#Nextchat: The Challenges of Employee Classification


2016 is shaping up to be a year of employee classification issues for employers. Between the classification problems within the gig economy and the Department of Labor’s (DOL’s) new overtime rules, many HR professionals’ “What keeps us up at night” list just got longer.

The gig economy, also known as the 1099 economy, is the workforce trend in which organizations such as Uber, Airbnb and TaskRabbit, contract with independent workers through digital apps to perform temporary assignments.  While workers have the ability to determine their own schedules, settings and conditions, they are also caught up in the quandary over several issues, including whether or not they should be classified as independent contractors or employees.

And this is leading to lawsuits.

In a class-action lawsuit by Uber drivers, several former employees are alleging “that drivers were misclassified as independent contractors rather than employees, and that Uber has thus cheated them out of things that employees get under California law, like reimbursements for gas, workers’ compensation and other benefits.”  According to SHRM Online legal writer Allen Smith in the article Up to Juries: Uber, Lyft Drivers’ Status as Employees or Contractors, “the most significant consideration in whether a worker is an employee is the company’s right to control work details.”


Another classification challenge for employers is the DOL’s proposed changes to “modernize and streamline” the Fair Labor Standards Act’s overtime regulations by expanding who would get overtime pay, increasing the salary-exempt level from $23,660 to $50,440. With 5 million more people eligible for overtime, many say the arguments over whether eligible employees are being paid overtime properly will proportionally increase, while others claim it will reduce litigation by creating more certainty about who is eligible.  

In an interview with “The American Law Journal,” Jumpstart:HR CEO Joey Price said, “you are essentially litigating the American Dream where you have ambitious, enterprising individual signing up for an opportunity to make more money on the side” and “by trying to litigate Uber and the opportunities it presents for independent contractors—and I believe it’s an independent contractor arrangement—we are doing the opposite of what’s intended.” Additionally, Price said that employee classification is “a management and training issue” and that “companies need to train managers about tips, overtime and classification to properly and ethically uphold the law so we won’t have litigation issues.”

Please join @shrmnextchat at 3 p.m. ET on March 16 for #Nextchat with special guest Joey Price @JVPsaid. We’ll chat about how employers can navigate the changes and challenges of employee classification. 

Q1. What are the traditional hallmarks of an exempt employee and a nonexempt employee?

Q2. What factors should be considered when determining if an employee is an independent contractor or an employee?

Q3. Do you think Uber drivers should be classified as independent contractors? Why or why not?

Q4. What kind of impact will the proposed DOL overtime rule have on employers?

Q5. How will the proposed DOL overtime regulation affect employers (businesses cutting back base pay, etc.)?

Q6. How can an organization avoid misclassifying employees?

Q7. What advice do you have for employers/HR for preparing to handle the issues that will accompany the DOL’s new overtime rule?

Q8. What can HR professionals do now to protect their organizations from FLSA and other misclassification litigation? 

If you missed this excellent chat filled with important information for employers, you can find the recap post here




The SHRM Blog does not accept solicitation for guest posts.

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