Wednesday, July 15, 2015

DOL Issues Administrator’s Interpretation on Employee/Independent Contractor Status under FLSA

    How do you know whether a worker counts as an “employee,” not an independent contractor, under the Fair Labor Standards Act (FLSA)?  On this often-litigated issue, the US Department of Labor has released Administrator’s Interpretation No. 2015-1, dated July 15, 2015, in order to help “the regulated community in classifying workers and ultimately in curtailing misclassification.” 

    Much of this fifteen-page document covers familiar ground.  DOL stresses that FLSA defines “employ” broadly as including “to suffer or permit to work,” 29 U.S.C. § 203(g); that courts use an expansive multi-factor “economic realities” test – not the traditional common-law test—to decide whether workers count as “employees” under FLSA; and that, given both, “most workers are employees under the FLSA.” 

    DOL also discusses each of the typical factors of the FLSA “economic realities” test, emphasizing throughout that each factor is not a necessary condition but just a guide: “Ultimately, the goal is not simply to tally which factors are met, but to determine whether the worker is economically dependent on the employer (and thus its employee) or is really in business for him or herself (and thus its independent contractor).”

    For example, for the “control” factor of “economic realities” test—itself not dispositive—DOL writes:

Technological advances and enhanced monitoring mechanisms may encourage companies to engage workers not as employees yet maintain stringent control over aspects of the workers’ jobs, from their schedules, to the way that they dress, to the tasks that they carry out. Some employers assert that the control that they exercise over workers is due to the nature of their business, regulatory requirements, or the desire to ensure that their customers are satisfied. However, control exercised over a worker, even for any or all of those reasons, still indicates that the worker is an employee.

Though not expressly addressing them, this view—and DOL’s guidance as a whole—may matter to the recent debates about employee/independent contractor status and the so-called sharing economy.


--Sachin Pandya

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