Attorney Eric D. Puryear

Employee Versus Independent Contractor Classification

Puryear Law » Legal Blog » Business Law in General » Employee Versus Independent Contractor Classification

 Classification of workers as independent contractors v. employees has become an important focus of the US Department of Labor in recent years. Misclassification of employees as an independent contractor is commonplace, and can subject an employee to significant financial penalties and costs.  For that reason it is in the interest of every business owner to ensure that employees are properly classified.


Puryear Law offers free in-office consultations, as well as emergency after-hours consultations by phone for people with cases in Iowa and Illinois. See our consultation options.

The reason that the Department of Labor is so concerned about the matter is that misclassification means that independent contractors who are really employees do not receive certain workplace protections, such as the minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.

 The Fair Labor Standards Act establishes the scope of the employment relationship under the Act and provides a basis for distinguishing between employees and independent contractors. An “employee” under the FLSA is “any individual employed by an employer.” 29 U.S.C. 203(e)(1). An “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. 203(d). The definition of “employ” includes “to suffer or permit to work.” 29 U.S.C. 203(g). The suffer and permit concept have been interpreted broadly.

 The U.S. Supreme Court has developed a multi-factor “economic realities” test to determine if a worker is an employee or an independent contractor under the FLSA. Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 301 (1985); Goldberg v. Whitaker House Co-op, Inc., 366 U.S. 28, 33 (1961). The factors to consider include the following: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on his or her managerial skill; (3) the extent of the relative investments of the employer and worker; (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. Id. No one single factor is determinative; all factors should be considered in totality, and the factors should not be applied as a checklist. Id. The label an employer gives the relationship is not determinative; therefore, an agreement between an employer and a worker labeling the worker as an independent contractor is not indicative of the economic realities of the work relationship and is not relevant to the analysis of a worker’s status. See, e.g., Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir 2013); Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2nd Cir. 1988); Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 667 (5th Cir. 1983).


Request More Information

Making intelligent and informed decisions about your case is vital. Enter your email address to learn more about your legal options.


Applying these factors to a given business can be complex, and the costs of an incorrect conclusion and classification can be hugely expensive.  The political aspect of employee classification in recent years only adds to the complexity.  For those reasons, every business owner who is considering classifying workers as independent contractors is well advised to consult with their attorney.


Tags for this legal blog article: , , , , ,


Related legal blog articles:

Legal Representation in Iowa or Illinois

See our Consultation Options to get the legal representation you need.
 

Request More Information

Enter your email address to receive information about legal representation from Puryear Law.


 

Map and Directions to Puryear Law

Puryear Law P.C.
3719 Bridge Ave
Suite 6
Davenport, IA 52807
Iowa Phone: (563)362-0901
Illinois Phone: (309)948-6699
Toll-Free Phone: (888)919-3719

Click the map shown below for turn-by-turn directions to Puryear Law's office. Map and Directions to Puryear Law