No matter what your boss tells you, the question of whether you are an “independent contractor” or “employee” is determined by the actual circumstances of your work relationship, not by any contract you sign or by a designation bestowed upon you by your boss. Often, the most important consideration is: which party controls the manner and means by which work is completed?
Whether you are an employee or an independent contractor has serious real-life consequences. Independent contractors are not entitled to the same employment rights, benefits, and protections as traditional employees. For example, because they are not “employees” according to the Fair Labor Standards Act (FLSA), independent contractors are not entitled to minimum wages or overtime compensation. For the same reason, independent contractors have no right to take medical leave according to the Family and Medical Leave Act (FMLA), will not be able to bring discrimination claims under most federal and state statutes such as Title VII of the Civil Rights Act, and are not entitled to unemployment insurance if they lose their position. These are only some of the rights and benefits that independent contractors are denied.
Additionally, an individual’s status affects the way both the company and the individual must pay taxes. This writer is not a tax professional, and therefore cannot provide advice on all of the specific ways independent contractor status relates to tax obligations. However, independent contractor status allows a company to push certain tax-paying burdens onto the individual.
So, are you misclassified? There are a number of factors considered in deciding whether an independent contractor has been misclassified. Many courts (and the U.S. Department of Labor) use the “economic realities” test, which considers the following factors:
- The extent to which the work performed is an integral part of the employer’s business;
- The worker’s opportunity for profit or loss depending on his or her managerial skill;
- The extent of the relative investments of the employer and the worker;
- Whether the work performed requires special skills and initiative;
- The permanency of the relationship; and
- The degree of control exercised or retained by the employer.
Within these factors, a wide range of factual circumstances can tip the scales one way or the other, such as:
- Does the individual have to work a specific schedule set by the company;
- Does the individual wear a company uniform;
- Does the individual have to perform tasks in accordance with company operating procedures;
- Does the individual perform similar work on a contract basis for other companies or individuals;
- Who supplies tools for the work to be completed;
- Who determined how much or in what manner the individual would be paid;
- Are expenses are reimbursed by the company;
- Does the individual receive benefits like paid time off, sick leave, insurance, or retirement benefits?
This is far from an exhaustive list, and each work relationship is analyzed based on the specific facts of the case. But generally, if the company exercise significant control over the work performed, and if the individually is economically dependent on the company, it is highly likely that the individual should be classified as an employee.
The recent trend is that “independent contractor” designations – especially for lower income workers – are being met with skepticism by courts and government agencies. Earlier this month, the DOL issued an agency interpretation as it relates to the FLSA, and made their position clear that “most workers are employees.” Also, as was widely publicized, the California Labor Commissioner concluded last month that Uber, the car service juggernaut, had misclassified its drivers as independent contractors, even though drivers drive their own cars and set their own work schedules.
If you think you are misclassified as an independent contractor, you should contact an employment attorney as soon as possible to ensure you are not being denied your legal rights. For a free, confidential consultation, contact Beggs Law Offices at 614-678-5640.