Freelancers and FLSA compliance: A ticking bomb?

FLSA guidelines for freelancers

Tempted to trim your firm’s benefits budget by using freelancers and independent contractors instead of regular employees? You’re not alone: The tactic may cut costs.

But this FLSA compliance case shows, you may also risk lawsuits from disgruntled freelancers who do the same work as regular employees, but lack health and retirement coverage, overtime eligibility, and other benefits.

Side-by-side with regulars

Richard Godshall and Steve Cusano worked as artists for a commemorative coin and collectibles manufacturer.

As freelancers, Godshall and Cusano didn’t qualify for overtime, nor did they get any health benefits. Problem was, the two artists worked in-house, side by side with employees who did the same job, but who had health coverage, pensions, other benefits and overtime pay.

Before classifying, look at FLSA guidelines

Unhappy with this arrangement, they filed a lawsuit.

The employer settled before the case went to court, agreeing to pay $1,125,000 to 112 “freelancers” who had been wrongly classified.

Before labeling a full-timer as a freelancer or independent contractor, review the job description for FLSA compliance.

If regular employees perform a similar job, talk with your company’s attorney.

Cite: Godshall and Cusano v. Franklin Mint Co., No. 01-CV-6539, E.D. Pa., 12/1/04.