Under the Fair Labor Standards Act (“FLSA”) and various state laws, companies have to pay their employees time and a half for all time working over 40 hours in a designated workweek. As you can imagine, employers don’t like to dole out overtime and have come up with a variety of dastardly schemes to keep money rightly and legally owed to their employees. FLSA lawyers call this wage theft. Today, I’m focusing on one such wage theft gambit by employers. Many employers misclassify employees as independent contractors as part of a ruse to steal wages. (Best Law Read: Overtime Pay: Am I An Independent Contractor?; My Boss Calls Me An Independent Contractor, Am I?). We call this misclassification.
Do companies have to pay independent contractors overtime at time and a half?
Best Overtime Pay Lawyer Answer: No. Unlike employees, true independent contractors have no right to the minimum wage, overtime, or protection against harassment or discrimination. However, as the case law on this subject has continued to develop, it has become much harder for employers to credibly argue that such a ruse is legitimate. Indeed, utilizing the “economic realities” test, courts have routinely found that so-called “independent contractors” are actually employees.
What is the Economic Realities Test?
Best Wage Misclassification Lawyer Answer: Whatever label your employer gives you will not determine whether you are an employee or independent contractor. Instead, the courts have developed and used an economic realities test, which includes six factors, which must all be considered because not one of them alone is dispositive. These six factors include:
- Control. Courts will first look to how much control an employer has over the alleged employee and their work. If the individual has enough control over a “meaningful part of the business” that she would be considered a “separate economic entity,” then the individual would likely be considered an independent contractor. On the other hand, if the alleged employer dictates how the individual is supposed to conduct their work, when they’re supposed to work, for how long, etc., then it is more likely they would qualify as an employee for FLSA purposes.
- Opportunity for Profit/Loss. This factor considers the individual’s opportunity for profit/loss based on her own managerial skill. True independent contractors incur their own expenses, have their own budget, and charge those that hire them based on what they determine their budget/expenses to be. If they do a terrible job, they’re the ones on the hook for it. Simply being in a position to earn more by working harder or volunteering for more shifts does not meet this requirement. Acosta v. Off Duty Police Services, Inc., 915 F.3d 1050, 1055 (6th Cir.2019).
- Investment in Equipment/Materials. This factor considers the question: who is investing money into the venture and providing the equipment? This is typically a comparison point, comparing what the alleged employer invested, and what the alleged employee invested.
- Special Skill. Does the individual have a unique skill, specific to that individual, that they use to create job opportunities or complete their work? Or does the individual rely on the employer’s business and skills to create work? The former suggests an independent contractor, while the latter points to an employee.
- Permanence/Duration. How long does the working relationship last? Independent contractors usually are only hired for a specific job or a pre-determined period of time. The duration of an employees’ employment is less exact: generally, when an employee is hired, it is with the understanding that they will continue working for the employer indefinitely, unless something changes and one party chooses to end the relationship. The longer, and more open ended the relationship, the more likely you are an employee.
- Integral Part of Alleged Employer’s Business. This factor asks: how essential is the individual’s work to the business? This is not about how well the employee performs, or has performed in the past, but about the work itself. If no one was doing the work, could the business do business?
Two recent court decisions show this framework in action. In the first case, Stephen Buzzell, Jr. v. Florida Keys Ambulance Service, Inc., No. 4:19-CV-10190-JLK, 2022 WL 2116953, at *1 (S.D. Fla. June 13, 2022), a group of EMTs and Paramedics sued for overtime based on unpaid “waiting time” when they worked on call. Along with other arguments made by the employer that it should not have to pay for this time, the employer also argued that the employees were independent contractors and thus, not entitled to overtime pay. The District Court for the Southern District of Florida found that there was so much evidence going both ways on the economic realities factors that it could not conclusively rule for either side, finding that a jury would have to ultimately decide:
Control: The parties dispute whether they could even choose their own shifts among other aspects of “control.” Because of this dispute, these arguments may be raised at trial where the jury will decide.
Profit or Loss: The Court concludes that Plaintiffs’ opportunity for profit or loss was largely based on the amount of shifts for which they were scheduled, which suggests an employer-employee relationship.
Investment: Plaintiffs claim they were required in the employee handbook to maintain Defendants’ equipment and replenish the ambulance with materials from supplies at the station. Defendant provides no evidence to the contrary, so the Court finds this factor weighs in favor of employee status.
