The employer-employee relationship under the FLSA is tested by “economic reality” rather than “technical concepts.”
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Independent Contractor OR Employee
Independent Contractor Misclassification — Employers in construction, delivery, home health care, and other industries often label workers “independent contractors” to avoid paying overtime, minimum wage, and benefits. Whether you are truly a contractor depends on the economic reality of the relationship — not on what your employer calls you or what you signed. Under the U.S. Department of Labor’s rule effective March 11, 2024, courts and investigators weigh six factors: your opportunity for profit or loss, your investments in the work, how permanent the relationship is, how much control the employer exercises, how integrated your work is into the employer’s business, and whether you use specialized skill and initiative. No single factor decides — the totality of the circumstances controls. If you were misclassified, you can recover the overtime and wages you should have been paid as an employee, plus additional damages. Contact the Frisch Law Firm for a free consultation.
Requirements
When it has been determined that an employer-employee relationship does exist, and the employee is engaged in work that is subject to the FLSA, it is required that the employee be paid at least the Federal Minimum Wage of $7.25 per hour, and in most cases overtime at time and one-half his/her regular rate of pay for all overtime at time and one-half his/her regular rate of pay for all hours worked in excess of 40 per week. The FLSA also has youth employment provisions which regulate the employment of minors under the age of eighteen, as well as hours worked in excess of 40 per week.
Typical Problems
- One of the most common problems is in the construction industry where contractors hire so-called independent contractors, who in reality should be considered employees because they do not meet the tests for independence, as stated above.
- Franchise arrangements can pose problems in this area as well. Depending on the level of control the franchisor has over the franchisee, employees of the latter may be considered to be employed by the franchisor.
- A situation involving a person volunteering his or her services for another may also result in an employment relationship. For example, a person who is an employee cannot “volunteer” his/her services to the employer to perform the same type service performed as an employee. Of course, individuals may volunteer or donate their services to religious, public service, and non-profit organizations, without contemplation of pay, and not be considered employees of such organization.
- Trainees or students may also be employees, depending on the circumstances of their activities for the employer. (5) People who perform work at their own home are often improperly considered as independent contractors. The Act covers such homeworkers as employees and they are entitled to all benefits of the law.
Industries Where Employees Are Frequently Misclassified
As with many FLSA violations, cases in which employees are misclassified as independent contractors are typically concentrated in specific industries. Industries where there is frequent independent contractor misclassifications include:
- the construction trades (painters, installers, plumbers, electrician, laborers, etc.);
- cable and fiber optic installers;
- delivery/courier services;
- maintenance crews;
- food processing plants;
- waiters and waitresses;
- nail salons;
- adult entertainment (i.e. strippers);
- nurses;
- stocking vendors.
