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Am I an Employee or Independent Contractor?

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Misclassification of Employees as Contractors and the FLSA

Many employers believe that they can save money by hiring a worker and call them an “independent contractor”, thus saving significant money on payroll taxes and workers’ compensation expenses. While in theory this may be a good money saving technique, in the long run, it could cost the employer a lot more money if the worker is found to be an employee and enforces their rights under the Fair Labor Standards Act. The distinguishing and controlling issue in determining whether a worker is an employee or an independent contractors is whether, “as a matter of economic reality,” a worker is “dependent upon the business to which they render service.” Martin v. Shelby Telecom, LLC, 2:11-CV-01563-AKK (N.D. Ala. June 26, 2012) citing Usery, 527 F.2d at 1311 (quoting Bartels v. Birmingham, 332 U.S. 126, 130 (1947)). Just because someone is labeled an “independent contractor” does not make them such. Rather the economic reality of the relationship controls. Where the work done follows the usual path of an employee, putting on an ‘independent contractor’ label does not take the worker from the protection of the [FLSA]. Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947).

Employee or Independent Contractor Checklist

To help evaluate whether a worker is an “employee” or an “independent contractor”, the Courts have applied a “economic realities test”. This test, which has been adopted by most of the Court’s throughout the United States, requires the Court to consider the following factors:

  1. (1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;
  1. (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill;
  1. (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers;
  1. (4) whether the service rendered requires a special skill;
  1. (5) the degree of permanency and duration of the working relationship;
  1. (6) the extent to which the service rendered is an integral part of the alleged employer’s business.

No one of these considerations can become the final determinant, nor can the collective answers to all of the inquiries produce a resolution which ignores the economic dependence. In other words, “[t]he purpose of weighing the factors is…to view them qualitatively to assess the evidence of economic dependence.” Antenor v. D & S Farms, 88 F.3d 925, 933 (11th Cir. 1996).

Moreover, “neither the presence nor the absence of any individual factor is determinative. Whether an employer-employee relationship exists depends upon the circumstances of the whole activity, and ultimately, whether, as a matter of economic reality, the individuals are dependent upon the business to which they render service. Donovan v. Sureway Cleaners, 656 F.2d 1368 (9th Cir. 1981) (internal citations omitted).

If the court determines that an employee is actually an employee, but has been misclassified as an independent contractor, then the employee has various causes of actions against the employer, including potential recovery of unpaid wages under the Fair Labor Standards Act. Specifically, under the fair labor standards that, unless the employee is exempt from the minimum wage, or is exempt from receiving overtime benefits, the employer must pay him at least the amount of the minimum wage for all hours worked. Additionally, for all hours worked over 40 hours in any work week, the employer must pay the employee one and a half times his regular rate of pay for each hour over 40 hours in any work week. Thus, if the employee has been misclassified as independent contractor, the employer could be liable for unpaid overtime benefits in addition to liquidated or double damages as punishment for the misclassification.

At the Law Office of J.J. Talbott, we regularly bring lawsuits against employers who misclassify employees as ”independent contractors” under The Fair Labor Standards Act. If you have questions as to whether you have been misclassified as an independent contractor, or questions about your legal rights under the Fair Labor Standards Act, please feel free to call one of our employment law attorneys for your free consultation today.

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