U.S. Department of Labor 

Wage and Hour Division 

 (Revised July 2009) 

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 of 

$7.25 per hour effective July 24, 2009, and in most cases overtime at time and one-half his/her regular rate

of pay for all hours worked in excess of 40 per week. The Act also has youth employment provisions
which regulate the employment of minors under the age of eighteen, as well as recordkeeping

 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 

For additional information, visit our Wage and Hour Division Website: http://www.wagehour.dol.gov

and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-

4USWAGE (1-866-487-9243). 

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. 

U.S. Department of Labor

Frances Perkins Building 

200 Constitution Avenue, NW 

Washington, DC 20210 

1-866-4-USWAGE

 TTY: 1-866-487-9243

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