Some New Guidance on the Independent Contractor Vs. Employee Question

The gig economy; it seems like we hear more and more about people to working as independent contractors for companies like Lyft or Uber. There has been some push back from state and local government. Now the federal government has put in their own two cents in regards to the independent contractor vs employee question.

David Weil, the administrator of the Department of Labor’s Wage and Hour Division released an opinion letter on July 15th clarifying the Department’s view on when a worker is an employee or an independent contractor.

According to the Department, for the purposes of the FLSA the test for determining whether a worker is an employee or independent contractor is multi-factorial “economic realities” test rather than the common law control test. It is also important that “The application of the economic realities factors must be consistent with the broad “suffer or permit to work” standard of the FLSA.”

The economic realities test requires a court to look at:

  1. the nature and degree of the employer’s control over the time, manner and method of the worker’s work;
  2. the worker’s opportunity for profit or loss;
  3. the worker’s investment in equipment, materials or their own employees;
  4. whether the worker’s position required special skill;
  5. whether the services provided by the workers were an integral part of employer’s business; and
  6. whether the relationship was permanent.

The ultimate question is one of economic dependence. “Each factor should be considered in light of the ultimate determination of whether the worker is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is its employee).” It is more than just the day to day control considered under the common law control test. An individual can be an other person’s employee even if the employer does not exercise much day to day control over how the individual performs their work.

The opinion letter concludes with this remark:

“In sum, most workers are employees under the FLSA’s broad definitions. The very broad definition of employment under the FLSA as “to suffer or permit to work” and the Act’s intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor.”

This opinion letter confirms the department is making correct classification a priority. It is also clear that most people who work for someone else are employees.

If you are currently classified as an independent contractor please speak to an attorney. Most independent contractors are actually employees. Your employer might even use a different word for your relationship than independent contractor. The Department has seen an increasing number of instances where employees are labeled something else, such as “owners,” “partners,” or “members of a limited liability company.”

Here in Atlanta, Georgia there are plenty of companies trying to get around worker protections by classifying their workers as something other than employees.

If you have any questions about your employment relationship and you are in the State of Georgia, call or email Atlanta employment law attorney Benjamin Kandy.

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