Independent Contractors

Employers often attempt to avoid the payment of overtime by classifying their workers as "independent contractors." Under the FLSA, a person who is a true independent contractor is not entitled to overtime pay from the company that hires the person under contract. An employer is required to pay overtime for only its "employees." When courts look at whether or not a person is an independent contractor or an employee, they attempt to analyze the "economic realities" of the relationship. In other words, they attempt to figure out the nature of the relationship based on the actual facts and not based on what the parties call the arrangement. While different courts use different factors to analyze the relationship, the following factors are representative of the things courts examine in the independent contractor analysis:

1. The degree of control exercised by the alleged employer;
2. The extent of the relative investments of worker and alleged employer;
3. The degree to which the workers’ opportunity for profit and loss is determined by the employer;
4. The skill and initiative required in performing the job;
5. The permanency of the relationship; and
6. The extent to which the worker’s services are integral to the entity.

Depending on your location, courts vary in how they assess these factors. Some courts are more likely that others to find a person is an employee rather than an independent contractor.

One category of people who seem to be called independent contractors where that designation is questionable is the temporary employee or "Temp" (like from Manpower or Kelly). Temps can be regularly assigned to a company where they are expected to work 40 or more hours in a week. Unless the workers under such plans are truly "independent contractors" (and this is relatively rare under the law), they are employees, either of the "employee leasing" company, or the "recipient company," or both. It is common for such individuals to fall through the cracks because no one is necessarily watching out for hour many hours someone is working or how that person is classified. However, as "employees," these folks are entitled to overtime pay if and when they actually work more than 40 hours in a work week.