Worker Classification: Employee or Independent Contractor?
Under federal law, a worker must be classified as either an employee or an independent contractor. This determination is important as employees are entitled to a number of protections that are not available to independent contractors. By way of example, independent contractors are not covered by the National Labor Relations Act, the Fair Labor Standards Act, or laws protecting workers against unlawful discrimination and retaliation. Courts and agencies apply different tests to determine proper worker classification. The most predominant tests are the Right to Control and Economic Realities Tests.
Right to Control
The Internal Revenue Service applies common law rules, often referred to as the “Right to Control” test, to determine if a worker is an employee or an independent contractor. Each factor is designed to evaluate who controls how work is performed. Generally speaking, the test looks to:
Courts making determinations regarding the application of federal anti-discrimination statutes, including Title VII of the Civil Rights Act of 1964, The Americans with Disabilities Act, The Equal Pay Act, the Age Discrimination in Employment Act, and the FMLA, as well as the Employee Retirement Income Security Act, generally apply a version of the Right to Control Test, as articulated by the U.S. Supreme Court in 1992 in Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323 (1992).
The twelve factors considered under the Darden test are:
Economic Realities Test
Alternatively, the Department of Labor uses the “Economic Realities Test” to determine the employment relationship under the Fair Labor Standards Act. The Third Circuit Court of Appeals has adopted this test for FLSA purposes. It looks, generally, at the following:
No single factor is dispositive in any of the above tests. Rather, courts and government agencies balance the factors. They may give certain items more or less weight depending on the industry involved.
To help ensure that an independent contractor classification is correct, make certain that a worker signs an independent contractor agreement that addresses the critical considerations outlined above. Do NOT, however, do the following:
Finally, experienced employment counsel should be consulted if there are serious questions about worker classification.
This article can be found in the Summer 2019 Pietragallo Periodical: The Construction Legal Edge
For more information about Worker Classification or other Employment matters, you can always contact our Attorneys direct.
Partner Pamela Coyle Brecht will be moderating a panel at the Federal Bar Association’s virtual 2021 Qui Tam Conference that is taking place February 17-19, 2021. The three-day conference will focus on the False Claims Act in times of crisis, including changes in enforcement priorities that may follow the COVID-19 pandemic. Ms. Brecht’s segment titled,… Read more »Read More