USDOL Issues New Guidelines
About Employees v Independent Contractors
A Presumption that Workers are Employees
A relatively new (July 15) Administrative Interpretation from the Wage and Hour Administrator of the US Department of Labor declares that the definition of “employ” is very broad under the Fair Labor Standards Act. Many businesses or other organizations asserting that an individual is an independent contractor is in reality an employee. “A worker who is economically dependent on an employer is suffered or permitted to work by the employer” the USDOL guidance declares. The tone of the guidance is that misclassification is rampant, and discussed the six-part test applied by many courts to distinguish employees from independent contractors:
· whether the worker's work is an integral part of the employer's business,
· whether the worker has an opportunity for profit or loss,
· the nature of the worker's investment in the company (the USDOL guidance suggest that investment in tools and equipment is "probably" not enough),
· a worker's use of business skills and initiative as opposed to technical skills,
· the permanence or indefiniteness of the relationship,
· the nature and degree of the employer's control.
Courts that apply the six-part test weigh each factor; a determination does not require that all factors must weigh one direction or the other. But the USDOL test indicates that the agency will expect an organization asserting the classification of independent contractor to demonstrate each of the six in the economic reality of the relationship.
Of course this new guidance will not be ignored by private practitioners who advocate in the plaintiff’s bar on behalf of clients claiming unpaid overtime pay or unpaid minimum wages.