Federal and Ohio Independent Contractor Attorneys
Similar to the misclassification of salaried employees, employers also often misclassify their workers as independent contractors to avoid paying them overtime compensation, minimum wages, payroll taxes and unemployment insurance.
In order for the overtime and minimum wage laws to apply to a worker, a worker must be an “employee” and not an “independent contractor.” This means that an employment relationship exists between the worker and the employer. Generally, workers who are economically dependent on the business of the employer, regardless of skill level, are considered to be employees, and most workers are employees. On the other hand, independent contractors are workers with economic independence who are in business for themselves.
Although the Fair Labor Standards Act’s (FLSA) definition of “employee” is strikingly broad to favor concluding that a worker is actually an employee, courts still evaluate a number of factors when deciding whether the individual is an “independent contractor” (not entitled to overtime) or is actually an employee (entitled to overtime wages). Basically, courts look to see whether a worker, even if labeled as an “independent contractor,” is as a matter of “economic reality” an employee. Below, please find a brief analysis.
In the event you are labeled an independent contractor and have questions about whether you are misclassified and owed unpaid minimum and overtime wages, contact a federal and Ohio independent contractor attorney at Bryant Legal, LLC.
Are you an Employee or an Independent Contractor?
The FLSA requires that businesses pay workers for minimum and overtime wages even if the company labels you as an “independent contractor” when the worker’s duties follow the usual path of an employee. Courts in the Sixth Circuit (Ohio, Michigan, Kentucky, and Tennessee) use what is commonly referred to as the “economic realities” test to conclude whether the worker is actually an employee vs. an independent contractor. Under this test, courts consider six factors:
(1) the permanency of the relationship between the parties
- permanency of indefiniteness in the worker’s relationship with the employer will likely suggest that the worker is an employee. However, if there is a lack of permanent work, then the worker will likely be an independent contractor.
(2) the degree of skill required for the rendering of the services
- although both employees and independent contractors may be skilled workers, the key issue is whether these workers exercise independent judgment and take initiative to operate as independent businesses as opposed to being economically dependent on the employer.
(3) the worker’s investment in equipment or materials for the task
- usually an independent contractor uses his own tools and equipment, but if the facts suggest that the employer and worker share tools and the risk of loss, it could mean that the worker is an employee.
(4) the worker’s opportunity for profit or loss, depending upon his skill
- this factor focuses on whether the worker exercises managerial skills and, if so, whether those skills affect that worker’s opportunity for both profit and loss.
(5) the degree of the alleged employer’s right to control the manner in which the work is performed
- the more control over the worker, the more likely the worker is an employee. Control over pay amounts, work hours, how the work is performed, and whether the worker is free to work or hire others are important details to determine who actually controls the relationship. An independent contractor generally works free from control by the employer.
(6) whether the service rendered is an integral part of the alleged employer’s business.
- if the work performed by a worker is integral to the employer’s business, it is more likely that the worker is economically dependent on the employer and less likely that the worker is in business as an independent contractor.