MN Employment Law Report

MN Employment Law Report

The Bottom Line on Labor & Employment Law

Yogi Berra: Human Resources Consultant

Posted in Employment Advice


Baseball Hall of Famer Yogi Berra passed away this month at the age of 90. In addition to being a great player for the perennial champion New York Yankees in the 1950’s and early 1960’s, Berra was also known as a type of clown-prince for his penchant for amusing malapropisms relating to baseball as well as life in general.

Many people probably don’t realize, however, that Yogi Berra’s frequently-quoted observations can also be viewed as astute critiques of the American workplace. His ability to reduce the complexities of life into humorous sound bites created a treasure trove of good counsel, especially on the importance of thoughtful evaluation and looking at the big picture, when he reminded us that you can “observe a lot by watching.”

Some of Berra’s shrewdest thoughts on the American workplace included:

  • “Ninety percent of the game is mental. The other half is physical.”  Berra understood that hiring workers and having them show up is only half the battle. You want a workforce that is motivated and engaged, and who takes pride and satisfaction in their jobs. That’s the other half of the equation and it is the far more significant half.
  • “I never said half the things I said.”  This was Berra’s great reminder of the importance of documentation for managers and supervisors. For all the times that employees claim that their supervisor said they could take the day off, or that a manager uttered a discriminatory remark, Berra knew that you have to be able to prove that you did not say what they claim you said.
  • “It was impossible to get a conversation going, everybody was talking too much.”   Despite his sometimes befuddling remarks, Berra understood the importance of clear and effective communication. It is important that everybody be on the same page and work together toward the common goal, and you can’t achieve that unless there is a very clear voice coming from the leader.
  • “There are some people who, if they don’t already know, you can’t tell ’em.”  Berra saw a great number of baseball players come and go, and he understood that some of them just could not compete at a Major League level. In any workplace, there will be people who simply are not able to perform their job responsibilities capably. In those cases, Berra would tell you that at some point, if they haven’t caught on, they never will. Don’t avoid making the hard decision to let someone go if they simply can’t play the game.
  • “Nobody goes there anymore. It’s too crowded.”   Innovation and creativity are often critical to success in business. You need employees who can think outside the box and come up with creative ways to increase productivity, reduce expenses and stay ahead of the competition. Berra reminded us of how important it is to distinguish yourself from the other guys.

Bottom Line

Berra’s most enduring line may have been “It ain’t over until it’s over.” He is gone now, but Yogi Berra’s impact on the American workplace will never be over.


Test for Unpaid Interns Getting More Relaxed

Posted in Wage & Hour

Internship Blue MarkerThe test for determining whether to classify workers as unpaid interns or paid employees is continuing to broaden, largely in favor of employers, as we reported here in July.  In Schumann v. Collier Anesthesia, P.A., the United States Court of Appeals for the Eleventh Circuit rejected the Department of Labor’s rigid six-factor test and ordered the trial court to decide an intern case under the more relaxed “primary beneficiary test” that the Second Circuit recently adopted in the case of Glatt v. Fox Searchlight Pictures, Inc. Interestingly, the trial court had already ruled that the interns were properly classified as unpaid but they did so using the “old” test. Therefore, it seems likely that that the employer will prevail again but we may get additional clarity on how the new standard is to be applied.

Why Can’t Both Sides Benefit?

A central part of the “old” test was whether the company offering the internship received an “immediate benefit” from the interns. If the answer was yes, this often meant the intern must be paid as an employee. The Eleventh Circuit determined that this test was outmoded since unpaid intern programs of the past tended to be used to train a pool of potential employees for future work opportunities. Now, internships typically offer the chance for students to “learn on the job” and it is only natural that companies will receive some sort of immediate benefit from the added labor. This coincidental benefit, the Court explained, should not be the deciding factor.

The interns in Schumann were all student registered nurse anesthetists (SRNAs) currently enrolled in school. In Florida, all students must complete several hundred clinical hours to become a certified registered nurse anesthetist (CRNA). These particular students all went to the same private college and all completed their clinical hours with Collier Anesthesia, (“Collier”), a privately owned practice group. The interns argued that they should have been paid because Collier received a financial benefit by being able to serve more patients when SRNAs were scheduled. Collier disagreed, explaining that their internship program was set up with either a 1:1 or 2:1 ratio of SRNAs to CRNAs. The CRNA would supervise the intern, evaluate their daily performance, and provide instruction throughout their shift. This level of supervision often took additional time for the CRNAs and several reported that the interns actually caused a decrease in the overall efficiency of their work.

