08 Jan Are you truly an independent contractor?
By: Jeremy Schatz, Attorney
Classifying workers as independent contractors come with multiple benefits to a company. For example, independent contractors are exempt from the Fair Labor Standard Act, Familly Medical Leave Act and companies do not pay payroll taxes for independent contractors*. Accordingly, companies have a financial incentive to label workers as independent contractors, but labeling a worker an independent contractor is not controlling.
While there is no bright-line rule in determining who is an employee versus who is an independent contractor under the FLSA, our courts generally use what is called the economic reality test that looks at the following factors to determine the employment relationship:
(1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;
(2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill;
(3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers;
(4) whether the service rendered requires a special skill;
(5) the degree of permanency and duration of the working relationship;
(6) the extent to which the service rendered is an integral part of the alleged employer’s business.
These factors are simply meant to be a guide with no single factor being more important than the other. Each merely serves to show the economic dependence of the worker to the potential employer. In addition to these factors, parties cannot merely contractually agree that a worker is an independent contractor.
If a worker has been improperly classified as an independent contractor, he or she may be entitled to certain benefits including, but not limited to time and a half for all hours worked in excess of 40 in a work week.
If you believe you have been improperly classified as an independent contractor, please give us a call for a free evaluation.
If you believe you have been improperly classified as an independent contractor, please give us a call for a free evaluation.
*Independent contractors are also generally not covered under state Worker’s Compensation laws the Nation Labor Relation Board, and Title VII of the Civil Rights Acts.
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