The U.S. Department of Laborâs recently concluded most workers should be classified as employees instead of independent contractors under the Fair Labor Standards Act â a contentious issue playing out in the trucking industry, as well as others, in both the courts, state legislatures and federally.
Referring to the July 15 guidance, the National Law Review wrote, âIndependent contractor. Owner. Partner. Member of a limited liability company. Whatever âlabelâ employers use, the DOL has a message for them â most workers are employees under the FLSA.â
The departmentâs David Weil, who heads wage and hour division, published his interpretation of the FLSAâs âSuffer or Permitâ standard in determining worker classification July 15.
âMost workers are employees under the FLSAâs broad definitions,â Weil wrote. âThe very broad definition of employment under the FLSA as âto suffer or permit to workâ and the actâs intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor.â
While the act defines employ as âto suffer or permit to work,â the later-developed âeconomic realitiesâ test is broader than the common law control test. Congress rejected the control test that had previously determined an employment relationship existed when it passed the FLSA in 1938, the administrator noted.
The control test analyzes if a worker is an employee, based on the employerâs control over the worker. But the economic realities of the relationship, the âsuffer or permitâ standard broadens the scope of employment relationships covered by the act.
Weil wrote that all of the following economic realities factors must be considered to determine whether the worker is an independent business or economically dependent on the employer:
* Is the work an integral part of the employerâs business? A firm that develops software for a construction company to tracks bids and material orders is not integral to the construction companyâs operation, which is indicative of an independent contractor.
* Does the workerâs managerial skill, such as deciding to rent space or purchase materials, affect that workerâs opportunity for profit or loss?
* How does the workerâs investment compare to the employerâs investment? The 10th U.S. Circuit determined that rig weldersâ investments in equipped trucks of $35,000 to $40,000 did not indicate they were independent contractors when compared to the employerâs investment of âhundreds of thousands of dollars of equipment at each work site.â
* Does the work performed require special skill and initiative? A workerâs business skills, judgment and initiative, not technical skills, will help decide if the worker is economically independent.
* Is the relationship between the worker and the employer permanent or indefinite? A lack of permanence does not automatically suggest an independent contractor relationship. Weil cites the 2nd U.S. Circuitâs ruling that neither working for other employers nor not relying on the employer as a primary source of income transform the worker into the employerâs independent contractor.
* What is the nature and degree of the employerâs control? The worker must control meaningful aspects of the work performed as a person conducting his or her own business.