whether a worker is an employee or an
independent contractor is the "economic
realities test," rather than the common
law "right of control"
known as the Silk
of control exercised by the employer
over the workers; (2) the workers'
opportunity for profit or loss; (3) the
relative investment in the business;
(4) the degree of skill and independent
initiative required to perform the work;
and (5) the permanence or duration of
the working relationship.
extent to which the work is an integral
part of the employer's business.
simply a regurgitation of existing law. It
is clear that this 15-page document is
an attempt to shape the analysis. First,
it places high emphasis on whether
the work performed is an integral
part (e.g. painter working for painting
company) of the employer's business.
Concerning the opportunity for profit
or loss factor, the DOL focuses less on
whether the individual could be held
to account for failing to perform and
more on the individual's ability to use
management skills to run and expand
a business. In considering the relative
investment factor, not only is the worker's
investment important, but also the
compared to the hiring business. Worker
investment in tools is downplayed. The
DOL's focus on the fourth factor is not
simply that the worker is skilled, but
that they also display initiative similar to
the management skills under the profit
or loss factor. Concerning factor five,
a permanent or indefinite relationship
between worker and business suggests
the worker is an employee. The "control"
factor is downplayed. It must be more
than theoretical; it must be actually
exercised. Working from home or offsite,
and employee control (flex schedules)
over hours worked is not significant.
The nature and degree of the alleged
employer's control is key, rather than
the employer's rationale. Finally, the
DOL takes the position that the FLSA
provides coverage where the worker
is economically dependent, even if
requisite control is not exercised.
If the DOL is successful in shaping
the standards to be used in determining
whether an individual is an employee
or independent contractor, not only will
there be greater exposure to businesses
under the FLSA, but exposure will
also be increased under the Family
Medical Leave Act (FMLA), as the
FMLA incorporates the FLSA's "employ"
definition.
should review their relationships with
those whom they contract. Red flags
include situations in which individuals
are employed in the same exact line
the individual works solely for the one
business and no other, those where the
business exercises control (even quality
control or following customer dictates),
and those situations in which the
individual has worked for the business
on a permanent or indefinite basis.
1, Administrator David Weil, July 15, 2015
("Interpretation No. 2015-1").
Health, Education, Labor, and Pensions, U.S. Senate,
Employment Arrangements, Improved Outreach Could
Help Ensure Property Worker Classification, p. 11,
Table 2 (GAO-06-656 (July 2006)).
Law Issue du Jour, Paradigm October 2010.
5 29 U.S.C. § 207(a)(1).
6 Id. at § 203(e)(1).
7 Id. at § 203(d).
8 Id. at § 203(g).
9 Rutherford Food Corp. v. McComb, 331 U.S. 722, 728,
640 (1947)).
of performance; (2) the mode of payment; (3) the
furnishing of material or tools; (4) the control
of the premises where the work is done; and (5)
the right of the employer to discharge. See e.g.
control was considered the most significant. Id.
13 Id. 331 U.S. at 716.
14 Id.
15 See e.g. Brock v. Superior Care, Inc., 840 F.2d 1054,
835 F.2d 1529, 1535 (7th Cir. 1987). But see Layton
v. DHL Express (USA), Inc., 686 F.3d 1172 (11th Cir.
2012) (applying an eight factor test, which is a hybrid
between the right to control test and the economic
realities test).
203(g)]." See Interpretation No. 2015-1 at p. 2, fn. 3.