1. Safari Professionals of the Americas
Michael D. Billok, Esq.
January 14, 2016

2. Are They Really Not an Employee? Independent Contractors
Right to Control Test
Determination rests upon whether employer exercises control over
the results produced or
over the means used to achieve the results
An agreement between the parties is not determinative
Analysis requires an examination of the actual course of conduct between the two parties
(cont’d) *

3. Are They Really Not an Employee? Independent Contractors
An independent contractor is a business that offers services to the public; this usually means media advertising, commercial telephone listing, business cards, insurance, own business establishment, etc.
Evidence of independent contractor status:
Significant investment in facilities (hand tools and personal transportation are not significant)
Risk of profit or loss in providing services
Freedom to work own hours and to schedule own activities
No requirement to attend meetings or training sessions and does not provide oral or written reports
Freedom to provide services for other businesses (competitive or non- competitive) (cont’d) *

4. Are They Really Not an Employee? Independent Contractors
Evidence of employment status includes:
Full-time work
Setting work hours
Attendance at meetings and / or training
Requiring prior permission for absences
Controlling when, where, and how to do the job
Direct supervision
Providing facilities, equipment, tools or supplies
Setting rate of pay
Reimbursement or allowance for business or travel expenses
Fringe benefits
(cont’d) *

5. Are They Really Not an Employee? Independent Contractors
Evidence of employment status includes:
Setting time, money or territorial limits
Requiring services to be rendered personally (no subcontracting)
Requiring oral or written reports
Providing services that are integral part of the business, particularly when performed on a continuing basis
Identification of the individual as a representative of the employer (e.g., office line or address)
Does not allow the individual to perform services for competitive businesses
Reserves the right to end services on short notice
Supervises unskilled labor (or is subject to supervision)
(cont’d) *

6. Are They Really Not an Employee? Independent Contractors
Ask yourself:
Does the contractor advertise, have a website, have business cards, have stationery, advertise in yellow pages?
Test the corporate structure
Check with the Secretary of State whether the corporation is actually incorporated
Ask for insurance; etc.
Run an Internet search on entity; What’s turning up?
For individuals, run LinkedIn search
What does profile say?
Self-employment?
Lists other representative clients?
Shows your company as an employer? (cont’d) *

7. FLSA & Independent Contractors
USDOL recently issued new “Administrator’s Interpretation” (July 15, 2015)
Addresses “problematic trend” of independent contactor “misclassification”
Employees are wrongfully being denied workplace protections
E.g., Minimum wage, overtime pay, unemployment insurance, and workers’ compensation protection
Misclassification also results in lower tax revenues for government *

8. FLSA & Independent Contractors
USDOL’s Position: “[M]ost workers are employees” under the FLSA
Scope of “employment” under FLSA is very broad
“Employ” = “to suffer or permit to work”
USDOL continues to target independent contractor relationships (even when mutually- acceptable and advantageous) *

9. FLSA & Independent Contractors
USDOL: Must use multi-factor “economic realities” test to determine if worker is an employee or independent contractor
No one factor determinative
Should not be “mechanically” applied
Guided by notion that “scope of the employment relationship is very broad”
Liberally construed to provide expansive coverage of workers under the FLSA *

10. FLSA & Independent Contractors
Factors to assess “economic realities” of relationship under FLSA:
Is work an integral part of employer’s business?
Does worker’s opportunity for profit or loss depend on his or her managerial skill?
What is worker’s investment compared to employer’s? *

11. FLSA & Independent Contractors
Factors to assess “economic realities” of relationship under FLSA (Cont.):
Does work performed require special business skills, judgment, and initiative?
Is relationship permanent or indefinite?
How much control is exercised by putative employer over the worker? *

12. FLSA & Independent Contractors
According to USDOL, the fundamental issue is as follows:
Is the worker “economically dependent” on the business? Or is the worker “in business” for herself/himself? *

13. Some “Actual Realities” About the USDOL’s Interpretation…
USDOL will be predisposed to find an employment relationship exists (and will be inherently skeptical that an independent contractor relationship is bona fide)
Application of the multi-factor “economic realities” tests leaves USDOL with extreme discretion
Any “good” facts in your case – tending to show an independent contractor relationship – will be marginalized and discounted *

14. Some “Actual Realities” About the USDOL’s Interpretation… (Cont.)
If you doubt our conclusions, consider some notable quotations from the guidance:
“[I]nvesting in tools and equipment is not necessarily a business investment or capital expenditure that indicates a worker is an independent contractor.”
“[A] lack of permanence [to the engagement] does not automatically suggest an independent contractor relationship.” *

15. Some “Actual Realities” About the USDOL’s Interpretation… (Cont.)
If you doubt our conclusions, consider some notable quotations from the guidance (Cont.):
“[W]orkers’ control over the hours when they work is not indicative of independent contractor status.”
“[A]n employer’s lack of control is not particularly telling if the workers work from home or offsite.” *

16. Some Actual “Realities” About the USDOL’s Interpretation… (Cont.)
Now ask yourself:
Is the “independent contractor” classification truly beneficial to your business or organization? (Even considering the hostile regulatory environment and potential risks?)
Are you prepared to fully litigate the issue? (Because you will likely have a hard time convincing USDOL that you have properly classified someone as an independent contractor.)
Are you prepared to incur the costs, damages and penalties resulting from worker misclassification? *

17. Review of Agreement *

18. Litigation v. Arbitration*

19. Arbitration can be less expensive than litigation.
Less time committed
Less work effort
However
Filing Fees
Final Fees
Hourly/Daily Compensation for the arbitrator(s)
Room rental fees
Other costs

20. Arbitration can be faster than litigation.
Streamlined process
No backlogged court dockets
However
No court scheduling order
Time to select arbitrator(s)

21. C. Arbitration affords greater privacy to the parties.
No publicly filed allegations
No public trials or decisions
Parties control of information
However
Leverage

22. D. Arbitration may allow the parties to avoid extensive and burdensome discovery.
Discovery limitations
However
May have needed more discovery

23. E. Arbitration may allow the parties to avoid motion practice.
Motions limited or eliminated
However
No early challenge of claims
No provisional remedies

24. F. Arbitration may allow the parties to avoid the strictures of the rules of evidence.
Relaxed standards
However
Lost advantage

25. G. Arbitration provides for greater finality.
Difficult to challenge decision
However
Stuck with bad decision
Arbitrators sometimes try to stick to the middle

26. H. Arbitration is a creature of contract.
Draft what you want
Flexible
However
Predictability of rules of civil procedure is lost

27. The information in this presentation is intended as general background information on labor and employment law. It is not to be considered as legal advice. Employment law changes often and information becomes rapidly outdated.
All rights reserved. This presentation may not be reprinted or duplicated in any form, without the express written authorization of Michael D. Billok, Esq. *

28. Safari Professionals of the Americas
Michael D. Billok, Esq.
January 14, 2016