Employers must properly classify workers to ensure they aren’t putting employees in a category as independent contractors to avoid misclassifications claims that may cost them multimillions of dollars.

Pending new guidance to be issued by the Department of Labor (DOL)—which will apply only to the Fair Labor Standards Act—will provide updates on what constitutes and independent contractor vs. an employee, but it may not simplify worker classification.

“I think every employer everywhere needs to pay attention to this misclassification issue,” said Steven Suflas, Partner with Ballard Spahr’s Denver office.

High-profile cases such as Uber and other start-ups, as well as established companies like FedEx, have proven that the cost of misclassification can be quite significant. FedEx recently agreed to pay $228 million as result of a 2014 ruling in the Ninth Circuit Court of Appeals that found the company was incorrectly labeling its ground unit delivery drivers as independent contractors, thereby foregoing overtime pay and benefits and also requiring them to absorb some operational costs from 2000-2007.

Suflas explained that the DOL has been targeting some industries—such as hotels, agriculture, and grocery stores—because they view these as hiring worker populations that are susceptible to employers’ exploitation.

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Labor and Employment