This is the second part on various tests that may be used by Florida Business Lawyers in determining whether a person should be classified as an employee or contractor. Follow this link to read the first part of the article.
B. The Economic Reality/ Economic Dependence Test
This test is used to answer the question of who is the employer in cases where there is more than one potential employer. It can also be used to determine whether a worker is an employee or an independent contractor.
The test may only be used for finding coverage of workers under the FLSA, AWPA, EPA, and the FMLA. The factors listed below are to be applied with an eye to determining whether and on whom the worker is economically dependent for his or her earnings and working conditions.
A worker is more likely to be an employee of an entity when:
1. The individual works in a production process or service that is an integrated part of the employer’s business.
Example: garment workers pressed clothes for clothing manufacturer Renaissance, or, farm workers pick cucumbers for a grower who sells them.2. The individual works on the employer’s premises and equipment.
OR Did the subcontractor function as a part of the employer’s business?
Example: Manufacturer Renaissance used the subcontractor Han Byul to sew and press the clothes it sold, or the grower used the farm labor contractor to harvest its crop.
Example: Although Han Byul rented the factory and equipment needed to sew and press clothes, the factory was only a few blocks away from Renaissance and Renaissance provided all the material for sewing, except thread.3. The individual performs most of his/ her work for that employer.
Example: over 85% of Han Byul’s work came from Renaissance. Garment workers spent over 80% of their time pressing exclusively for Renaissance.4. The worker had a steady and consistent working relationship with the employer.
Example: Renaissance consistently relied on Han Byul to sew and press garments and Han Byul was dependent on Renaissance for business. Han Byul closed when Renaissance stopped giving Han Byul work.5. The employer retains the right to control and/or in fact controls or supervises the work.
Example: the employer sets the hours or rate of pay of the workers by dictating turn-around times and piece rates, or monitors the quality of the garments by visiting or sending an agent to visit the plant. If the work is unskilled, the right to supervise is more important than the actual supervision.
6. The subcontractor changed its name or ownership but still performed the same work.
Example: ownership of Woo Bros. passed to Han Byul, meanwhile the same people that were employed at Woo Bros. continued to be employed at Han Byul, doing the same work for Renaissance.7. The worker did not seek out his or her own work.
Example: Garment workers were expected to spend every work day at Han Byul’s factory. They didn’t hear by word of mouth that there was a job one day at this subcontractor and another day at another subcontractor.8. The employer and the subcontractor shared personnel.
Example: Peter Pak used to be the owner/manager of subcontractor Woo and then he went to work for manufacturer Renaissance as a production manager. While production manager, he sent work to his former business where his parents still worked.9. The employer absorbed losses for unsatisfactory merchandise.
Example: when Han Byul made mistakes in production, Renaissance didn’t deduct it from the amount it agreed to pay Han Byul for completed garments.10. The employer determines the pay rates or method of payment.
Example: by setting strict turn-around times and the piece rates, the garment employer determined the rate of11. The employer has the right, directly or indirectly, to hire and fire the workers.
pay of the workers.
12. The employer prepares the payroll and pays the wages.
Example: a packinghouse operator maintains the payroll and has workers’ compensation insurance to cover the labor contractors’ workers.13. Performs work that is not highly skilled, or is more like piece work.
14. The employer invests more in the equipment and facilities than the worker.
C. The "Suffer or Permit to Work" Test.
The broadest theory for finding an employment relationship is the "suffer or permit" test. This test may only be used to find coverage under the FLSA, AWPA, EPA, and the FMLA. It is based on a return to the statutory definitions of employment contained in these statutes. It can be used to find an employment relationship where one would not be found under the more restrictive tests.
This test is more likely to be met when the worker:
1. Works in a production process or service that is an integrated part of the employer’s business.Remember: These Checklists are not exhaustive, and should be adapted for use in other industries. Use them as a general fact-finding tool to determine whether or not there is an employment relationship between a worker and any potential employer. YOU DO NOT HAVE TO ANSWER "YES" TO 100% OF THESE FACTORS TO FIND AN EMPLOYMENT RELATIONSHIP.
2. Works on the premises and equipment of the business.
3. Works for another business that is integrated into the business of the employer.A. Due to the low skill/ piece work nature of the work
B. Due to the small investment of capital in that integrated business.
