Today, the United States Department of Labor's Wage & Hour Division issued guidance on the Fair Labor Standard Act's (FLSA) "suffer or permit to work" standard regarding the classification of workers as employees or independent contractors under FLSA. You can read the guidance here.
Recognizing an increasing number of complaints from workers about being treated as independent contractors by employers, the DOL determined it may be helpful to provide additional guidance on the issue of what workers qualify as employees or independent contractors.
In its guidance, the DOL stresses that most workers should be classified as employees and emphasizes that the economic realities test should be applied broadly to take into account the remedial purposes of FLSA. The DOL's guidance reiterates that the FLSA "defines 'employee' as 'any individual employed by an employer,' 29 U.S.C. 203(e)(1), and 'employer' as including 'any person acting directly or indirectly in the interest of an employer in relation to an employee,' 29 U.S.C. 203(d). The FLSA’s definition of 'employ' includes to suffer or permit to work. 29 U.S.C. 203(g). This 'suffer or permit' concept has broad applicability and is critical to determining whether a worker is an employee and thus entitled to the Act’s protections."
Under the economic realities test, Court's typically look at 1) the extent to which the work performed is integral to the employer's business; 2) whether the worker has an opportunity for profit or loss; 3) the extent of each party's investment in the relationship; 4) whether the work performed requires special skills and initiative; 5) the permanency of the relationship; and 6) the degree of control exercised or retained by the employer. Generally, workers who are in business for themselves, have a true risk of loss and operate a business independent on the relationship with the employer are independent contractors. In contrast, workers who are economically dependent on the employer are employees. See Baker v. Flint Eng’g & Constr. Co., 137 F.3d 1436, 1440 (10th Cir. 1998) (the economic realities of the relationship govern, and the focal point is whether the individual is economically dependent on the business to which he renders service or is, as a matter of economic fact, in business for himself).
While the DOL's Administrative Guidance 2015-1 outlines the factors to consider when determining whether a worker is an employee or independent contractor, it is most significant in regard to the emphasis placed by the DOL on enforcing compliance and stomping out employee misclassification. As such, employers who have a question about appropriate classifications - or employees who believe they have been misclassified - should contact a competent wage and hour attorney to discuss their legal issues.
For more information about this guidance, or independent contractor/employee classification issues, please contact one of our Utah employment lawyers at (801) 758-7604, or visit us online at www.utahtriallawyers.net. Our Utah lawyers can assist you with any issues you may have, including audits, lawsuits, investigations and compliance issues.
