Employee
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The question of who is (and who is not) an employee is fundamental to the FLSA’s minimum wage and overtime requirements. Generally speaking, whether an individual is an employee will rely on the “economic reality” of the relationship. Often, there is no question that an individual is an employee. However, the issue of whether someone is an employee often arises when the worker has been labeled an independent contractor, trainee, or volunteer.
Importantly, labels are not controlling. Even if a worker is called an independent contractor, he or she may still be held to be an employee entitled to minimum wages and overtime. The same is true where the employee is labeled a trainee, intern, or volunteer. The statutory definition is quite broad, albeit rather circular. Courts have applied an economic reality test and seek to determine whether the worker was, in all reality, an employee. In certain instances, courts have gone beyond the common elements of the economic reality test to determine if the workers were, in reality, employees.
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The Economic Reality Test
Under the modern economic reality test, whether an individual is an employee is determined by looking at several factors:
- Degree of control of the employer
- Extent of the relative investments of the employer and the worker
- Degree to which the employer determines the worker’s opportunity for profit or loss
- Skill and initiative required to perform the job
- Permanency of the relationship
See Brock v. Mr. W Fireworks, 814 F.2d 1042, cert. denied, 484 U.S. 924 (1987); United States v. Silk, 331 U.S. 704, 716 (1947)
Additional Considerations
Although labels, such as independent contractor, do not control whether an individual is actually an employee, the fact that an employer calls an individual an employee is strong evidence that an employment relationship exists.
Because the ultimate question is whether the individual is in economic reality an employee, courts have also considered these additional factors:
- Whether the work performed was an essential part of the employer’s business
- Expectation of compensation
- Tax treatment
- Industry practice
Statutory Definition of Employee
For the FLSA’s minimum wage and overtime requirement to apply to an individual worker, that worker must be an employee. An “employee” is “any individual employed by an employer.” 29 U.S.C § 203(e)(1). An “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C § 203(d). The term “employ” means “to suffer or permit to work.” 29 U.S.C § 203(g).
These definitions have been interpreted very broadly. The statutory language “stretches the meaning of ‘employee’ to include some parties who might not qualify as such under a strict application of agency principles.” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992).
Cases Defining Employee
The common law test for employee status was “right of control.” In the National Labor Relations Act context, this definition was rejected in favor of a more reality-based test that directed courts to consider “the economic facts of the relation.” NLRB v. Hurst Publications, 322 U.S. 111, 128 (1944).
The common law test was similarly rejected for Social Security Act cases. The Court adopted the NLRA definition and set forth factors to consider, including control, opportunity for profit or loss, investment in facilities, permanency of the relationship, and skill required. United States v. Silk, 331 U.S. 704, 716 (1947).
On the same day the Silk decision was released, the Supreme Court further held that the definition of employee used in NLRA and SSA cases would apply to cases under the FLSA. Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947).
The Court used the term “economic reality” to describe the ultimate inquiry into employment status in an FLSA case. Bartles v. Birmingham, 332 U.S. 126, 130 (1947).
Employee Status Found
A variety of workers have been found to be employees, including
- Topless dancers
- Locker room attendants
- Real estate salesperson
- Night dispatcher
- Laundromat attendants
- Security guards
- Lumberjack and related workers
- Waiters and waitresses
- Hotel card room supervisor
- Cake decorators
- Employment counselors
- Nurses
- Gas station operators
- Parking lot valets
See Am. Bar Ass’n, The Fair Labor Standards Act, Kerns, E. ed. (1999), pp. 89-90.
Special Problems
Homeworkers, meaning people who work out of their homes, are often employees.
Trainees may or may not be employees. The DOL has a six-criteria test based on factors enumerated by the Supreme Court in Walling v. Portland Terminal Co., 330 U.S. 148 (1947).
Volunteers are unpaid workers. Generally, there is no such thing as a volunteer where the employer is a for-profit business. A worker may be a volunteer in the public sector or where humanitarian objectives are involved.
Patient-Workers, such as patients at a mental hospital or other treatment center, who perform work may be employees.
Prisoners are generally not employees, however, there is some argument that prisoners could be employees under certain work programs. This is mainly an academic argument as nearly every action involving prisoners has found prisoners not to be employees. Notably, the DOL ruled that prisoners of war were workers in 1942.
Aliens, illegal workers, and undocumented workers generally are considered to be employees the same as a citizen. At least one court has noted that exempting aliens from the FLSA would only increase demand for such illegal workers, given that their primary appeal is their willingness to work for minimal pay.
Related Concepts
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