|                                                            | U.S. Department of Labor |
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| Employment Standards Administration Wage and Hour Division |

Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA)
This fact sheet provides general information concerning the meaning of "employment      relationship" and the significance of that determination in applying      provisions of the FLSA.
Characteristics
An employment relationship under the FLSA must be distinguished from a      strictly contractual one. Such a relationship must exist for any provision      of the FLSA to apply to any person engaged in work which may otherwise be      subject to the Act. In the application of the FLSA an employee, as      distinguished from a person who is engaged in a business of his or her      own, is one who, as a matter of economic reality, follows the usual path      of an employee and is dependent on the business which he or she serves.      The employer-employee relationship under the FLSA is tested by "economic      reality" rather than "technical concepts." It is not      determined by the common law standards relating to master and servant.

The U. S. Supreme Court has on a number of occasions indicated that      there is no single rule or test for determining whether an individual is      an independent contractor or an employee for purposes of the FLSA. The      Court has held that it is the total activity or situation which controls.      Among the factors which the Court has considered significant are:

1) The extent to which the services rendered are an integral part of the      principal's business.

2) The permanency of the relationship.

3) The amount of the alleged contractor's investment in facilities and      equipment.

4) The nature and degree of control by the principal.

5) The alleged contractor's opportunities for profit and loss.

6) The amount of initiative, judgment, or foresight in open market      competition with others required for the success of the claimed      independent contractor.

7) The degree of independent business organization and operation.

There are certain factors which are immaterial in determining whether there       is an employment relationship. Such facts as the place where work is performed,       the absence of a formal employment agreement, or whether an alleged independent       contractor is licensed by State/local government are not considered to have       a bearing on determinations as to whether there is an employment relationship.       Additionally, the Supreme Court has held that the time or mode of pay does       not control the determination of employee status.
Requirements
When it has been determined that an employer-employee relationship does       exist, and the employee is engaged in work that is subject to the Act, it       is required that the employee be paid at least the Federal minimum wage,       -- $5.15 an hour effective 9/1/97 -- and in most cases time and one-half       his/her regular rate of pay for all hours worked in excess of 40 per week.       The Act also has child labor provisions which regulate the employment of       minors under the age of eighteen, as well as record keeping requirements.
Typical Problems
(1) One of the most common problems is in the construction industry      where contractors hire so-called independent contractors, who in reality      should be considered employees because they do not meet the tests for      independence, as stated above. (2) Franchise arrangements can pose      problems in this area as well. Depending on the level of control the      franchisor has over the franchisee, employees of the latter may be      considered to be employed by the franchisor. (3) A situation involving a      person volunteering his or her services for another may also result in an      employment relationship. For example, a person who is an employee cannot "volunteer"      his/her services to the employer to perform the same type service      performed as an employee. Of course, individuals may volunteer or donate      their services to religious, public service, and non-profit organizations,      without contemplation of pay, and not be considered employees of such      organization. (4) Trainees or students may also be employees, depending on      the circumstances of their activities for the employer. (5) People who      perform work at their own home are often improperly considered as      independent contractors. The Act covers such homeworkers as employees and      they are entitled to all benefits of the law.
Where To Obtain Additional Information
This publication is for general information and is not to be considered       in the same light as official statements of position contained in the regulations.

**For additional information, visit our Wage-Hour website: http://www.wagehour.dol.gov       and/or call our Wage-Hour toll-free information and helpline, available       8am to 5pm in your time zone, 1-866-4USWAGE (1-866-487-9243).**

 

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