CHAPTER 2 – LEGAL BOUNDARIES OF THE EMPLOYMENT RELATIONSHIP
EMPLOYEES V. INDEPENDENT CONTRACTORS
Secretary of Labor v. Lauritzen
P. 13
Migrant pickle farmers were working for Lauritzen. Sec. of Labor said the migrants were EEs, not ICs. Π said the FLSA was violated – said ∆ violated the minimum wage requirements and the child labor laws. Workers came to ∆s farm every year, they decided how/who would do the work, all they needed was a pair of gloves, minimal training, and they’d get half of the proceeds of the pickles. ∆ provided housing and all equipment except for the gloves
ECONOMIC REALITY TEST – factors to consider
1) The nature and degree of the alleged employer’s control as to which the work is to be performed – If the boss controls, the person is an employee. If the worker controls, he is an independent contractor – CONTROL TEST!
2) The alleged employee’s opportunity for profit or loss depending upon his managerial skill
3) The alleged employee’s investment in equipment or materials required for his task, or his employment of workers
4) Whether the services rendered require a special skill – If anyone could perform the task, the person is an independent contractor. If the task requires specialized skills, the person is an employee
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 alleged employer’s business – More dependent people are employees and less dependent people are independent contractors
Analysis in this case
½ of the profits was an incentive for the workers
∆ occasionally visited the migrants in the fields, but they mainly controlled themselves, ∆ exercised control over the operation as a whole
No risk of loss, only a chance of gaining more profits – the more pickles the migrants picked, the more money they’d make
No real investment – only the cost of gloves à NOT a capital investment
No specialized skills were needed
Work was seasonal, but workers came back every year
Migrants are dependent economically – THIS FACT MAKES THEM EES!
Concurrence: Easterbrook doesn’t like the balancing test used in the main opinion. Says everything is essential to an employer, because he wouldn’t hire people to do nothing, so the last factor is irrelevant. The heads of the migrant families split up the work. Talks about PHYSICAL CAPITAL, which is very important because the migrant workers are rich in HUMAN CAPITAL. Said there’s no evidence of dependence because the migrants can move from one locale to another. Should think of employment as “to suffer or permit to work”. Cannot contract around FLSA requirements and migrants are EEs under the law.
NOTES:
FLSA is designed to protect vulnerable workers
EEs à ERs must withhold state and federal income tax, pay FUTA tax, FICA tax, un
f the corporate family
Short-term attachment
No real job security
COVERED EMPLOYERS
Liu v. Donna Karan International, Inc.
P. 40
Chinese workers in a garment factory claimed FLSA violations
Sweatshop made clothes for Donna Karan
Πs were paid by the hour or by the number of pieces they produced
Πs said they worked 80 hrs/wk and didn’t get minimum wage or overtime
Πs claim sweatshop and Donna Karan were joint employers
Πs claim Donna Karan is jointly responsible because she dictated the prices and production requirements
ER – any person acting directly or indirectly in the interest of an ER in relation to an EE
EE may have more than one ER under the Dept. of Labor’s definitions
JOINT EMPLOYER – one ER is not completely disassociated from employment by the other ER(s)
CARTER TEST
1) The alleged ER had the power to hire and fire the EEs, and
2) The alleged ER supervised and controlled the EE’s work schedules or conditions of employment, and
3) The alleged ER determined the rate and method of payment, and
4) The alleged ER maintained employment records
The Carter test is very hard to pass
