{"id":21525,"date":"2016-04-11T23:55:30","date_gmt":"2016-04-11T23:55:30","guid":{"rendered":"http:\/\/www.youngwooldridge.com\/?p=7202"},"modified":"2016-04-11T23:55:30","modified_gmt":"2016-04-11T23:55:30","slug":"employee-or-independent-contractor-part-1","status":"publish","type":"post","link":"https:\/\/themediabeast.com\/resources\/employee-or-independent-contractor-part-1\/","title":{"rendered":"Is Your Worker an Employee or Independent Contractor – Part 1"},"content":{"rendered":"

Independent Contractor vs. Employee\u00a0\u2502<\/strong>\u00a0In an attempt to reduce employee misclassification, the Department of Labor (\u201cDOL\u201d) has provided guidance on how to determine whether a worker is an employee or independent contractor. Unfortunately for employers, in the process of bringing clarity to the evaluation, they have given credence to the broad employer-employee definition used by the Fair Labor and Standards Act (FLSA).<\/h4>\n

For many years, employers<\/a><\/span> have become familiar with the common law, \u201ccontrol\u201d approach. As the name suggests, the \u201ccontrol\u201d test analyzed the employer\u2019s control over the worker\u2019s activities (hours, instrumentalities of work, location, etc.). Although there was a FLSA definition of \u2018employ\u2019 concurrently in place, most employers undertook the control approach, as it was narrower than the FLSA alternative.<\/h4>\n

Despite being in place for years, and commonly known by California employers, it appears that the control test was not applied correctly. This is evidenced by the fact that the Department of Labor\u2019s Wage and Hour Division (WHD) continued to receive, investigate, and ultimately enforce employee misclassification complaints at an alarming rate.<\/h4>\n

On July 15, 2015, in a memorandum entitled, \u201cAdministrator\u2019s Interpretation No. 2015-1<\/a><\/span>,\u201d the DOL rejected the common law control test, in favor of the FLSA\u2019s broader \u201cto suffer or to permit work\u201d definition. In part one of this two-part series, we outline the factors that business owners and employers need to be aware of when classifying their workers.<\/h4>\n

FLSA Definitions of Employee and Independent Contractor<\/u><\/h2>\n

In light of the DOL\u2019s recent endorsement of the FLSA\u2019s approach to classifying the employees and independent contractors, it is important for employers to become familiar with the FLSA definitions. The FLSA defines \u201cemployee\u201d as an individual employed by an employer, and \u201cemployer\u201d as including \u201cany person acting directly or indirectly in the interest of the employee.”<\/h4>\n

As mentioned above, to \u2018employ\u2019 under the FLSA is defined as \u201cto suffer or to permit.\u201d The court in Antenor v. D&S Farms<\/a> <\/em><\/span>(1996) 88 F.3d 925, 929 has determined that an entity \u2018suffers or permits\u2019 an individual to work, if as a matter of economic reality, the individual is dependent on the entity. In other words, independent contractors are those with economic independence, who run their own business<\/a><\/span>. On the other hand, employees are those who are economically dependent on the employer, regardless of their skill level.<\/h4>\n

Economic Realities Test <\/u><\/h2>\n

We now know that economic dependence is at the center of the employee-independent contractor analysis. Unfortunately, determining whether a worker is an employee or independent contractor is still a cumbersome analysis. The Supreme Court and Circuit Court of Appeals have developed a multi-factor \u2018economic realities\u2019 test to determine whether a worker is an employee or independent contractor under the FLSA. Below is a list of those factors, and a brief illustration of each:<\/h4>\n
    \n
  1. \n

    The extent to which the work performed is an integral part of the employer\u2019s business. <\/strong>See, e.g., Dole v. Snell<\/a> <\/span><\/em>(1989) 875 F.2d 802, 811 (holding that work performed by cake decorators \u201cis obviously integral\u201d to the business of selling cakes which are custom decorated.\u201d);<\/h4>\n<\/li>\n<\/ol>\n
      \n
    1. \n

      The workers\u2019 opportunity for profit or loss depending on his or her managerial skill<\/strong>. (worker\u2019s decisions to hire others, purchase materials and equipment, advertise, and rent space may reflect managerial skills that will affect his or her opportunity for profit or less beyond a current job);<\/h4>\n<\/li>\n<\/ol>\n
        \n
      1. \n

