Overtime Myth: Overtime Rules Don’t Apply to ICs

Myth 11: Overtime Rules Do Not Apply to Independent Contractors

Welcome back to the final post in the series: 11 Employee Overtime Myths. To help you navigate employee overtime classification, we broke one of our most popular whitepapers down into an easily digestible series. The regulatory environment of employee overtime is very complicated, and often confusing. The content from this series comes from the ComplianceHR whitepaper Overtime Myths. If you would like to receive an email alert for each blog post in this series, please submit this brief form.

Overtime Myth 11: Overtime Rules Do Not Apply to ICs

We saved this myth for last because it is a tricky one. Why? Because it is technically correct, but with one significant caveat – the worker and the project they have been engaged to deliver must meet the federal and state independent contractor compliance criteria in order to be properly classified as an IC.

Misclassification of non-exempt employees can occur in several ways. One of the most common is to misclassify a worker as an independent contractor when they are, in fact, a non-exempt employee. There can be a significant financial incentive for unscrupulous organizations to do this in order to avoid extra employer burdens, like having to pay for employee benefits and overtime. Therefore, overtime rules do not apply to independent contractors, but only if the IC is properly classified and is not an employee.

Note: If you are concerned about independent contractor compliance and would like to learn more about a solution that will help you to mitigate the risk of IC misclassification, then you should check out ComplianceHR’s Navigator IC solution. We’ve also authored a whitepaper on 5 potential strategies to help mitigate IC misclassification.

Non-compliance with the FLSA, or their state equivalents, can be very costly for employers. In addition to developing core internal expertise on determining overtime eligibility, it is also very helpful to be aware of the most common overtime myths.

Employers can find more information about the FLSA and overtime pay from the Department of Labor’s Wage and Hour Division website. Many employers rely outside counsel, or expert systems like ComplianceHR’s Navigator OT to help them determine exempt/non-exempt status.

How can I read the rest of the 11 Employee Overtime Myths?

We recommend you check the Resources section of our website for past myths, or download the Overtime Myths whitepaper.

ComplianceHR’s Navigator Overtime Solution

Navigator OT eliminates much of the legwork and helps to reduce the headache of evaluating roles for overtime exemption by providing you with:

  • A simple digital questionnaire to capture your specific fact pattern
  • A summary of the relevant federal and state exemption standards
  • Actionable risk assessment(s) driven by expert analysis of over 2,400 court cases and federal and state regulations
  • Instant actionable guidance and a customized report on how to lower your misclassification risk
  • A complete questionnaire transcript

Navigator OT helps to simplify the complexity of employment law and mitigates the risk of misclassifying a non-exempt employee as exempt from overtime. If you would like to learn more about Navigator OT, an expert system built with the employment law expertise and legal knowhow of Littler, please sign up for a demo.

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About ComplianceHR

ComplianceHR offers the only on-demand, intelligent suite of compliance applications. We focus on helping companies address the ever-changing federal and state employment law requirements. Our solutions cover many common HR topics, such as employee handbooks, minimum wage, overtime, independent contracting, and more.

We provide employers of all industries, sizes, and locations with solutions that empower employers to handle complex compliance issues. Markedly, our solutions take less time, cost, and complexity than traditional methods. The Navigator Suite both simplifies employment law compliance and helps you streamline your compliance workflow in only a few simple clicks.

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This blog and the associated whitepaper are should serve as a starting point for educating Human Resources and Legal professionals on certain aspects of legal obligations of employers. It is not a comprehensive resource or a complete explanation of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ComplianceHR is not rendering legal or tax advice, or other professional services. The contents are for general informational purposes only. We urge you to consult your attorney concerning any particular situation and any specific legal questions you may have.