Special Skill: Defendants state that Plaintiffs were required to have their own state certifications and licenses to work as EMTs and paramedics. Plaintiffs were also required to use these certifications and licenses to determine what medical assistance a patient needed and provide other aspects of patient care. Because Defendants did not provide Plaintiffs with those necessary skills, Defendants argue that Plaintiffs were not employees. In response, Plaintiffs claim that Defendants made these certifications and licenses a job requirement and did not treat the Plaintiffs as independent entities. Overall, this factor weighs in favor of independent contractor status.
Permanence: Because the parties dispute whether Plaintiffs were free to stop working at any time and had the opportunity to take on other jobs, genuine issues of material fact remain precluding summary judgment.
Integral Part of Business: This factor weighs in favor of employee status in the instant case. There is no evidence in the record suggesting that Defendants could complete a call for emergency medical transportation without the EMTs and paramedics to provide these services.
Based on these factors, the court decided…that it could not decide, and that a jury would have to determine whether the plaintiffs were in fact employees.
Other decisions are more certain. For example, in Tassy v. Lindsay Ent. Enterprises, Inc., No. 3:16-CV-77-RGJ, 2022 WL 801279 (W.D. Ky. Mar. 15, 2022), the District Court for the Western District of Kentucky recently found that a group of exotic dancers who sued for minimum wage violations were employees as a matter of law:
All factors of the economic realities test weigh in favor of Plaintiffs. Plaintiffs were exclusively employed by The Godfather for a considerable time; entertainers had no specialized skills; they had a small investment in their position compared to Defendant; Defendant’s opportunity for profit and risk of loss was much greater than Plaintiffs’; Defendant exercised significant control over entertainers; and entertainers were integral to the success of The Godfather. A reasonable juror could only conclude that the totality of the circumstances shows as a matter of economic reality that Plaintiffs were employees of The Godfather.
By contrast, in Roslov v. DirecTV Inc., 218 F. Supp. 3d 965 (E.D. Ark. 2016), the District Court for the Eastern District of Arkansas found the opposite because of the amount of control the plaintiff had over his work and compensation:
Even if he had been assigned orders, [plaintiff] testified that he could take days off; he could decide not to take additional orders at the end of the day without recourse; and he could complete some work orders in any order if he was double-booked. While DirecTV’s installation standards and uniform requirements certainly provided expectations, installation specifications and quality control measures are “entirely consistent with the standard role of a contractor who is hired to perform highly technical duties.” Herman v. Mid–Atl. Installation Servs., 164 F.Supp.2d 667, 672 (D. Md. 2000)….The second (investment in the business), fourth (degree of skill required), and fifth (permanency of employment) factors, weigh strongly in DirecTV’s favor. Degraftenreed purchased his own equipment, tools, and supplies, his own fuel and insurance, and used his own cell phone and computer system, for use in completing the DirecTV orders. This is a significant investment, favoring independent contractor status. As for the skill required, Degraftenreed admits that specialized training and skills are required and that someone off the street cannot perform the job. Finally, there is no evidence to suggest that he expected his work to continue, uninterrupted, for any duration of time. It is true that he worked for the Service Provider for many months; however, he also worked another job along side his installation job. He also testified that there were occasions when he had no work and that work orders fluctuated. Therefore, permanance is lacking. The sixth factor (the importance of Degraftenreed’s work on DirecTV’s business) is arguably the only factor suggesting he was an employee. This conclusion is unfounded, however, because the fact that a business depends on its independent contractors is not itself indicative of an employment relationship.
How do I get legal help if my employer is not paying me correctly?
Best Minimum Wage and Overtime Lawyer Answer: The above cases all came out differently based on the unique facts of each case, and how the lawyers for the plaintiffs applied those facts to the law. This is why it is so important to make sure you call the right attorney when you have been denied minimum wage or overtime. If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. (Read: What is the Spitz No Fee Guarantee?). The experienced wage and hour lawyers at Spitz will provide you with the top options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call our Cleveland, Columbus, Cincinnati, Toledo, Boardman, and Detroit attorneys right now. Do not wait. The longer that you wait, the less that your claim may be worth.
The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me extra when I work over 40 hours per week”, “My paycheck is not right” or “What do I do if my company will not pay overtime”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of Spitz, The Employee’s Law Firm, Brian Spitz, or any individual attorney.