On July 15, the United States Department of Labor issued an interpretative memorandum, entitled Administrator’s Interpretation No. 2015-1, stating its position that employers are generally misclassifying employees as independent contractors.
“Department of Labor’s Wage and Hour Division continues to receive numerous complaints from workers alleging misclassification,” the Department of Labor stated.
The guidance notes that in “order to make the determination whether a worker is an employee or an independent contractor under the FLSA, courts use the multi-factorial “economic realities” test, which focuses on whether the worker is economically dependent on the employer or in business for him or herself. The Department of Labor has taken the position that a worker who is “economically dependent on an employer is suffered or permitted to work by the employer.” The Labor Departmentcontends that the terms employ, suffered and permitted to work should be viewed broadly.
The Labor Departmentdiscusses the following factors in analyzing the economic realities test and deciding whether a worker is an independent contractor or an employee:
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* Is the work performed by the individual an integral part of the employer’s business?
* Does the individual’s managerial skill affect his or her opportunity for profit or loss?
* How does the worker’s investment compare with that of the company?
* Does the work performed require skill and initiative?
* Is the relationship between the worker and the company permanent or indefinite?
* What is the nature and degree of the employer’s control?
While this memorandum is not law, many courts often give deference to agency opinions. In addition, this memorandum signals that there will be stronger agency enforcement on this issue in the future. As such, employers should review their current independent contractor relationships.
If you have any questions regarding this article or any other employment or labor law issues, you should contact an experienced employment law attorney.
Sarah Phaff is an employment law attorney in Atlanta and Macon at the national labor and employment law firm of Constangy, Brooks, & Smith LLP.