Legal Risks of Misclassification The risks of misclassification are high. Federal and state agencies can launch regulatory actions to enforce tax or wage-and-hours laws. Even more potential risk comes from class actions filed by workers seeking employee protections, which could include unpaid overtime under state or federal law, unpaid benefits such as health insurance or retirement plans under ERISA, FMLA benefits, or protections against discrimination. Best Practices for Flooring Retailers To reduce risk and ensure compliance, consult an attorney and consider the following: • Contracts » Written contracts are the best practice (but they are not determinative). » » Consider whether you can encourage the installer to work with other businesses through referrals. »
Consider how best to ensure your installers are capable of quality work without directly training them yourself.
Consider what you can do to document that the contract terms were negotiated. » Consider using different contracts with different installers or asking the installer whether he or she has a form contract that you can revise/negotiate.
• Investments/Equipment »
Consider how to document what equipment the installer owns and will use.
• Nature of Relationship »
» If it’s necessary to provide equipment, consider how to document that you are providing the equipment at a cost and, if possible, are not mandating the use of your particular equipment. • Entrepreneurship » Consider prioritizing using installers who have formed their own businesses, hold licenses that they pay for, carry Stay Ahead of the Curve All of the tests are fact-dependent, and there are no guaranteed ways to prevent a misclassification claim if you work with any independent contractors. The DOL’s return to the economic realities test, while an encouraging sign, does not shield a retailer from class action claims by workers, state agencies, or IRS audits. Retailers should stay diligent in documenting how their relationships with installers genuinely qualify as independent. their own insurance, and/or market themselves to the general public.
Consider varying what installers you work with. Consider contracting separately for each job.
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» Consider what you can do to emphasize the installer’s ability to select the job. » Avoid referring to any independent contractor as an “employee.” » Avoid offering employee benefits like insurance or retirement plans to non- employees. Nature of the Work » Consider what you can do to emphasize the retail nature of your business versus the installation services the installer performs. Consider working with installation contractors who perform other forms of construction services beyond flooring installation. » » Consider avoiding having installer employees and installer independent contractors at the same time. Consider how to provide installers with the most amount of control over work hours and the “means and methods” of installation.
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• Behavior »
Premier Flooring Retailer tise | 2026 21
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