Are You Misclassified as an Independent Contractor?

Under the Fair Labor Standards Act, a person who is a true independent contractor is not entitled to overtime pay from the company that hires the person under a contract.  Just because the company refers to you as an “independent contractor,” however, does not mean you are an independent contractor.  You may actually be an employee – even if you work under a contract or are paid by the job or assignment rather than by the number of hours you work.  If you are actually an employee and not an independent contractor, you are likely entitled to be paid for overtime.

Courts will look at several factors to determine whether you are an employee or an independent contractor.  The U.S. Supreme Court established the widely-accepted “economic reality” test based on five factors:

1. The degree of control exercised by the alleged employer;
2. The extent of the relative investments of the alleged employee and employer;
3. The degree to which the worker’s opportunity for profit and loss is determined by the employer;
4. The skill and initiative required to perform the job; and
5. The permanency of the relationship.

Courts will use these factors to determine whether the overall “economic reality” indicates the worker is so dependent upon the employer that the worker should be considered an employee.

In determining how to apply these factors, a court will look at facts such as whether you do all of your work for one company or for several companies.  An employee generally sells only his or her time and labor, and only to one employer, and is therefore far more dependent on the employer.  An independent contractor invests in supplies and equipment, essentially runs his or her own business, and is more likely to have a “customer” base of employers, and therefore does not depend as much upon work from any one particular source.  Another question that will be asked is whether you decide when you are going to work for the company or whether the company sets your schedule.  Employees are instructed how and when to perform their work.  Independent contractors decide for themselves how and when they are going to work on specific assignments.  Is the amount of profit or loss you are going to make from a particular job or assignment dependent on how you decide to price your work?  Or does the company decide how much you will be paid?  Independent contractors generally set their own pricing.

The analysis of whether you are an employee or an independent contractor is a complex one.  If you have questions as to whether you are truly an employee, please contact the lawyers  at Spencer Scott pllc for a free consultation and evaluation of your personal employment law claims.