Laws on Classification of Workers as Independent Contractors vs. Employees

Laws on Classification of Workers as Independent Contractors vs. Employees
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March 31, 2023
The worker classification issue has been a source of ongoing debate and concern for many employers and employees. This paper will explore the history and definition of the laws surrounding the classification of workers as independent contractors or employees, as well as review articles and relevant cases that help shed light on this complex topic.
History and Definition
The Fair Labor Standards Act (FLSA) was established in 1938 to establish fundamental labor standards, such as the definition of an employee. According to the FLSA, an employee is "any individual employed by an employer." The act requires that workers under its coverage be paid at least the federal minimum wage and receive overtime pay for any hours worked over 40 in a workweek (US Department of Labor). Nonetheless, it does not provide a clear definition of an independent contractor.
To differentiate between employees and independent contractors, the Internal Revenue Service (IRS) and the Department of Labor (DOL) created a set of standards that take into account the level of control an employer has over the worker, the worker's economic dependence on the employer, and the nature of the relationship between the two (Eversheds Sutherland).
Article Review
One article, "Employee or Independent Contractor? It Depends on the Job," by Michael C. Jacobson, provides a detailed overview of the criteria used to determine worker classification. The article explains that the critical factor in determining worker classification is the extent of control the employer has over the worker. If the employer has the right to control the worker's job performance, including when, where, and how the work is done, then the worker is likely an employee. On the other hand, if the worker has a high degree of autonomy in performing the work and the employer is only concerned with the end result, then the worker may be an independent contractor (State of California - Department of Industrial Relations).
Another critical factor in determining worker classification is the worker's level of economic dependence on the employer. If the worker is economically dependent on the employer for his or her livelihood, then the worker is more likely to be classified as an employee (Kautonen et al.). This is because employees are entitled to certain legal protections and benefits, such as minimum wage, overtime pay, workers' compensation, and unemployment insurance.
In another article by Volkin, "Why the Gig Economy Could Be the Future of Work,." Volkin explores the rise of the gig economy and how it has complicated worker classification. The gig economy refers to a labor market characterized by short-term contracts or freelance work, as opposed to permanent jobs. In the gig economy, workers often work for multiple companies or clients and have a high degree of autonomy in deciding when, where, and how they work.
The gig economy has made it more challenging to determine worker classification because the traditional employee-employer relationship no longer exists. Instead, workers in the gig economy may be considered independent contract...