Am I an Employee or Contractor?

Many employers will make the bold assertion that an individual working for them is an independent contractor and not an employee. Under this classification, the employer will contend that Federal and State wage laws do not apply to employer’s employment relationship with employee. Very often, the employer is mistaken and its classification of the employee is fatally flawed.

It is well settled law that the mere fact that workers are labeled “independent contractors” does not make the workers independent contractors. On the contrary, courts look not to the label, but to the underlying “economic reality” of the relationship between the employer and the worker in determining whether a worker is an independent contractor or employee under the law.

Courts have established a six-factor test to determine whether a worker is an employee or independent contractor, based on “economic reality.” These factors, derived from United States v. Silk, 331 U.S. 704 (1947), are: (1) the degree of control that the employer has over the manner in which the work is performed; (2) the worker's opportunities for profit or loss dependent on his managerial skill; (3) the worker's investment in equipment or material, or his employment of other workers; (4) the degree of skill required for the work; (5) the permanence of the working relationship; and (6) the degree to which the services rendered are an integral part of the putative employer's business. No single factor is dispositive.

1. Control

The factor is the degree of control that the employer has over the manner in which the worker performs his work. Where an employer provides specific direction for how workers, particularly low-skilled ones, are to perform their jobs, courts have weighed the control factor in favor of employee status. The issue is not the degree of control that an alleged employer has over the manner in which the work is performed in comparison to that of another employer. Rather, it is the degree of control that the alleged employer has in comparison to the control exerted by the worker.

2. Opportunities for Profit or Loss

In this factor, the “profit” question turns on where a worker’s pay comes from. If the large majority of a worker’s pay comes from the employer, the employer is more likely to be considered an employee. However, if a worker is receiving pay from the individuals to whom he or she provides services, a worker is more likely to be considered an independent contractor. The “loss” question turns on who makes business decisions and whose income will be affected by such decisions. More specifically, if decisions such as when and where a worker works are decided by the employer and the employer stands to lose profit based on such decisions, the worker is more likely to be considered an employee. However, if a worker decide individually when and where to work, and a worker stands to lose profits based on such decisions, the worker is more likely to be considered an independent contractor.

3. Investment in Equipment

This factor turns on the degree to which a worker owns their own “tools.” Tools may include any equipment necessary for the performance of job duties. On balance, the more equipment and/or tools that are provided by the employer for the workers, the more likely that the workers are employees.

4. Degree of Skill Required

This factor turns on the degree to which specialized skills and knowledge are required to perform a worker’s job duties. If a worker’s job duties require skills that can only be acquired through a specialized degree or training, this suggests that the worker is an independent contractor. However, if a worker’s job duties do not require specialized skills or training and the skills to perform a worker’s job duties can be taught to general members of the public, this suggests that the worker is an employee.

5. Permanence of the Working Relationship

This factor turns on whether a worker is providing services on an ad hoc or sporadic basis, or whether a worker is consistently providing services for the employer. If the employer only contacts workers to provide ad hoc services when needed at the job site, such a work arrangement suggests that the worker is an independent contractor. However, if an employer hires a worker to provide services for an indefinite period or on an ongoing basis, such a work arrangement suggests that the worker is an employee.

6. Integral Part of the Business

This factor turns on what service the employer is in the business of providing. More specifically, the more closely connected the employer’s business is to the type of job duties the worker is performing, the stronger the presumption that worker is an employee.

Finally, it is important to emphasize that the determination of whether a worker is an employee or an independent contractor is rarely an absolute certainty. If you believe that you have been misclassified as an independent contractor and that you are really an employee, you should immediately contact Gregg C. Greenberg, Esquire at The Zipin Law Firm, LLC 8403 Colesville Road, Suite 610, Silver Spring, Maryland 20910. Attorney Greenberg is available by phone at (301) 587-9373 or email ggreenberg@zipinlaw.com

These materials have been prepared by The Zipin Law Firm, LLC for information purposes only and are not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between the sender and receiver. Internet subscribers and online readers should not act upon this information without seeking professional counsel.