What is Employee Misclassification?
Employee misclassification occurs when an employer incorrectly classifies a worker as an independent contractor, freelancer, or another exempt employee. Independent contractors and self-employed professionals are considered vastly different under state and federal labor laws.
Labor laws in Tennessee are designed mainly to protect employees. These laws outline an employee’s rights and the wages they must be paid, including overtime. Anyone that is classified as an employee is entitled to these benefits.
Independent contractors and freelancers are considered their own separate entities. They are not direct employees of the business owner, and employers typically have less oversight of these workers. As such, they are not expected to owe contractors the same type of responsibility. That system makes sense for people who are truly independent contractors. But when misclassification is used to benefit from the services of the worker while denying them the rights that they deserve, there’s a problem.
What is the Purpose of an Employer Misclassifying an Employee?
The main reason employers misclassify employees is to save money. When employers are not required to pay overtime, they avoid having to pay “time and a half” to those who work more than 40 hours in a work week.
Employers also misclassify employees so they do not have to offer workers certain benefits, such as workers’ compensation. Workers’ compensation pays medical costs and provides partial wage reimbursement to employees that are injured on the job. However, filing a workers’ comp claim could cause an increase in the employer’s insurance premiums. By misclassifying an employee, they reduce their own risk.
It’s important to remember that sometimes employee misclassification is a simple error. Even so, employers can be held liable for the mistake and may be required to pay unpaid wages along with other penalties and fines.
What Does it Mean to be an Exempt Employee in Nashville?
An exempt employee is not protected by the overtime laws outlined in the FLSA. In Tennessee, there are four categories of jobs that are exempt from overtime and wage laws, including:
- Executives: An employee is considered an executive if they are responsible for managing two or more employees on a full-time basis. Only 20 percent of an executive’s time is allowed to be spent on duties other than managing employees. In a retail environment, the permitted amount of time spent on other activities is increased to 40 percent. Executive positions are also considered salaried positions.
- Administrative: Administrative positions are those that require a person to perform non-manual work that assists with the business’s operations, management policies, or training in an administrative capacity. Only salaried employees are considered to work in an administrative role. Just like executives, administrative employees are only allowed to spend up to 20 percent of their time doing work that is not administrative. Again, retail employees can spend up to 40 percent of their time doing work that is not considered administrative.
- Professionals: Professional positions typically require advanced knowledge, often gained after several years of education. Certified teachers, highly skilled computer professionals, and artists are examples of professionals. To be classified as a professional, a person must be paid a salary, their job must be primarily intellectual, and they must be expected to use discretion and their own judgment. They should also spend no more than 20 percent of their time performing non-professional duties.
- Outside sales: Employees are considered to hold an outside sales position if the main duty of their job is to sell or take orders in a location that is not their employer’s main place of work. Payment structures for outside sales individuals may be either salary-based or commission-based. Like the other exempt classifications, outside sales workers cannot spend more than 20 percent of their time making sales or taking orders.
Workers that earn more than $455 a week are also considered exempt under Nashville’s employee misclassification laws.
Exempt workers are not entitled to overtime pay. But if you don’t fit in one of these categories and have been denied overtime, you may have a valid claim against your employer. Contact a wage and hour attorney at the Employment and Commerce Law Group for a free consultation.
Nashville Employee Misclassification Laws
In Tennessee, employers must classify their workers as employees unless they fall into one of the four exempted categories.
Keep in mind that these rules are absolute. An employer cannot misclassify an employee, even if he or she agrees to it. In addition, the U.S. Department of Labor notes that:
It doesn’t matter whether you are paid by cash, check, or under the table. You could still be an employee under the FLSA.
“Common industry practice” is never an acceptable excuse to misclassify an employee.
You can learn more about federal employee misclassification laws by visiting www.dol.gov/whd or calling 1-866-4US-WAGE. If you suspect that you have a claim in Tennessee, our skilled attorneys will fight for you to be reclassified and to obtain any benefits that you have been denied.
Employees vs. Independent Contractors
Tennessee law makes very distinct differences between employees and independent contractors. Under the law, an independent contractor:
- Is not under the discretion and control of the employer
- Has the required knowledge and training to perform certain tasks
- Has a location for their business
- Performs the same service, or related services, for many different clients
- Sets the hours when they will work
- Establishes a price for their services
- Provides the equipment, supplies, and tools required to complete the job
- Does not qualify for employee benefits
- Can be held personally liable for accidents and errors made on the job
- Can hire and fire their own workers to complete the job
- Is bound by certain terms outlined in a contract
By contrast, Tennessee law defines an employee as someone that:
- Performs work controlled by the employer and with tools and supplies provided by the employer
- Receives training from the employer to do the job
- Works at the business location of their employer
- Works according to hours set by the employer
- Accepts the salary or wage offered by the employer
- Cannot be held liable for accidents or mistakes on the job
- Can be hired or fired at any time and for any reason by the employer
Even with these guidelines, it is sometimes difficult for individuals to determine if they are an employee or an independent contractor. This makes it confusing for them to determine if they have been misclassified and if their employer is violating their rights.
What Happens if an Employee is Incorrectly Classified?
The government penalizes employers that incorrectly classify their workers. However, employees can also hold employers personally liable when they are misclassified. When employees are not classified properly, they lose a great deal of wages. They can file a lawsuit against their employer to recover this lost income, as well as other damages, including attorney’s fees.
When to Contact a Nashville Employment Misclassification Lawyer
In Tennessee, most employees are entitled to earn at least $7.25 per hour and work no more than 40 hours in one week. When employees work over this amount of time, they are entitled to earn overtime, which is at least 1.5 times greater than their normal hourly wage.
When employees stop receiving overtime or their employer never offers it, it may be time to contact a Nashville employment misclassification lawyer. An attorney can help you determine if you are an exempt employee or an independent contractor. If you have been misclassified, you are likely entitled to back pay for your wages and compensation for your other losses.
It is best to speak to a lawyer as soon as you suspect that you have been misclassified. These cases can be complex and a lawyer will help you secure the compensation you are owed as quickly as possible. It is also best if a lawyer starts working your case right away to ensure the proper steps are taken to protect your rights.
How Can the Employment and Commerce Law Group Help Me?
At the Employment and Commerce Law Group, our Nashville employee misclassification lawyers have the experience necessary to hold your employer accountable for their wrongdoing and get the compensation you deserve. We can advise on whether or not you are an exempt employee and help you navigate the system to obtain the justice you deserve. Contact us online to schedule your free case evaluation today.