Classifying employees as independent contractors is one of the hottest areas of litigation and enforcement across an array of government agencies. It can also be an extremely complex area for even diligent companies to navigate with different rules applicable to different laws—from the Fair Labor Standards Act (FLSA) to Title VII and everything in between. Today’s gig economy often blurs the lines even further as ongoing litigation involving workers as diverse as Uber and Lyft drivers, U.S. Open tennis umpires, and exotic dancers demonstrates. The consequences to companies of misclassifying employees can be significant, including back wages, missed benefits, back taxes, double damages, fines, and attorney fees.
Worker Classification
Different tests are used in different contexts to determine whether workers are properly classified as employees or independent contractors. While emphasizing different factors, sometimes leading to different results, the tests generally derive from the common law “right of control test” and consider, to varying degrees, the amount of control the company may exercise over the worker and the economic reality of the relationship from the worker’s point of view. The right of control test typically looks at the following factors: the control the company may exercise over performing the work; whether the worker is engaged in a distinct occupation or business; the nature of the work; industry practice; the skill required; who supplies the tools and equipment and workspace; the length of the relationship; whether payment is based on time or project; whether the work is part of the regular business of the company; the understanding of the parties; and whether the worker has his own business.
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