1099 contractor or employee? Why it matters for overtime

Why classification matters

Overtime law protects employees. If you're truly in business for yourself, you set your own prices and hours and there's no overtime. But if a company controls your work like an employer and simply pays you on a 1099, you may legally be an employee, with overtime rights and back pay.

How the question is decided

Under the FLSA, the question is whether you are economically dependent on the business or genuinely in business for yourself. Courts and the Department of Labor look at the whole picture. Factors include:

• Control: who sets your schedule, methods and rules?
• Opportunity for profit or loss: can you increase earnings through business decisions, or only by working more hours?
• Investment: do you invest in your own business, beyond tools of the trade?
• Permanence: is the relationship ongoing and indefinite?
• Integral work: is your work a core part of what the company does?
• Skill and initiative: do you use business-like initiative, or follow the company's directions?

States can use stricter tests for their own wage laws, so the answer can differ depending on where you work.

Warning signs

• You work set shifts the company assigns
• You wear a uniform, use company equipment and follow company scripts
• You can't work for competitors or set your own rates
• You've worked only for this company for a long time

What to do

Keep copies of your contract, invoices or pay records, schedules and communications showing how your work was directed. The Wage and Hour Division investigates misclassification at no cost, and an employment lawyer can evaluate your situation.