Client Alert - Employment Law Update
Federal Court Finds Wrongly-Classified Independent Contractor
Entitled to Overtime Pay
A federal magistrate judge recently found a worker entitled to years of unpaid overtime after deciding he was not an independent contractor, as claimed by his former employer. The case demonstrates the potential pitfalls of misclassifying workers.
The case of Bulaj v. Wilmette Real Estate & Management Company, et al., No. 09 CV 6263 (October 21, 2010) began when Rexhep Bulaj was terminated after working for twelve years maintaining residential apartment properties. He filed suit, seeking unpaid overtime under the Illinois Minimum Wage Law and the federal Fair Labor Standards Act.
Independent contractors are self-employed workers. In determining whether an individual is an employee or an independent contractor, courts and government agencies generally look past labels and examine the "economic realities" of working relationships. In so doing, various multi-factor tests are employed under different laws. In this case, the court considered the following: (1) the nature and degree of the alleged employer's control as to the manner in which the work is performed; (2) the alleged employee's opportunity for profit or loss depending on his managerial skill; (3) the alleged employee's investment in equipment or materials required for his task or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; and (6) the extent to which the service rendered is an integral part of the alleged employer's business.
The Court found many of these factors in Mr. Bulaj's favor. Wilmette Real Estate instructed and heavily supervised him for twelve years, gave him cleaning supplies, tools, and a cellphone to do his job, monitored the quality of his work, even disciplining him, and reported his income to the IRS on W-2s. As a result, the Court concluded that he was actually an employee eligible for overtime pay.
What to Do
Understanding the legal requirements for independent contractor relationships is important, not only under employment statutes, but also because the IRS and state tax authorities have increasingly scrutinized the classification of workers. Independent contractors cannot be managed like employees, and employers should institute practices that properly differentiate this category of workers.
If you would like more information about this decision, or have questions about your employment policies or practices in general, please contact Mr. Gonzalez at 312-558-9779 or at egonzalez@elvisgonzalezltd.com.
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