THE ECONOMIC REALITIES TEST
There are criteria to figure this out. In order to determine by whom a worker is “employed” for FLSA purposes, 29 U.S.C. §203(g) relies on what is called the
“Economic Realities” test, basically sifting through the
facts of someone’s work situation to figure out which
party actually controls the work. The following issues
are often considered under the Economic Realities test:
1. Have the parties expressly agreed to an
independent contractor relationship?
2. Who sets the hours and days worked?
3. Who selects and/or provides working
tools and materials?
4. For traveling employees, who selects
the routes?
5. Who selects the length of employment?
6. Who selects the method of payment?
Hourly? Commission? By the job?
7. Is the work performed differently by
independent contractors than employees?
Although I am not giving legal advice here, I will offer
some ideas to consider. Procedurally, companies that
hope to establish independent contractor relationships
that will withstand a misclassification charge should
have a written agreement that lists the respective rights
and obligations of the parties, paying particular attention to the issues generally considered in the “Economic Realities” test. Substantively, company supervisors
should acknowledge the independent contractor relationship on the job site and not direct the work of
hired labor the same way as company employees. Finally, companies that engage independent contractors
should require the labor provider to present evidence
of workers’ compensation coverage before beginning
work.
The Department of Labor will err on the side that a
hired worker is an “employee,” at least for their purposes, so you should plan accordingly.
“Invention, imagination,
originality, or talent in
a recognized field of
artistic or creative
endeavor.”
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