Appeals Court Reaches Same Conclusion as DOL on Independent Contractors

By Eric B. Meyer

Last week, I did a post about a memo from the U.S. Department of Labor, Wage and Hour Division addressing independent contractor misclassification under the Fair Labor Standards Act.

That memo described six factors which the Labor Department says reflect the “economic realities” of when a worker is an employee or an independent contractor.

On Tuesday, the Philadelphia-based Third U.S. Circuit Court of Appeals issued this unpublished opinion in which it too examined the factors that it felt are important for determining employment status under the FLSA (and New Jersey state law).

Another “economic realities” test

I’ll cut right to the chase. The Third Circuit continues to apply the same “economic realities” test as the U.S. Department of Labor:

1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; 2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6)whether the service rendered is an integral part of the alleged employer’s business.”

And there you have it. But, before I go, something caught my eye as I continued to peruse the Court’s opinion. Specifically, it’s the section quoted below, partially because it applies the rule cited above; but, also because I’m a 13-year-old trapped in a 39-year-old employment lawyer’s body:

In Rutherford Food Corp. v. McComb, 331 U.S. 722, 726 (1947), the Supreme Court held that meat boners in a factory were employees, even though the boners owned their own tools, hired employees to assist with the boning operation, and were not paid hourly. The Rutherford court noted that “[w]hile profits to the boners depended upon the efficiency of their work, it was more like piecework than an enterprise that actually depended for success upon the initiative, judgment or foresight of the typical independent contractor.”

6 factor test applies in Third Circuit

(If you didn’t literally LOL, maybe this blog isn’t for you. Otherwise, share some sunshine and forward this post to 10 of your co-workers).

And remember, whether you operate a boning operation, or you have no boners in Pennsylvania, New Jersey, Delaware, or the U.S. Virgin Islands, it’s the six-factor test when determining who is an independent contractor and who is an employee.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.