Employee or Independent Contractor? The answer could affect your rights

When it comes to employment law, few issues are as important (or as complex) as whether an individual is properly classified as an “employee” or an “independent contractor.”  The answer to this question often determines what rights an individual has via-a-vis his employment, including his eligibility for overtime compensation or protected medical leave, and the extent of the protection to which he is entitled, if any, under the civil rights laws.

Because the factors used for determining employee/independent contractor status may vary somewhat depending on which statutory rights are at issue in the particular case, see Corbo v. Tompkins Rubber Co., 2002 U.S. Dist. LEXIS 11830, *9, fn. 1 (E.D. Pa. Jan. 22, 2002), this article focuses on the test used by courts in the Third Circuit to address the question under the Fair Labor Standards Act (“FLSA”).  It should be noted, however, that most of the tests used by courts to determine employee/independent contractor status borrow largely from the same principles of agency law, best articulated by the Supreme Court in Nationwide Mutual Insurance, Co. v. Darden.  See 503 U.S. 318, 322 (1992) (articulating a twelve-factor “right to control” test).

The Third Circuit has adopted the so-called “economic realities” test for determining whether an individual is an employee or an independent contractor for purposes of the minimum wage and overtime requirements of the FLSA.  See Donovan v. Dialamerica Marketing, Inc., 757 F.2d 1376, 1382-83 (3d Cir. 1985) (adopting a refined version of the test originally articulated by the Supreme Court in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947)).  Under the test, courts consider a non-exhaustive list of factors for determining whether a worker is an “employee,” including:

• the degree of the alleged employer’s right to control the manner in which the work is to be performed;
• the alleged employee’s opportunity for profit or loss depending upon his managerial skill;
• the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
• whether the service rendered requires a special skill;
• the degree of permanence of the working relationship; and
• whether the service render is an integral part of the alleged employer’s business.

Donovan, 757 F.2d at 1382 (quoting Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir. 1981)).  Neither the presence nor absence of any one of these factors is dispositive, and courts tend to examine the circumstances of the employment as a whole.  Id.  Moreover, it should be noted that different tests, perhaps more employee-friendly, may apply under state wage and hour laws.  See e.g. Alexander v. FedEx Ground Package Sys., 2014 U.S. App. LEXIS 16585 (Aug. 27, 2014) (reversing MDL court’s denial of plaintiff class of FedEx drivers’ motion for partial summary judgment that they were employees rather than independent contractors under California’s “right to control” test).

As the number and open-endedness of these factors indicate, these cases tend to be fact intensive, their outcomes uncertain.  However, given the impact a finding of independent contractor status has on a worker’s rights – e.g. ineligibility for minimum wage or overtime protections – it is important for any individual who thinks he or she may be wrongfully misclassified as an independent contractor to consider seeking the advice of an attorney with experience in wage and hour law.

If you believe that you have been wrongfully misclassified as an independent contractor, or are otherwise not receiving overtime compensation for hours worked over forty (40) in a workweek, please contact the Murphy Law Group at (267) 273-1054 for a free consultation.