To determine whether a worker is an employee or an independent contractor, courts focus on the economic realities of the work relationship. Although the “economic reality test” varies from among the various federal appeals courts, the inquiry centers on whether or not the worker can fairly be said to be in business for himself or herself. In 2015, the Depart of Labor (“DOL”) issued an interpretation on independent contractors, which was intended to provide clarification on the issue of who is an independent contractor. The DOL stated that “the application of the economic realities factors should be guided by the Fair Labor Standards Act’s statutory directive that the scope of the employment relationship is very broad. The DOL emphasized that the core of the multi-factor test is the “concept of economic dependence”—“whether the worker is economically dependent on the employer or in business for him or herself.” On June 7, 2017, the DOL withdrew its interpretative statement regarding independent contractors. However, the DOL stated that the removal “does not change employers’ legal responsibilities” under the FLSA and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction including the Fair Labor Standards Act.”
In the Eleventh Circuit, “courts look to the ‘economic reality’ of the relationship between the alleged employee and the alleged employer and whether the relationship demonstrates dependence. Though neither exclusive nor determinative, the Eleventh Circuit has held that the following six factors are relevant to answering the question whether the alleged employee is in business for himself or, as a matter of economic reality, dependent on the alleged employer. Here are the relevant factors:
(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 on his managerial skill;
(3) The alleged employee’s investment in equipment or materials required for his or her task, or his employment of workers;
(4) Whether the service rendered requires a special skill;
(5) The degree of permanency and the duration of the working relationship and
(6) The extent to which the service rendered is an integral part of the alleged employer’s business.
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