Overtime Pay for Not-So- “Independent” Contractors

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Often, employers will classify a worker as an “independent contractor” — and many times the worker agrees to this categorization– and the worker is not paid overtime for hours worked over 40 per week.

However, if you are a worker who is called an “independent contractor,” that categorization may not apply for overtime-law purposes and more understanding of the law can help you determine whether you are eligible for overtime pay.

It is wage law’s standards, not the designations of the employer and worker, that ultimately control whether the worker is in actuality an “employee” under wage law standards who is entitled to overtime pay.

The Fair Labor Standards Act (FLSA), the federal overtime and minimum wage law, sets forth the standards for what makes a worker an independent contractor (who is not entitled to overtime) versus an employee (who is entitled to overtime).

According to the U.S. Department of Labor (DOL), which enforces the FLSA, employers commonly misclassify employees as independent contractors.  Employment situations where misclassifications are common– i.e. where workers are often wrongly labeled “independent contractors” and denied overtime pay– include construction-contractor, franchiser-franchisee, and volunteer relationships.

As a general matter, FLSA standards involve a weighing of facts by a Court, and they relate to the degree of economic independence from the employer the worker has.

DOL posted this Fact Sheet about an employment relationship, and the factors that distinguish a worker from being an independent contractor versus an employee. According to DOL’s Fact-Sheet summary, significant factors a court considers include:

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.

As stated, these factors are fact-intensive, and rely on the discretion of a court.  If your independent contractor designation is keeping you from time and one-half rate pay for overtime hours, you may be considering whether you are an independent contractor under the FLSA, per the factors above.  For more guidance on how a working relationship like yours may be analyzed under the factors above and other applicable law and cases, you can consult DOL’s website resources, your State’s wage-enforcement agency (which may enforce State overtime laws very similar to the FLSA), and/or a wage attorney.