United States Department of Labor Issues Memorandum Indicating Agency’s View that Most Workers Are “Employees” Covered by the Fair Labor Standards Act

Confirming what many employment law practitioners already know, on Wednesday July 15, 2015, the United States Department of Labor, Wage and Hour Division (“USDOL” or the “Agency”) confirmed that the Agency takes a very expansive view of “employment” under the federal Fair Labor Standards Act (“FLSA”). The USDOL issued a 15 page “Administrator’s Interpretation” in which the USDOL pointed out the importance of properly classifying workers as “employees” so that they do not lose critical legal protections important for such workers, particularly those in low paying jobs. The noted protections include minimum wage, overtime compensation, unemployment insurance and workers compensation. The Interpretation also noted the need to provide an even playing field for employers who properly classify their workers. The Interpretation can be accessed here.

Under the FLSA, to “employ” means to “suffer or permit to work.” The Agency reads the phrase broadly, concluding that Congress intended the FLSA to have broader application than the common law control test. To assess employment under the FLSA, the Interpretation confirms the six (6) part “economic realities test” long analyzed by courts. In so doing the Agency notes that the “ultimate inquiry” in the analysis of a worker’s status is whether the worker is in business for him/herself (making the worker an independent contractor) or dependent on the employer, which indicates employment. The Interpretation outlines the six (6) factors to be considered in conducting this analysis as follows: the nature and degree of the employer’s control, whether the work is integral to the business, whether the worker has an opportunity for profit or loss, how the worker’s relative investment compares to the employer’s investment, whether the work performed requires special skill and initiative, and whether the relationship between the worker and the employer is permanent or indefinite. The Agency notes that the factors are “tools” and “guides” to aide in the ultimate question of determining economic independence, which should be assessed “in totality.”

The Interpretation should be viewed in conjunction with the USDOL’s recent issuance of proposed regulations regarding changes to the number of employees eligible for exclusion from overtime under the FLSA. In light of the Agency’s focus on this issue, this is an excellent time for companies to take note of the USDOL’s conclusion that “most workers are employees under the FLSA’s broad definitions” in closely assessing their classification of workers.