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Am I an Independent Contractor or am I an Employee? And am I Entitled to Overtime?

Am I an Independent Contractor or am I an Employee?  And am I Entitled to Overtime?

Independent Contractor or Employee? Columbus Employment Law Attorney Discusses the Differences

Say you find out about an exciting job opportunity from a friend.  The new position offers higher pay and is closer to home than where you work right now.  You submit an application and are called in for an interview.  Three days later, you are offered the job and you accept.  You give notice to your current employer, and two weeks later you head out for your first day of work at the new job.

When you arrive, you are presented with what you think is normal first-day paperwork.  You sign a couple of tax forms and what your supervisor tells you is a standard employment agreement.  Eager to get started, you sign the agreement without reading it over very closely.  You then begin training for your new position.

A few weeks later, you receive your first paycheck.  Although you are being paid by the hour, you notice that taxes and FICA haven’t been taken out.  Thinking that this is a mistake, you go to your supervisor and let them know what happened.  She tells you that it isn’t a mistake, and that you are working for the company as an independent contractor as set forth in your employment agreement.  You are told that you will receive a 1099 at the end of the year and that you should put some of the money aside to cover your own taxes.  Your manager also suggests that you set up your own company – an LLC – because you are working for yourself and it will be better for tax purposes.  This seems reasonable, so you go ahead and set one up.

You think this is a little strange, but at this point you don’t have another job and the money is pretty good.  Soon your training ends, and your employer starts giving you more and more hours to work.  Although you are working way more than 40 hours per week, you find that you are not being paid overtime.  Again, you go to your supervisor and she tells you that the company doesn’t have to pay you overtime because you are an independent contractor.

Although you are being called an independent contractor, it sure seems to you like you are an employee.  You are required to come to the same office every day on a set schedule and your work is closely managed by your supervisor.  You have to adhere to a company dress code, and all of your equipment is provided by your employer.  Although you supposedly have your own company, you cannot hire anyone to do your duties for you.  Gosh, you think to yourself, although they call me an independent contractor it sure seems like I’m an employee.

If this sounds like your situation, your employer may have misclassified you as an independent contractor.[1]  As a result, you may be entitled to your lost overtime compensation under Federal and Ohio wage and hour laws.

The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq; and corresponding state laws such as the Ohio Minimum Fair Wage Standards Act (OMFWSA), R.C. §§ 4111 et seq., in most cases require that employers pay their employees a minimum wage and overtime of one and one half times an employee’s regular hourly pay for hours worked in excess of forty hours per week.  Although these laws only cover “employees,” the FLSA’s definition of employee – any person employed by an employer – is very broad.[2]

An employer does not have the final say on whether someone is employed as an independent contractor or an employee.  Instead, the law uses a substance over style approach when determining if a worker has been misclassified. Courts employ a balancing test that weighs several factors regarding your relationship with your employer to determine whether or not you are, indeed, an independent contractor.  The most important thing that courts will look at is the concept of control.[3]

The more an employer controls your work, the more likely it is that you are an employee.  For example, if an employer demands that you work certain hours, say from 9:00AM until 6:00PM every day and requires you to physically clock in and out, that tends to show an employment relationship.  Further, if your employer demands that you clock in and out at a certain location rather than from home or another site, it tends to show a traditional employment relationship.

Another aspect of control that Courts review is how you perform your assigned tasks.  An example of this is an individual who is hired to perform data collection.  There are dozens of ways a person can collect data, including at times various software programs, and a true independent contractor might be left to choose their own method of doing so.  In a traditional employee/employer setting, however, the employer might demand that the data be collected using certain steps and methods monitored by a supervisor.

Independent contractors also differ from employees in that they have an opportunity for profit or loss on work they perform, whereas an employee is insulated from the profit and loss of their employers. That is, if a contractor is paid a flat rate to complete a particular project, how fast they can complete the project will affect its profitability.  An employee, however, might be paid the same hourly rate no matter how long the job takes.

Independent contractors also typically provide the tools of their trade, be it trucks, heavy equipment, or even computers and printers.  In contrast, employees are usually provided equipment by their employer. Further, independent contractors may be allowed to hire outside staff to assist them with their projects, whereas an employee would not have that ability.

In addition to reviewing when and where you work, in determining control Courts will also look at what rules an employer requires of their workforce. This can even extend to a dress code – if you are required to wear a uniform or dress a certain way, it is more likely that you are an employer.

If you believe that you have been misclassified as a Contractor it is important to seek the advice of an experienced employment attorney who will be able to further assess whether or not you are entitled to overtime compensation.

Sam Schlein is an associate with the law firm Marshall Forman & Schlein LLC. He represents individuals in a wide range of employment issues, including overtime and minimum wage claims.

[1] In addition to overtime issues, whether you are an employee or an independent contractor may have an effect on your eligibility for unemployment benefits, workers compensation, and employer provided benefits, as well as tax implications.  Although these are not within the scope of this article, you may wish to consult with an attorney about some or all of these issues.

[2] See https://www.law.cornell.edu/uscode/text/29/203

[3] A comprehensive list of factors that Courts consider can be found at https://www.dol.gov/whd/regs/compliance/whdfs13.pdf .

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