Insight

Employee vs. Independent Contractor: Which Are You?

The distinction between the two is integral. Misclassifying someone as an independent contractor can have several implications.

Employee vs. Independent Contractor
Greg Mansell

Greg Mansell

January 30, 2020 12:00 PM

My employer classifies me as an independent contractor when I believe I should be classified as an employee. How do I determine if I am properly classified? Does this matter? Should I be paid overtime? Our wage and hour lawyer breaks it down for you here.

The answer to this question requires an evaluation of multiple factors. Labels are not determinative. Even if your employer informs you that you are an independent contractor, requires you to sign a contract identifying you as an independent contractor, or pays you as an independent contractor, these designations—alone—do not conclusively define the nature of the working relationship.

This article focuses on whether you are an employee or an independent contractor for purposes of employment laws and the Fair Labor Standards Act (FLSA). This is not an article related to the Internal Revenue Service (IRS) and the test or determination used by the IRS. The IRS test can be found here: IRS Test.

In the Sixth Circuit (the federal jurisdiction the includes Ohio), courts evaluate the “economic reality” of the relationship to determine if you are properly classified as an independent contractor. The “economic realities” evaluation is not a precise test but instead is an analysis of six factors on a case-by-case basis to weigh the circumstances as a whole.

Courts in the Sixth Circuit typically evaluate the following six factors:

  1. The permanency of the relationship between the parties: Evaluation of this factor involves determining whether the worker provides services on a fulltime basis or as needed; whether the work is limited to a fixed timeframe or indefinite; and whether the worker provides services for that employer exclusively or provides services for other employers as well.
  2. The degree of skill required for the rending of services: Evaluation of this factor involves determining whether the work requires a mastery of a particular skill or basic, repetitive movements.
  3. The worker’s investment in equipment or material for the task: Evaluation of this factor requires looking at what, if anything, the worker brings to the job with him or her. Does the worker use the employer’s tools or bring his or her own tools or supplies? Does the worker wear a uniform, and if so, is the uniform provided by the employer?
  4. The worker’s opportunity for profit or loss, depending on skill: Evaluation of this factor looks at whether the worker has an opportunity to earn more money if he or she produces a higher quality product or a higher quantity; whether the worker is paid the same wage regardless of what his or her work yields; and whether the worker is exposed to any risk of loss if he or she fails to perform.
  5. The degree of the employer’s right to control the manner in which the work is performed: This factor requires an evaluation of the type of control the employer has over the worker’s day to day activities, whether the employer sets the worker’s schedule, whether the employer supervises the work, and whether the employer dictates the method by which the work must be performed.
  6. The extent that service rendered by the worker is an integral part of the company’s business: Evaluation of this factor looks at whether the work is integral to the employer’s operation, and whether the employee is economically dependent on the employer’s business.

Why does this distinction matter?

Misclassifying you as an independent contractor can have several implications. For example, your compensation may be impacted by this misclassification. The Fair Labor Standards Act’s minimum wage and overtime provisions apply to employees. In other words, as an employee, rather than an independent contractor, you may be entitled to compensation that is being improperly withheld.

Additionally, you may be entitled to other benefits as an employee that you are not entitled to if your employer classifies you as an independent contractor, such as the option of receiving medical insurance or unemployment benefits.

If you believe that your employer has misclassified you, reach out to an employment attorney to help you evaluate your situation and determine the best course of action. You can also submit a form as well.

Mansell Law LLC

Columbus, Ohio Employment Attorneys

1457 S High St, Columbus, OH 43207

(614)610-4134

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