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Workers Should Properly be Classified as Employees Under the FLSA

U.S. Department of Labor ("DOL") today issued an Administrator Interpretation Memorandum announcing its position that most American workers are employees (as opposed to independent contractors), and thus are covered by the Fair Labor Standards Act (FLSA). The announcement comes exactly two weeks after the DOL issued a Notice of Proposed Rulemaking that would significantly change the legal requirements for an employee to qualify as exempt from the overtime requirements of the FLSA.

According to the Memo, employers are intentionally misclassifying workers as independent contractors to cut costs and avoid compliance with various laws, which deprives workers of certain benefits of employment. Taken together, the two recent DOL actions make the DOL’s true intentions abundantly clear: to sweep more American workers under the umbrella of the FLSA, and in turn, have more of those covered employees earning overtime compensation (or significantly higher salaries).

In the Memorandum, the DOL sets forth its interpretation of the FLSA’s definition of "employ" and the multi-factored "economic realities test" utilized by the courts to guide the analysis of whether a worker is properly classified as an independent contractor under the law. According to the DOL, applying the economic realities test in view of the FLSA's expansive definition of "employ" will result in most workers being employees, and not independent contractors. In other words, a worker is an employee unless a convincing argument can be made that the worker is properly classified as an independent contractor.

While the "economic realities test" might vary somewhat depending on the court applying the test, the traditional questions considered are:

  • Is the work done by the worker an integral part of the employer’s business?;
  • Does the worker’s managerial skill affect the worker’s opportunity for profit or loss?;
  • How does the worker’s relative investment compare to the employer’s investment?;
  • Does the work performed require special skill and initiative?;
  • Is the relationship between the worker and the employer permanent or indefinite?; and
  • What is the nature and degree of the employer’s control over the worker?

These questions should be considered under the guiding principle that workers who are economically dependent on the employer are employees, and only workers who are really in business for themselves are independent contractors. All factors must be considered in each case, no one factor is determinative, and the ultimate determination must be the degree of the worker’s economic independence from the employer.

© Copyright 2019 Armstrong Teasdale LLP. All rights reserved

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About this Author

Jeremy M. Brenner, Labor Law Attorney, Armstrong Teasdale Law firm
Associate

Jeremy Brenner, a member of Armstrong Teasdale’s Employment & Labor and Non-Compete/Trade Secrets practice groups, combines his experience and education in human resources and law to provide clients with a unique perspective on the challenges they face in the workplace. In addition to providing guidance, he is both a trial attorney and a certified mediator who is trained to assist parties in amicably resolving disputes without resorting to the time and expense of traditional litigation.

314-342-4184
Robert A Kaiser, Employment, Labor, Attorney, Armstrong Teasdale, Law firm
Partner

Bob Kaiser is a member of the Employment and Labor practice group representing emerging and mature businesses in labor and personnel-related disputes. Because employment and labor laws and regulations continue to evolve, he deftly guides management in creating “fences” and boundaries to assess risks and decrease litigation.

A portion of Bob’s practice includes traditional labor law, a focus he has had for more than 25 years. For small- to mid-sized organizations, he handles labor union relations such as union avoidance, collective bargaining, elections, strikes, picketing and other...

314-342-4153
Daniel K. O'Toole, Litigation Attorney, Armstrong Teasdale Law Firm
Partner

Dan O’Toole, a respected leader and trial strategist, heads Armstrong Teasdale’s Litigation practice group and is a key member of the firm’s executive and management committees.

In his practice, Dan defends employers against a broad range of complaints and threats of legal action involving workplace situations. Because of his background and achievements in employment and labor law, Dan has been recognized repeatedly by Chambers USA, The Best Lawyers in America, Super Lawyers and for the last several years was included as one of the “Top 50”...

314-552-6612
Jovita M. Foster, Armstrong Teasdale Law Firm, Labor Law Attorney
Partner

Jovita Foster is an accomplished litigator working with small- to medium-sized businesses, public utilities, and Fortune 100 and 500 companies in all facets of employment and labor law.

In state and federal jurisdictions and in front of the Appeals Tribunal, Jovita defends employers and managers in disputes involving claims of discrimination, retaliation, violations of public policy, sexual harassment, wrongful termination, and unemployment appeals. She successfully defends employers and managers in arbitration. Jovita also represents broker-dealers in...

314-552-6698