Professor: Doug Scherer
Course: Employment Law
Fall 2014
❖ Employee v. Independent Contractor
➢ Definition of an employee is still controlled and analyzed by principles of common law Agency.
➢ Independent Contractor definition:
■ One who contracts with another to perform a service for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of that service.
➢ Employee definition:
■ A person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of those services is subject to the other’s control or right to control.
➢ Factors to include in determining employee vs. independent contractor:
■ Whether the worker is under the control of the employer in terms of its day-to-day operation? If so, then employee.
■ The type of occupation? Is the work normally done under the direction of an employer (employee) or by a specialist without supervision (independent contractor)?
■ The skill required for the particular occupation. Likely if more skilled, then independent contractor.
■ Does the worker supply his own tools/materials? If so, then independent contractor.
■ Where is the work performed? Likely if performed on-site, then employee.
■ What is the method of payment? By hour (employee) or by job (independent contractor)?
■ Were benefits included? Were taxes deducted? If so, then employee.
■ What are the hiring/firing methods or procedures in place?
■ Is the employer considered a business or simply an individual? If business, then employee.
➢ Vicarious Liability (Third Party v. Employer)
■ Courts are not confined to the terms of the contract; they may look as well to the conduct of the parties.
■ Employee:
● The event must have occurred during the employee’s scope of employment.
● The employer is vicariously liable.
■ Independent Contractor:
● The general rule is that the employer of an independent contractor has no vicarious liability for the torts of the independent contractor or for the torts of the independent contractor’s employees in the performance of the contract.
■ Public Policy Test:
● In situations where the relationship would be characterized as an employer/employee relationship, but the employer’s contract specifically names the worker as an independent contractor to avoid this type of liability, the courts will scrutinize the contract to see if the parties should be allowed to categorize the worker as an independent contractor. An employer will not be allowed to escape liability by drafting a contract which labels its employee as an independent contractor, but retains employer-like control over him.
➢ Liability (Employee v. Employer)
■ In a suit (usually negligence or some other tort claim) against the employer, the employer usually wants the individual to be treated as an employee, rather than an independent contractor, so the company can be off the hook and the liability falls under worker’s compensation.
➢ Work For Hire
■ The general rule is the creator of any work is the author of that work, the two exceptions being cases of joint work and work made for hire.
■ If the individual is considered an employee, then the work he is hired for is considered “work for hire,” meaning the employer enjoys exclusive ownership of the copyrights to the work created.
■ If the individual is considered an independent contractor, then the work he is hired for belongs to the individual.
■ There are two ways a created work will fall within the work for hire exception: 1. a work is prepared by an EMPLOYEE within the scope of his employment; or 2. a work is specially ordered or commissioned . . . if the the parties expressly agree in a written instrument signed by them.
● For example, if the individual(s) are considered independent contractors, a “written work made for hire agreement” signed by both parties is usually executed to provide the employer with exclusive ownership of the copyrights.
■ Courts use the Reid factors to determine whether the creator of the work is an employee within the meaning of the Copyright Act. Those factors are in large part the same as those used in the common law agency test.
❖ Fair Labor Standards Act (FLSA)
➢ Definition: The FLSA mandates that employees receive a minimum wage and overtime pay of time and a half of the worker’s regular hourly rate for each hour worked in excess of forty hours per
that they employee performs)? Compare the following:
◆ Relative importance of the exempt duties with other types of duties.
◆ Amount of time spent performing exempt work (this factor weighs heavily).
◆ Employee’s relative freedom from direct supervision.
◆ Relationship between the employee’s salary and the wages paid to the other employees for the kind of nonexempt work performed by the employee.
● 3) “Customarily and Regularly” direct the work of two or more other employees.
◆ A frequency that must be greater than occasional but which, of course, may be less than constant; work should be normally and recurrently performed every work-week; it should not include isolated or one-time tasks.
◆ “Two or more employees” means full-time employees or their equivalent (i.e. 4 part-time employees); generally construed as requiring “a total of 80 employee-hours of work each week”.
● 4) Have authority to hire/fire other employers or make recommendations about the hiring, firing, advancement, promotion or any other change of status of other employees that are given “particular weight” (akin to “tangible employment action” under Title VII).
◆ Evidence of particular weight could include: testimony that recommendations were made and considered, exempt employee’s job description lists responsibilities in this area, exempt employee’s performance reviews documenting activities in this area, etc.
◆ Occasional suggestion does not qualify.
➢ Notes on FLSA
■ Generally, an owner is not an employee for FLSA purposes.
■ But, there are instances where an owner can be considered an employee:
● Look beyond the mere formalities and titles and focus on whether the owner exercised employer-like control.
● Look at the language of the controlling statute. Ex.) ERISA allows an owner to be considered an employee
