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Why is the difference between being an employee or an independent contractor important under the FLSA?

The distinction between being an employee and an independent contractor is important under the Fair Labor Standards Act (“FLSA”) because the protections and benefits afforded to employees under the law are not necessarily available to independent contractors.

The FLSA sets standards for minimum wage, overtime pay, and other employment-related matters, and these standards only apply to employees, not independent contractors. In general, employees are entitled to minimum wage and overtime pay for hours worked beyond 40 hours per week, while independent contractors are not.

In addition to minimum wage and overtime pay, employees are entitled to other benefits and protections, such as workers’ compensation, unemployment insurance, and certain protections under anti-discrimination laws. Independent contractors, on the other hand, are generally responsible for their own taxes and benefits, and are not entitled to these same protections and benefits.

Therefore, the distinction between employee and independent contractor status is important under the FLSA because it determines the extent of the protections and benefits available to the worker. It’s important for employers to properly classify their workers as employees or independent contractors to ensure compliance with the FLSA and other employment laws, and to avoid legal liability for misclassification.

Best Overtime Pay Lawyer Blogs on Point:

What is the standard for determining whether a worker is an employee or an independent contractor under federal law?

To decide a worker’s employment status under the FLSA, courts use an ‘economic reality’ test. Ultimately, in considering economic dependence, court focus on whether an individual is in business for him or herself or is in employment in the business of others. This test was developed by the courts and is based on the idea that the relationship between a worker and an employer should be determined by the economic realities of the situation, rather than by technical legal concepts.

Depending on the jurisdiction, courts may consider a number of the following factors as part of the economic reality test:

  • The degree of control that the employer has over the worker’s work;
  • The worker’s opportunity for profit or loss;
  • The worker’s investment in equipment and facilities;
  • The worker’s skill and independent judgment;
  • The permanency of the relationship;
  • The method of payment;
  • The worker’s right to hire and fire assistants;
  • The worker’s right to make investments;
  • The worker’s right to terminate the relationship;
  • The worker’s right to receive business expenses;
  • The worker’s right to use his or her own tools and materials;
  • The worker’s right to set his or her own hours;
  • The worker’s right to work for other employers;
  • The worker’s right to be treated as an independent contractor by the employer.

No single factor is determinative, and the courts will consider all of the factors in each case to determine whether the worker is an employee or an independent contractor.

Recently, in Yoder, v. Florida Farm Bureau, No. 22-11135, 2023 WL 3151107, at *1 (11th Cir. Apr. 28, 2023), Plaintiffs Diana Yoder, Kelley Williams, Joshua Davis, and Richard Butts, who were insurance agents, sued Florida Farm Bureau for overtime payments under the FLSA. The trial court held that the four were actually independent contractors not employees. The United States Court of Appeals for the Eleventh Circuit affirmed after considering some of these factors. As to the control element, for example, the United States Court of Appeals for the Eleventh Circuit held:

Under the control factor, we consider the “nature and degree of the alleged employer’s control as to the manner in which the work is to be performed. Control is only significant when it shows an individual exerts such a control over a meaningful part of the business that she stands as a separate economic entity.” Scantland, 721 F.3d at 1313 (internal quotation marks omitted). The evidence the Agents point to reflect control over aspects like what products can be sold and what the commission rate is, but the evidence does not go towards the manner in which the work is to be performed. The record reflects that the Agents are free to control the manner in which they work. Notably, they pursued their own leads, determined their own methods for developing sales, and hired and maintained support staff if they determined a need for assistance. Thus, there was not sufficient control to label the parties as the same “economic entity.” Usery, 527 F.2d at 1313.

Id. at *3.

Further, the Eleventh Circuit looked at the investments element and held:

We agree with the Agents that they did not have significant investments in the materials required for their tasks. Farm Bureau provided the software necessary to complete and log their duties. However, the Agents did invest personal capital into advertising and had the ability to employ support staff without the approval of Farm Bureau. The latter investment would be wholly the Agents’, as they would be responsible for paying the salary of those hired staff members. Thus, they had the ability to hire workers, and also invested significant risk capital for the success of their business.

Although the Eleventh Circuit Court of Appeals held that some factors favored an employee status, such as the agents’ integral role in the business, it held that considering and weighing all the factors, the agents controlled more of their business than did Florida Farm Bureau.

The morale of the story is that there is no clear answer to this question, which must be resolved on a case by case basis – preferably with the help of the best wage and hour lawyers near you.

Best Wage Theft Attorney Blogs on Point:

Why is it important to hire a wage and hour lawyer regarding overtime issues?

There are a few reasons why it is important to hire a wage and hour lawyer regarding overtime issues. First, wage and hour laws are complex and can be difficult to understand. A lawyer can help you understand your rights under the law and ensure that you are properly compensated for your overtime work. Second, employers may try to avoid paying overtime by misclassifying employees as independent contractors or by failing to track hours worked. A lawyer can help you protect your rights if your employer is trying to violate the law. Finally, if you have been denied overtime pay, you may be entitled to recover back pay, liquidated damages, and attorney’s fees. A lawyer can help you file a lawsuit and recover the compensation you deserve.

Here are some of the benefits of hiring a wage and hour lawyer:

  • Expertise: A wage and hour lawyer has the experience and knowledge to understand the complex laws governing overtime pay.
  • Representation: A lawyer can represent you in negotiations with your employer or in court if necessary.
  • Compensation: A lawyer can help you recover back pay, liquidated damages, and attorney’s fees if you are successful in your case.

If you believe that you have been denied overtime pay, it would be best to call the right attorney to schedule a free and confidential consultation. (Read: What is the Spitz No Fee Guarantee?; Why Having Skilled Employment Attorneys Is Critical; Employment Law: Avoid Hiring The Wrong Attorney). Call our lawyers in Ohio, Michigan, North Carolina, and Kentucky to get help now. Spitz, The Employee’s Law Firm and its experienced attorneys are dedicated to protecting employees’ rights and solving employment disputes.


This employment law website is an advertisement. The wage and hour and wage theft materials available at the top of this page and at this overtime, minimum wage, and FLSA website are for informational purposes only and not for the purpose of providing legal advice. If money is missing from your paycheck, it would be best for you to contact our top attorneys to obtain advice with respect to any particular employment law issue or problem. 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 or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.

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