Employee or Independent Contractor?

By August 18, 2015 August 22nd, 2018 Uncategorized

The US Department of Labor has issued a memo to test whether the relationship between a worker and employer is independent contractor or employee for the purposes of protection under the federal Fair Labor Standards Act (FLSA). This act establishes minimum wage, overtime pay, recordkeeping and youth employment standards.

There are 6 parts to the “economic realities” test:

1. Is the work an integral part of the employers business?
If the work performed is a compelling part of the employer’s business, the worker is likely economically dependent on the employer.

2. Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?
A worker truly in business for themselves faces the possibility of experiencing a loss.

3. How does the worker’s relative investment compare to the employer’s investment?
If the worker’s investment is minor, it suggests that the worker is economically dependent on the employer.

4. Does the work performed require special skill and initiative?
A worker’s business skills, judgment and initiative, not their technical skills determine if the worker is economically dependent.

5. Is the relationship between the worker and employer permanent or indefinite?
Permanency suggests the worker is an employee.

6. What is the nature and degree of the employer’s control?
More control exercised over a worker indicates they are an employee.

Click here for a more comprehensive article from Insurance Journal.

If you have questions on this topic or other HR concerns, contact The Flanders Group at 800-462-6435.