Contractor or Employee? How to Know.

How to Determine If You Are Contractor or Employee

WASHINGTON D.C — On July 15, 2015, the Wage and Hour Division of the U.S. Department of Labor issued additional guidance on employee misclassification as independent contractors under the Fair Labor Standards Act (FLSA). According to the guidance, which came in the form of an Administrator’s Interpretation, DOL continues to receive numerous misclassification complaints, and misclassified employees may not receive important workplace protections such as minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.

Economic Realities Test

The Administrator’s Interpretation indicated that a legal test called the “economic realities” test should be used to determine whether an individual is an employee or an independent contractor under FLSA. This test is used to determine whether an individual is economically dependent on the putative employer (and thus an employee) or is really in the business for him or herself (and thus is an independent contractor). A worker who is economically dependent on an employer is suffered or permitted to work by the employer, which provides a broader scope of employment than older common law standards.

While the economic realities test is not new, the Wage and Hour Division’s application of the test is more expansive than before and weighs heavily in favor of classification of workers as employees. Additionally, the economic realities of the relationship between the worker and the employer, and not the label an employer gives it, are determinative. Therefore, an agreement between an employer and a worker designating or labeling the worker as an independent contractor is not indicative of the economic realities of the working relationship and is not relevant to the analysis of the worker’s status.

Broad Definition of “Employee”

According to the guidance, most workers are employees under the FLSA’s expansive definitions. The very broad definition of employment under the FLSA as “to suffer or permit to work” and FLSA’s intended expansive coverage for workers must be considered when applying the economic realities test to determine whether a worker is an employee or an independent contract. The test should not be analyzed mechanically or in a vacuum, and no single factor, should be over-emphasized. The test should be used to ultimately answer the question of economic dependence.

Employee misclassification remains a substantial issue that leaves many workers without the valuable protections of FLSA and other labor laws. You should call (855) 754-2795 or complete the Free Unpaid Overtime Case Review form on the top right of this page if you feel your employee wage rights have been violated because you have been misclassified as an independent contractor. Our top-rated team of wage lawyers will evaluate your situation to determine your best course of action. We will also determine if it is in your best interest to file a lawsuit against your employer. There are strict time limitations for filing, so it is important that you call our experienced attorneys today

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