Florida Business Litigation Lawyer Blog
The Fair Labor Standards Act (often referred to as the “FLSA”) applies to “employees” but does not apply to “independent contractors.” The FLSA has an expansive definition of who constitutes an employee. At 29 U.S.C. section 203(e)1), the FLSA defines the term “employee” as “any individual employed by an employer.” The FLSA, at 29 U.S.C. section 203(g), defines the term “employ” as “to suffer or permit to work.” The United States Supreme Court in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947), opaquely explained that the determination of whether a person is an employee, as opposed to an independent contractor, is based on the “underlying economic realities” as exposed by the “circumstances of the whole activity. Fortunately, later appellate decisions from the United States Court of Appeals for the Eleventh Circuit (i.e., the federal appellate court governing all federal courts in the State of Florida) along with other appellate courts have clarified specific criteria used to decide whether an individual is properly classified as an “employee” or instead as an “independent contractor.” Peter Mavrick is a Fort Lauderdale employment attorney, who defends businesses and their owners against employment law claims, including claims asserting employment discrimination and retaliation as well as claims for overtime wages and other related claims. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.
The United States Court of Appeals for the Fifth Circuit in Usery v. Pilgrim Equip. Co., 527 F.2d 1308 (5th Cir. 1976), the controlling factor whether a person is an employee or independent contractor is whether, “as a matter of economic reality,” a worker is “dependent upon the business to which they render service.” Sometimes businesses have mislabeled employees as independent contractors in employment contracts and visa versa. The particular label is not dispositive. Economic reality, rather than any label placed on the relationship by the parties, controls. In this regard, the Supreme Court’s Rutherford Food Corp. decision stated in pertinent part: “[w]here the work done, in its essence, follows the usual path of an employee, putting on an ‘independent contractor’ label does not take the worker from the protection of the [FLSA].”
The United States Department of Labor has issued a regulation, at 29 C.F.R. section 500.20(h)(4) that follows the “economic realities” test and the guiding factors as set forth the by the federal courts to determine employment status under the FLSA. Precedent from the Eleventh Circuit, in Freund v. Hi-Tech Satellite, Inc., 185 Fed.Appx. 782 (11th Cir. 2006), articulated several factors courts use in a balancing test to decide whether an individual is an independent contractor:
(1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;
(2) the alleged employee’s opportunity for profit or loss depending upon his or her managerial skill;
(3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers;
(4) whether the service rendered requires a special skill;
(5) the degree of permanency and duration of the working relationship; and
(6) the extent to which the service rendered is an integral part of the alleged employer’s business.
The United States District Court for the Southern District of Florida in Muller v. AM Broadband, LLC, 2008 WL 708321 (S.D. Fla. March 14, 2008), explained that these six factors are a guide, are not exhaustive, and no single factor is dispositive. The Fifth Circuit’s Usery cautioned that the analysis of independent contractor status has as its primary focus whether there is economic dependence, and stated in pertinent part that, “[n]o one of these considerations can become the final determinant, nor can the collective answers to all of the inquiries produce a resolution which submerges consideration of the dominant factor—economic dependence.” For example, a person is more likely to be considered an independent contractor when he decides when to start work and how to perform the work, he can make a profit or loss based on how efficiently he operates, he invests in tools and other materials for his work, he employs subordinates, his service is particularly skilled, and his work is ancillary to the payor’s business (such as, for example, a cleaning crew to a factory). This type of fact pattern can increase the likelihood of a court finding there is a lack of economic dependence, that the person is operating consistent with owning an independent business, and therefore is not an employee under the FLSA.
Peter Mavrick is a Fort Lauderdale employment lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.