Is it legal to pay outsourced hourly contractors less than minimum wage if they are based in the U.S.?


4

If I hire someone on oDesk or a similar website by the hour and they are based in the U.S., will my company get in trouble for paying that person less than minimum wage?

I've found some answers on this in the oDesk forum, but it seems to be mixed opinions. I was hoping someone with a legal background could answer this questions for me. Thanks!

Outsourcing

asked Apr 28 '11 at 05:24
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Andy Cook
2,309 points

4 Answers


8

The other two answers miss the point that the person being hired is IN THE US.

IANAL, but IMO, these individuals are truly contractors (unless you tell them where and when to be and the hours they must work, aka the IRS regulations regarding contractors and employees) and you're not required to pay them minimum wage, benefits, withhold taxes, etc.

That said... why would you choose to use someone that you know is willing to do the work and not make a living wage? The likelihood of them being a) good and b) committed enough to complete your project has got to be very, very low.

answered Apr 28 '11 at 07:39
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Sean
1,149 points
  • Thanks for the thoughtful response, Sean. Very helpful. I think the second part of your answer is an interesting insight. Our work is basic data entry, so I'm not extremely worried about the commitment issues and we have a moderation system in place that monitors quality. – Andy Cook 8 years ago
  • @Andy Cook - one of the things we've looked at (for boring data entry from faxes received to a central queue) is hiring stay at home moms that want to work for 2-4 hours during they day (either at home or at an office). A lot of these women were in the workforce, so they have skills, but they want to be able to bring in $3-800 a month for their family. This is something you might investigate in your area. My area (Dallas) has a lot of suburbs with college graduate SAHMs. The benefit is you can get them locally, they speak english and if they are good, you can hire them full time. – Sean 8 years ago
  • We've toyed around with pay schemes for this, and other than straight hourly, we have thought about throughput based pay (say $.25/fax). They would all be straight 1099 contractors, with no forced hours. The main issue is making sure that there was enough labor during periods like Spring Break. Also, you don't want too much labor without enough work... I wonder if I can start a SAHM Outsourcing business? :) – Sean 8 years ago

2

The 1099 (independent) contractor is also usually not protected by minimum wage laws. In fact, some independent contractors work below minimum wage. In all cases, a 1099 contractor's payment is assessed by the completion of a job, not by the hours worked. When a job takes more time than expected, earnings may fall below minimum wage. Yet the skilled independent contractor can work for far above minimum wage, particularly those who have expertise in a specific field and work on a consultant basis.

http://www.wisegeek.com/what-is-a-1099-contractor.htm

answered Jul 13 '11 at 16:23
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Julia
178 points

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As long as you don't control the exact hours they work, train them, or control anything but project guidelines and due date you can pay what you want, but it's really a better idea not to do hourly but by piece or by entire price for the project. For instance, if a contractor bids too low on a project and they lose money, that's their loss.

However, as a writer, I refuse to work for less than a fair hourly wage for my expertise and hard work. I ensure that I bid appropriately. I do this by estimating the time it will take me to do the project then multiplying that by what I need to earn hourly. In addition, I write specifics into the contract. For instance:

I will write 10 articles of at least 500 words each for $200.00, they will be 100 percent original works, as verified by copyscape.... or I will enter 100 pieces of data consisting of x number of keystrokes for x dollars.

This protects all of us from scope creep and other issues.

answered Jul 13 '11 at 15:41
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Stephanie
11 points

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I am not a Lawyer and this is just my opinion. If it were illegal, will Fortune 500 companies with armies of Lawyers at their disposal be outsourcing work abroad?

Though the cost might be less than the minimum wage here in the US, you most likely are paying above minimum wage to the contractor in their own country hence win,win,win!

answered Apr 28 '11 at 07:06
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  • I agree with outsourcing being a win-win for the company and contractors in other countries. I was asking about U.S. contractors though. – Andy Cook 8 years ago
  • As with all countries including US, you will have to abide by the laws and I doubt you can pay below set minimum wage. You can go the free route by using Interns. Check out http://www.Youtern.comOwen Mc Gab Enaohwo 8 years ago

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