee making less than that amount will not be considered exempt and may be eligible for overtime pay and other benefits. The proposed rule also discusses the current duties test and solicits suggestions for additional occupation examples.

Definition of Independent Contractor

Until recently, the Department of Labor used a set of 20 “tests and triggers” as its criteria for determining whether an individual was the employer’s employee or an independent contractor. That list has been replaced with a new set of criteria aimed at assisting employers solving definitional problems related to the employee-employer relationship under the FSLA.

In general, an employee, as distinguished from an independent contractor who is engaged in a business of his own, is one who “follows the usual path of an employee” and is “dependent on the business he serves.” The revised guidance may prove helpful, particularly as each Applicable Large Employer attempts to determine which individuals he must deem an employee for ACA purposes.

The revised factors are:

1. The extent to which the worker’s services are an integral part of the employer’s business;

2. The permanency of the relationship;

3. The amount of the worker’s investment in facilities and equipment;

4. The nature and degree of control by the principal;

5. The worker’s opportunities for profit and loss, and;

6. The level of skill required in performing the job and the amount of initiative, judgment or foresight in open market competition with others required for the success of the claimed independent enterprise.

Employers should be aware of how these rules will affect both their employee populations and their benefit plans.

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