The Department of Labor issued an Administrator’s Interpretation No. 2015-1 on the application of the Fair Labor Standards Act’s “suffer or permit” standard in the identification of employees who are misclassified as independent contractors.
The interpretation is important in that it is authority that has some weight with the Courts, although it is not binding upon a court. Frequently, opinions such as these, are used as guidance by a court in determining whether a worker, who has been classified as an independent contractor, should actually be classified as an employee. This is important to workers because being classified as an employee has certain legal protections; such as the minimum wage laws, overtime compensation, unemployment insurance, employment discrimination protections, and worker’s compensation. Although, independent contracting relationships can be advantageous for workers and businesses, some employees may be intentionally misclassified, as a means to cut costs and avoid compliance with labor laws.
The Fair Labor Standards Act (FLSA) definition of employ as “to suffer or permit to work” and the later-developed “economic realities” test provide a broader scope of employment than the common law control test. Congress rejected the common law control test in drafting the FLSA. Instead, the FLSA defines “employ” broadly, as including “to suffer or permit to work.”
In order to make the determination whether a worker is an employee or an independent contractor under the FLSA, courts use the multi-factorial “economic realities” test, which focuses on whether the worker is economically dependent on the employer or in business for himself. A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of employ under the Act, most workers are employees under the FLSA.
The Administrator’s opinion goes into depth in fleshing out the idea of when a worker is an employee or independent contractor and should be studied at length if this is important to you.