A growing number of workers have filed lawsuits against their employers, claiming that they should be classified as employees rather than free agents. Though the classification may seem nominal, it has a considerable impact on workers’ ability to claim benefits and protections under the Fair Labor Standards Act (FLSA). Employers do not have to offer independent contractors benefits like 401(k)s, health insurance, overtime, and paid days. They also do not have to contribute to worker’s compensation funds and state unemployment insurance. In addition, they do not have to withhold income taxes or cover a share of payroll taxes that is usually covered by employers.
Some freelancers are fine with this situation, as it affords them greater autonomy in deciding where, when, and how to complete their work. Unfortunately, however, the situation does not work for all independent contractors. Individuals who are denied critical benefits such as overtime, unemployment insurance, family and medical leave, and safe workplaces may be better off classified as employees.
The Department of Labor’s stance on independent contractors
Recently, the Department of Labor issued new guidance concerning independent contractors, stating that “most workers are employees under the FLSA’s broad definitions.” This broad interpretation will make it more difficult for employers to classify workers as independent contractors. As a consequence, it expands the FLSA’s coverage to a greater number of workers.
Six factors to consider when determining whether a worker is an independent contractor
The Department of Labor says that employers must conduct an “economic realities” test to determine whether a worker is an employee or independent contractor. This test is composed of six factors or questions:
If you have been denied FLSA benefits, contact the Akin Law Group as soon as possible
- Is the work an essential part of the employer’s business?
- Workers whose work is integral to the business are more likely to be be considered employees under the new guidance
- Does the worker’s managerial skill impact his or her opportunity for loss or profit?
- An independent contractor’s managerial skill impacts his or her opportunity for loss and profit.
- How does the worker’s investment compare in relation to the employer’s investment?
- If the worker’s investment is minor compared to the employer, he or she may be economically dependent on the employer.
- Does the worker perform activities that require special skill or initiative?
- A worker who markets his or her services, determines how to fill orders or do work, and displays other forms of initiative is more likely to be considered an independent contractor.
- Is the relationship between the employer and worker permanent or temporary?
- A permanent or indefinite relationship suggests that a worker is an employee, not an independent contractor.
- What is the nature and extent of the employer’s control over the worker’s activities?
- If an employer exercises considerable control over a worker, that worker is more likely to be classified as an employee.
Individuals who have been improperly classified as independent contractors may be denied crucial benefits that are guaranteed under the FLSA. If you believe that you have been improperly denied FLSA benefits or protections, contact the Akin Law Group at 866.685.5163 for legal assistance.