What, if any, benefit Collier received from the use of interns will be sorted out in the district court, but the Eleventh Circuit left no doubt that under the new primary beneficiary test, the central focus should be on the benefit that the internship affords to the students. As long as Collier is not taking unfair advantage of the students by making them perform tasks or work hours well beyond the clinical hour requirement, the court concluded that “the mere fact that an anesthesiology practice obtains benefits from offering SRNAs internships cannot, standing alone, render the student interns “employees” for purposes of the FLSA.”

Bottom Line:

Again, Collier probably will win this one and employers will get some relief if they utilize hands-on, “on the job” internship programs. As long as the program provides the intern with tangible benefits such as educational credits, experience, and training, the fact that the company also benefits will no longer preclude the intern’s status as unpaid. Remember, however, that these rulings are limited to the Second Circuit Court of Appeals (covering New York, Connecticut and Vermont) and the 11th Circuit (Florida, Alabama and Georgia). Minnesota employers can take heart from these developments but our Eighth Circuit still has yet to weigh in on this emerging trend.

President Orders Paid Sick Leave for 2017

Posted in Employee Benefits, New Legislation

Blog-Pic---Doc---Cropped.jpgPresident Obama has now issued an Executive Order requiring federal contractors (and subcontractors) to offer up to 7 days of paid sick leave each year. This new requirement will not apply, however, until January 1, 2017, and only to contracts bid on or received in 2016 or later.

Paid Sick Leave for Federal Contractors

The Department of Labor must still undertake rulemaking to implement the Executive Order. However, here is a summary of the new sick leave requirement for federal contractors:

  • Employees earn at least 1 hour of paid sick leave for every 30 hours worked.
  • Employers may not “cap” the accrual of sick leave at or less than 56 hours.
  • The paid leave can be used for the employee’s own illness or to obtain “diagnosis, care, or preventive care from a healthcare provider.”
  • The paid leave also may be used to care for or to obtain a diagnosis or preventative care for a family member, which is defined to include anyone “related by blood or affinity whose close association with the employee is the equivalent of a family relationship.”
  • The paid leave also may be used to recover from or seek assistance for incidents of domestic violence, sexual assault or stalking.
  • The paid leave cannot be made contingent on the employee finding a replacement to cover the missed time
  • The paid leave can carry over to successive years (subject to the 56-hour cap).
  • The paid leave need not be paid out at termination, although employees who are rehired within 1 year are entitled to have their paid leave reinstated.

Questions remain about how the mandatory sick leave will interact with employer-provided PTO and other leave mandated by state or local law. It appears, however, that contractors who already provide sick leave benefits (and presumably PTO) will not be required to do anything more as long as their policies meet or exceed what the Executive Order requires.

Bottom Line

It is interesting to note that the Executive Order kicks in after President Obama’s term expires, so it remains to be seen whether his successor will be as committed to this new benefit for federal contractors’ employees.

Nevertheless, the move is expected to spur Congressional debate over the “Healthy Families Act,” which would require all businesses with 15 or more employees to offer up to 7 paid sick days each year.

We will continue to monitor this story as it develops.

Are Employers Now Responsible for Their Contract Workers?

Posted in Employment Advice, Labor Law

OutsourceMaybe so, according to the latest pronouncement of the National Labor Relations Board (NLRB).   In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), the NLRB dramatically expanded their definition of “joint employers,” so that businesses may now be responsible for the terms and conditions of employment of their subcontractors, franchisees and temp agencies.

What Used to be a Business Contract . . .

Browning-Ferris Industries (“BFI”), retained a staffing agency (Leadpoint) to supply temporary workers to its recycling facility in California.  The contract between the two companies specifically stated that Leadpoint was the workers’ sole employer and set forth the following assignment of responsibilities:

  • Leadpoint handled all the hiring (but the contract required that they make “reasonable efforts” to not assign former BFI workers who had been deemed ineligible for rehire at BFI);
  • Leadpoint was responsible for disciplinary matters (but there were a couple of occasions where BFI insisted that a temp be disciplined);
  • Leadpoint set wages (but could not pay more than what a BFI employee would get for similar tasks); and
  • Leadpoint handled all terminations (although BFI could bar any worker from continuing to work at BFI facilities).

