The news has been filled with stories about the gig economy and independent contractors. Some states have made it almost impossible to have a worker be an independent contractor. At the end of the Trump administration the U.S. Department of Labor (DOL) proposed an independent contractor (IC) test and even issued an Opinion Letter using this new test. However, as soon as President Biden took office he froze the rule, withdrew the Opinion Letter, and his new DOL delayed the effective date until May 2021, likely killing this new rule.
Therefore, because the “new” IC rule is likely to never be implemented, Florida employers are confused about what are the requirements in order to have a worker be classified as an independent contractor.
This is an important question because an independent contractor is not an “employee” for purposes of the Fair Labor Standards Act (FLSA)’s overtime and minimum wage protections. To determine whether an individual falls into the category of covered “employee” or exempted “independent contractor,” courts look to the “economic reality” of the relationship between the worker and the company and whether that relationship demonstrates dependence.
As recently as February 2021, a Florida federal court (Lange v. Tampa Food & Hosp., Inc., No. 8:19-cv-34-CEH-CPT, 2021 U.S. Dist. LEXIS 32199, at *20 (M.D. Fla. Feb. 22, 2021) explained that the Eleventh Circuit Court of Appeals (controlling in Florida) has identified six factors that guide courts in applying the economic reality test:
(1) the nature and degree of the worker’s control as to the manner in which the work is to be performed;
(2) the worker’s opportunity for profit or loss depending upon his managerial skill;
(3) the worker’s investment in equipment or materials required for his task, or his employment of workers;
(4) whether the service rendered requires a special skill;
(5) the degree of permanency and duration of the working relationship;
(6) the extent to which the service rendered is an integral part of the business’s business.
However, the overarching focus of the inquiry is economic dependence. This means that the final and determinative question must be whether the total of the testing establishes the worker is so dependent upon the business with which he is connected that he comes within the protection of the FLSA or is sufficiently independent to lie outside its ambit.
Many businesses incorrectly classify workers as independent contractors, when they really are employees. This misclassification creates significant liability for employers. Therefore, it is recommended that businesses that THINK they are using independent contractors, should have an experienced employment attorney audit the actual duties performed to ensure that the worker is properly classified. A common error that employers make is to pay an “independent contractor” an hourly wage or even a salary and issue a W-2.
Independent Contractors in the Florida Workplace in 2021