        The extent of the relative investments of the employer and the worker<\/strong>. See, e.g., Dole v. Snell (1989) 875 F.2d 802, 811 <\/em>(Comparing cake decorator\u2019s $400 investment against employer\u2019s business investments, including paying rent, advertising, operating expenses, and labor);<\/h4>\n<\/li>\n<\/ol>\n
          \n
        1. \n

          Whether the work performed requires special skills and initiative. <\/strong>(A highly skilled carpenter that uses his skills for a construction firm may not qualify, as his skills are not used independently. However, a carpenter who does specialized work for a variety of construction companies likely will qualify. It is imperative that skills be used in an independent way.);<\/h4>\n<\/li>\n<\/ol>\n
            \n
          1. \n

            The permanency of the relationship.<\/strong> (An employee with a long term relationship is more characteristic of an employee, rather than an independent contractor. Even if the relationship is scheduled to last even for a few weeks or months, it is still more likely to be an employee, because an independent contractor is more likely to finish one project, then end the relationship.); and<\/h4>\n<\/li>\n<\/ol>\n
              \n
            1. \n

              Control exercised or retained by the employer.<\/strong> (The worker must control meaningful aspects of their work, such that it is possible to view the worker as conducting his or her own business. An employer\u2019s lack of control of a worker is not particularly telling if the worker works from home or offsite.)<\/h4>\n<\/li>\n<\/ol>\n

              It is important to note that each factor should be evaluated under the premise that the employer-employee relationship is very broad. Additionally, the factors are evaluated in their totality. The six factors are not a checklist, and no single factor is independently determinative.<\/h4>\n

              In the second post of this two-part series<\/a><\/span>, learn what the DOL’s interpretation means and why it is significant for business owners and employers. Read Part 2 of Is Your Worker An Employee Or Independent Contractor >>><\/a><\/span><\/h4>\n

              Every employment law situation is unique and this Employment Law article\u00a0is not replacement for legal counsel. \u00a0If you have questions\u00a0on\u00a0how these changes may affect your business, contact the Employment Law Department<\/a> at Young Wooldridge, LLP<\/a>. \u00a0<\/strong><\/p>\n

              Photo Credit: NCinDC<\/a>\u00a0via Flickr\u00a0<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

              Independent Contractor vs. Employee\u00a0\u2502\u00a0In an attempt to reduce employee misclassification, the Department of Labor (\u201cDOL\u201d) has provided guidance on how […]<\/p>\n","protected":false},"author":1,"featured_media":7279,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","footnotes":""},"categories":[843,844],"tags":[845,866,839],"class_list":["post-21525","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-law","category-employment-law","tag-employment-law","tag-independent-contractor","tag-business-law"],"yoast_head":"\nEmployee or Independent Contractor? \u2502Young Wooldridge, LLP<\/title>\n<meta name=\"description\" content=\"In an attempt to reduce employee misclassification, the DOL has provided guidance on determining whether a worker is an employee or independent contractor.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/themediabeast.com\/resources\/employee-or-independent-contractor-part-1\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is Your Worker an Employee or Independent Contractor - Part 1\" \/>\n<meta property=\"og:description\" content=\"In an attempt to reduce employee misclassification, the DOL has provided guidance on determining whether a worker is an employee or independent contractor.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/themediabeast.com\/resources\/employee-or-independent-contractor-part-1\/\" \/>\n<meta property=\"og:site_name\" content=\"MMG Resources\" \/>\n<meta property=\"article:published_time\" content=\"2016-04-11T23:55:30+00:00\" \/>\n<meta name=\"author\" content=\"MediaBeast\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"MediaBeast\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/\"},\"author\":{\"name\":\"MediaBeast\",\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/#\\\/schema\\\/person\\\/f1e4fbc14f15dffe99af02d0efb60287\"},\"headline\":\"Is Your Worker an Employee or Independent Contractor – Part 1\",\"datePublished\":\"2016-04-11T23:55:30+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/\"},\"wordCount\":901,\"image\":{\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/#primaryimage\"},\"thumbnailUrl\":\"\",\"keywords\":[\"employment law\",\"independent contractor\",\"business law\"],\"articleSection\":[\"Business Law\",\"Employment Law\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/\",\"url\":\"https:\\\/\\\/themediabeast.com\\\/resources\\\/employee-or-independent-contractor-part-1\\\/\",\"name\":\"Employee or Independent Contractor? 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