A union then petitioned the NLRB to represent both the BFI employees and the Leadpoint temporary workers under the theory that the two companies jointly employed the Leadpoint workers.   This theory required that the supposed joint employer (1) possessed authority to control the terms and conditions of employment, and (2) actually exercised that authority.

. . . Is Now an Employment Agreement

The NLRB ruled for the union, choosing to adopt a new and scaled-back version of the joint employer test.  Now, for the first time, an employer need only possess the authority to control the working conditions but does not have to have actually exercised that control.  The NLRB declared that the explosive growth of the contingent workforce meant that continuing to follow the old test would represent a failure “to adapt the [National Labor Relations] Act to the changing patterns of industrial life.”

In determining whether an employer possessed control over the working conditions of contract workers, the NLRB acknowledged that “direct, indirect, and potential control” were all relevant to the joint-employer inquiry, as was the “way the separate entities have structured their commercial relationship” because it determines whether the putative employer might have the authority to govern working conditions.

Under the new, relaxed standard, BFI was deemed to be a joint employer of the Leadpoint workers because:

  • BFI “codetermined” the outcome of the hiring process by imposing specific conditions on Leadpoint’s ability to hire certain workers.
  • BFI essentially had the ability to terminate Leadpoint employees because of their “unqualified right to ‘discontinue the use of any personnel.’”
  • BFI managers actually assigned specific tasks that needed to be completed, specifed where Leadpoint workers needed to be positioned, and exercised “near-constant oversight of employees’ work performance.”
  • BFI played a “significant role in determining the employees’ wages” because contract specifically prevented Leadpoint from paying employees more than BFI employees performing similar work.

Bottom Line

Pay attention to this decision if you use independent contractors.  If you are considered a joint employer of the people working at your company from staffing agencies, subcontractors, etc., the value of using those resources is greatly diminished.  Therefore, you should try very hard to minimize your involvement in decisions affecting contract workers in the areas of hiring, discipline, termination and all the others that are typically associated with employers.  Hire a good contractor and let them make those decisions.

Incidentally, the NLRB is not the only government agency looking at these issues.  The Department of Labor recently announced that is also is exploring an expansion of liability for OSHA violations by joint employers, as is the Equal Employment Opportunity Commission in regard to discrimination liability.

Drug Tested Employee Can be Fired For Rejecting Agreed-Upon Treatment Provider

Posted in Drug and Alcohol Testing, Lesser-Known Employment Laws


Blog Pic - Drug TestingWe rarely see reported cases interpreting Minnesota’s workplace drug testing law so when such a decision is handed down, it is usually worth a look. That certainly proved true when the Minnesota Court of Appeals recently affirmed the termination of an employee who sought to attend a different chemical dependency treatment program from the one he consented to attend following his positive drug test.

Under the Minnesota Drug and Alcohol Testing in the Workplace Act (DATWA), Minnesota employers can’t fire an employee after their first positive drug or alcohol test unless two conditions are satisfied:

First, the employer must give the employee an opportunity to participate in “either a drug or alcohol counseling or treatment program, whichever is more appropriate, as determined by the employer after consultation with a certified chemical dependency [professional].”

Second, the employee has refused to participate in or failed to successfully complete the program.

With a Choice Between Options A and B, Choosing Option C Won’t Work

In Jones v. Green Bay Packaging, Inc. James Jones tested positive for marijuana after a workplace injury. His employer, Green Bay Packaging (“GBP”), placed him on an unpaid suspension and told him that he could return if he (1) immediately submitted to an evaluation by a chemical dependency treatment facility approved by GBP, and (2) successfully participated in a treatment program for the period of time recommended by that approved facility.

Jones initially agreed to the company’s proposal and identified two treatment facilities where he could be evaluated and treated, both of which GBP approved. Jones was then evaluated by one of the designated facilities and was told that he should receive outpatient treatment four times per week. Jones claimed he could not afford the gas money for travelling 30 minutes to this facility four times per week so he suggested that he attend a different facility closer to his home. Said no and said Jones would be terminated if he did not participate in the program where he had already been evaluated. When Jones refused, GBP fired him.

