Anyone who has operated a business here in Michigan knows that business litigation is never a good result. It means somewhere, somehow, something broke down. Payments were not received, products or services were not provided or some other problem occurred that has left the courtroom as the final step to resolve the dispute.
This is expensive and time-consuming and often distracts those involved in the operations of the business from focusing on their core duties. This can cause additional problems for the business. And one of the most divisive forms business litigation is employment litigation. Where an employee or employees sue the business, or where the business is forced to sue an employee.
One area that is particularly problematic is that of misclassification. In an increasingly competitive economic environment, businesses look to obtain every possible advantage, and for some, managing personnel and labor dollars requires imaginative solutions.
The use of independent contractors can be valuable when faced with limited or uncertain needs, and where the taking on of full-time employees with benefits is economically difficult or unsustainable. The use of independent contractors may permit a business to obtain work or perform jobs that would otherwise not be possible.
The danger for some employers is that they may misunderstand the factors that create an employment relationship. The creation of an employment relationship is defined by the Fair Labor Standards Act (FLSA) and the relevant U.S. Department of Labor regulations.
An employee may begin as an independent contractor, but then gradually drift into a closer employment relationship. When this happens, the employer could suddenly find a lawsuit brewing.
If your business is subject to the FLSA, it may be a good idea to have an attorney review your employment practices and your employees, to head off any potential disputes before they become protracted and expensive litigation.