DOL Interpretation Says “Most Workers are Employees” Under the FLSA’s Broad Definitions

Rachel UllrichFrom JDSupra, Rachel Ullrich from Ford Harrison discusses the recent DOL Administrative Interpretation. Rachel writes:

“While the Interpretation did not change the factors most courts consider in determining the economic realities of a work relationship, the Interpretation did provide some important takeaways regarding each factor:

  • The DOL specifically noted that work performed away from the employer’s premises, whether in the worker’s home or at the employer’s customer, can still be integral to the employer’s business.
  • If a worker is truly in business for him or herself, and, therefore, an independent contractor, the worker should be at some risk of loss due to the managerial decisions he or she makes. Merely being able to work more hours is not a managerial skill that affects the worker’s opportunity for profit or loss.
  • In evaluating the relative investments of the employer and worker, courts should consider whether the worker has made investments in his or her business to further its ability to expand, reduce its cost structure or extend its business plan. Courts should also consider how that investment compares to the employer’s investment, not just to the work performed by the worker but to the employer’s overall investment in the project.
  • Merely having specialized skills does not mean that the worker is an independent contractor. There is a difference between providing skilled labor and demonstrating the skill and initiative of an independent contractor.  The Interpretation states, in probably its most telling sentence: “Only carpenters, construction workers, electricians, and other workers who operate as independent businesses, as opposed to being economically dependent on their employer, are independent contractors.”
  • Courts should also consider whether the lack of permanence or indefiniteness in the worker’s relationship with the employer is the result of operational characteristics of the business (i.e., whether the work is typically transient or seasonal) or the result of the worker’s own independent business initiative.
  • Control exerted due to the nature of the business, regulatory requirements and/or customer satisfaction are indicative of an employee/employer relationship. The issue is how much control is exercised by the employer, not why the employer is exerting it.

While no single factor is determinative, the DOL emphasized that the “control factor” should not be given undue weight. Ultimately, according to the DOL, the “factors should be considered in totality to determine whether a worker is economically dependent on the employer, and thus an employee.” If the worker is in business for him or herself, and not economically dependent on the employer, then he or she is an independent contractor….”

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