Jones sued GBP claiming that his termination violated DATWA because he was in fact willing to attend a treatment program. The trial and appellate courts both disagreed, noting that the company followed the statute by providing Jones with an opportunity to attend a treatment program that the company had approved. When Jones refused to attend that particular program, GBP was within its legal rights to terminate him. The Minnesota Court of Appeals explained that the plain language of DATWA did not require GBP “to grant Jones an additional opportunity to attend a different treatment program after the company had already approved the treatment center initially requested by Jones.”

Bottom Line

A Minnesota employer must provide an employee with an opportunity for counseling or treatment before discharging the employee following a first positive drug test under DATWA. However, once the counseling and/or treatment provider has been selected, the law does not let the employee keep shopping for alternative treatment programs. This helps move the process along and bring finality to the drug testing process and related follow-up.


Labor Board Stiff Arms College Players’ Unionization Attempt

Posted in Labor Law

two american football players walking rear view silhouetteToday, the National Labor Relations Board (“the Board”) issued a unanimous decision dismissing the election petition filed by scholarship football players at Northwestern University.  The Board punted on the issue of whether these players are “employees” under the NLRA, and instead exercised its discretion not to assert jurisdiction.

Given the unique nature and structure of NCAA Division I Football, the Board concluded that asserting jurisdiction in this case would not “promote stability in labor relations.”  First, unlike professional sports such the NFL or MLB, the vast majority of Division I schools are public institutions, which are not subject to the Board’s jurisdiction.  In fact, because all of the other schools in the Big10 are public institutions, the Board could not assert jurisdiction over any of Northwestern’s competitors.  Second, the Board noted that both the NCAA and individual conferences exercise considerable control over individual teams, so asserting jurisdiction over a single team would not promote stability in labor relations across the league.  Indeed, the Board noted that “all previous Board cases concerning professional sports involve league-wide bargaining units.”

In the end, the Board took care to limit the effect of this decision just to the case at hand.  They made clear that other athletic personnel (e.g., coaches, groundkeepers, etc.) may be subject to the Board’s jurisdiction and could seek to unionize.  Northwestern’s players, however, have been stopped short of the goal line.

Bottom Line

While nothing prevents the Board from changing its mind in the future, today’s decision likely means that the Board will likely decline to exercise jurisdiction over future election petitions filed by college athletes.  As such, those players will have to go back to the huddle and come up with a different game plan to seek greater control over their “work” environment.

Newspaper’s Response to Harassment Report Was a Winner

Posted in Discrimination


The news got out quickly that University of Minnesota (U of M) Athletic Director Norwood Teague resigned following revelations that he engaged in sexually inappropriate behavior with two other U of M administrators .  Although this situation involved someone with a high public profile, it seemed like a relatively straightforward workplace harassment matter – employee allegations surfaced, the offender acknowledged his behavior (in the face of irrefutable evidence) and a departure quickly ensued.

But there was more.  The next day, Amelia Rayno, a sports writer for the Minneapolis Star Tribune, published a story recounting sexually aggressive behaviors she encountered from Teague, with whom she interacted regularly in her role as the beat reporter for U of M basketball.  Rayno had agreed to meet Teague for a drink, as she had done several times in the past in pursuit of information about Gopher sports.  She assumed that this would also be a discussion about basketball and U of M athletic department but, as Rayno reported, Teague grabbed at her, tried to put his arm around her and talked about their “chemistry.” Rayno said nothing to anyone about this incident at the time, but subsequent repeats of the behavior eventually led Rayno to seek out the Star Tribune Human Resources Department.

Rayno’s story described what is often referred to as “third party harassment”, i.e. harassing behavior endured by an employee at the hands of someone who does not work for the same company.  It might be a customer or client, a vendor, an independent contractor or a member of the general public.  Still, the behavior likely conflicts with the employer’s anti-harassment policy which usually promises protection against such behavior even if the perpetrator is employed by someone else.

Harassment Game Plan

In a typical harassment scenario involving two employees of the same company, the employer generally is not liable for the harassment unless they knew or should have known about the issue and then failed to take timely remedial action.  This remedial action could take the form of disciplinary action or even termination depending on the seriousness and frequency of the harassing behavior.  In addition, the employer might consider changing the offender’s work location or schedule to minimize further interaction with the complaining employee.  Other methods of persuasion might include a demotion, a salary reduction or additional training on appropriate workplace behavior.  Since the employer control’s the offender’s employment circumstances, they have a great many options from which to choose.

