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Independent Contractor or Employee?

One of the most important and least well understood elements of the Fair Labor Standards Act (FLSA) concerns the Act’s definition of “employee.”  So, who exactly is an employee? First of all, just because an employer says a worker is an independent contractor, not an employee, does not make it true, especially for FLSA purposes! Millions of workers nationwide are misclassified. Here’s the crucial point: An employee under the FLSA must be paid overtime for every hour worked over 40 hours at time and a half their usual rate. Independent contractors don’t have to be paid anything extra for overtime. Unscrupulous employers save billions nationwide by misclassifying their employees. Other employers simply don’t know the law. The test courts apply for the FLSA is different than the test used by the IRS for tax purposes. And the FLSA test is much more likely to find a worker is an employee than any other test used by the federal government.

A court will employ a six factor “economic reality” test to determine whether a worker is an employee or independent contractor under the FLSA. The Sixth Circuit Court of Appeals (Ohio is one state in the Sixth Circuit) uses the following multifactor test:

  • The permanency of the relationship between the parties
  • The degree of skill required for rendering the services
  • The worker’s investment in equipment or materials for the task
  • The worker’s opportunity for profit or loss, depending on his or her skill
  • The degree of the alleged employer’s right to control the manner in which the work is performed
  • Whether the service rendered is an integral part of the alleged employer’s business

(See Donovan v Brandel, 736 F2d 1114, 1116 (6th Cir. 1984) (citations omitted)).

Misclassification in Ohio is especially rampant in the construction industry and other blue-collar occupations. To determine whether or not you are an employee under the FLSA, contact a wage and hour attorney, especially if you are currently classified as an independent contractor and work more than 40 hours a week.

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