Are independent contractors and 1099 employees entitled to overtime pay? Very often the answer is yes. Overtime pay is owed to employees who work over forty (40) hours in a workweek. Employers often try to get around this law by classifying workers as independent contractors or 1099 employees. However, these workers are often entitled to additional money for overtime work.

The Test for Overtime

Generally, under the Fair Labor Standards Act, everyone who works over forty (40) hours in a week is entitled to overtime pay. Simply referring to a worker as a contractor, or 1099 worker, does not mean the employer does not have to pay that person overtime wages. Also, agreeing to be a contractor or 1099 worker does not necessarily mean you are not entitled to overtime pay.

To determine whether an individual is entitled to overtime pay, the law will often disregard titles, labels, and even written agreements. Instead, courts and the Department of Labor rely on the “Economic Realities Test.”  In other words, as a matter of economic realities, is the so-called contractor truly in business for themselves, or are they economically dependent of the employer for their livelihood? If they are economically dependent on the employer for their livelihood, they will be considered an employee. This would mean they are entitled to overtime pay.

Factors to Consider

Several factors are considered to determine whether a worker is truly an independent contractor or whether they are really an employee who should be paid overtime:

1).  Degree of control exercised by the alleged employer.

For example, who controls the hours to be worked? Does the worker decide when they will work and how many hours they will work like somebody who is truly self-employed? Or does the employer dictate the hours to be worked? Who decides how the work will be performed and how payment will be made? If the employer makes these decision, then it is more likely the worker is an employee.

2).  Extent investment by the worker and the alleged employer.

Has the worker invested money into the business? If not, then this factor weighs in favor of finding the worker is an employee, not a contractor.

3).  Degree to which the employer determines the worker’s opportunity for profit or loss.

This factor looks at whether an individual is more akin to an independent entrepreneur seeking a return on a risky capital investment or a wage-earning employee. If the worker receives a predetermined hourly wage or day rate, they are more likely to be considered an employee.

4).  Skill and initiative required in performing the job.

Does the worker perform specialized services like an entrepreneur would offer? Or does the worker perform more routine type work like an employee would perform for an employer?

5).  Permanency of the relationship.

Is the relationship intended to be for only for a short term, or is it without a foreseeable end date? Also, is the worker free to perform services for other entities, or are they required to work for only this employer?

Remedies

If it is determined that the worker was actually an employee, then they are entitled to recover unpaid overtime for at least the past two years. The employee can go back three years if it is determined the violations were willful. Additionally, the employee may be able to recover twice the amount of unpaid overtime if the employer did not act in good faith. Finally, the employer may also be required to pay the employee’s attorney’s fees.

Conclusion

Have you been misclassified as an independent contractor? Are you owed money for unpaid wages? Leave a comment and let’s discuss.

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Photo of David Langenfeld David Langenfeld

David Langenfeld is Board Certified as a Specialist in Labor and Employment Law by the Texas Board of Legal Specialization. Mr. Langenfeld represents employees from various industries in claims and lawsuits against employers and former employers. Mr. Langenfeld has been a lawyer for…

David Langenfeld is Board Certified as a Specialist in Labor and Employment Law by the Texas Board of Legal Specialization. Mr. Langenfeld represents employees from various industries in claims and lawsuits against employers and former employers. Mr. Langenfeld has been a lawyer for more than twenty-five years. During that time he has successfully represented workers in cases involving unpaid overtime wages, wrongful termination, and employment discrimination. In addition to litigating these cases, Mr. Langenfeld has lectured to attorneys and human resource professionals on issues involving employment law.

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