An employer’s menu of options for responding to a claim of third party harassment is much more limited because of the diminished ability to exercise control over the offender’s employment.  In some cases, the employer might be able to contact the offender’s employer to seek relief, or perhaps reassign their own employee to an account or location that eliminates their contact with the offending individual.

If these methods are not viable, or if they did not relieve the problem, the employer might have to consider discontinuing the relationship with the offender and the customer or vendor who assigned that individual to work with the company. In all such cases, the employer must try to minimize any actual impact on the complaining employee so as to avoid any appearance of reprisal for having raised the concern.  For example, if reassignment to a new account or location is to be considered, the employer should make sure that this does not represent a loss of pay, status or convenience for the complaining employee.

This can be tricky.  If the offending person is, or works for, the employer’s biggest customer, the harassed employee may not want to miss the opportunity of working on that account, and the employer may be wary losing the business.   Similarly, if the employee’s job absolutely requires interaction with the offender because that is what the employee was hired to do, the choices for how to respond to harassment may not be all that clear.

Response was a Slam Dunk

In Rayno’s situation, the Minneapolis Star Tribune’s response was a slam dunk.  Rayno reported that after informing the newspaper, they gave her several options:

  • The company could contact Teague to demand that he cease the inappropriate behavior;
  • They could contact Teague’s superiors to inform them of his behavior;
  • They could switch her to a different (but presumably equally prestigious) beat; or
  • They could accept Rayno’s request that she simply be allowed to wait to see if Teague’s behavior persisted.

Ultimately, the Star Tribune accepted Rayno’s request that they hold off on taking any further action so that she could continue covering Gopher basketball the way she wanted. Still, they let her know that they stood behind her and would carry the matter forward if need be. This fulfilled their legal obligation to protect her from harassment by a third party, but it also respected the employee’s desire not to impair her working relationship with her primary “customer.” In so doing, Rayno’s and the Star Tribune’s patience carried the day – Rayno’s work with U of M basketball continues but now without the burden of facing further inappropriate advances from Teague.

Bottom Line

Third party harassment cases can be nuanced and complex. Employers facing those challenges would be wise to follow the Star Tribune’s lead in making sure that your employees are protected against harassment regardless of its source and to take timely and appropriate action whenever such harassment shows itself.

NLRB Tells Employers to Hand Over Witness Statements

Posted in NLRB


The National Labor Relations Board (NLRB) recently affirmed that employers may not reject union requests for access to witness statements that the company obtained while investigating claims of employee wrongdoing. This decision marks the latest in a tortuous path that now overturns more than 30 years of legal precedent.

Way back in 1978, the NLRB declared in Anheuser-Busch, Inc., 237 NLRB 982 (1978) that a witness statement was different from other employer data and therefore was not within the scope of information that unions could demand from employers. That legal standard held firm until 2012 when the NLRB changed course, deciding that the employer had an obligation to turn over witness statements to the union. That decision was vacated, however, when the US Supreme Court ruled that President Obama’s “recess appointments” to the NLRB were unconstitutional and the decisions issued during their tenure were invalid.

Witness Statements are Not Confidential

After new members were officially seated, this issue was considered anew and the reconstituted NLRB again overturned Anheuser-Busch, ruling in American Baptist Homes of the West (Piedmont Gardens) that employers must turn over witness statements when demanded to do so by the union. The NLRB reasoned that a unionized employer has a duty to provide information relevant to a union’s performance of its bargaining duties, and that they were “not persuaded that witness statements are so fundamentally different from other types of information that a blanket exemption from disclosure is warranted.”

The NLRB acknowledged that there might be some instances where protection of witness statements was warranted (e.g. avoiding witness intimidation or harassment) but there simply was no reason why a general exemption should apply. Thus, from now on, when access is requested, an employer seeking to prevent disclosure has the burden of establishing a legitimate confidentiality interest that outweighs the union’s need for the statements.

The dissenting members of the NLRB cited the risk that employees might now be more reticent about providing statements since they are more likely to be exposed to intimidation and retaliation. This in turn will impair employers’ abilities to maintain safe and productive workplaces. These concerns failed to carry the day.

Bottom Line

This decision could make it very difficult for unionized employers to conduct adequate investigations. While employees participating in investigations may have understood that they could be called upon to testify in an arbitration or court proceeding, they also knew that most such matters got resolved long before testimony was required. Now that the union can access witness statements in every investigation, it might be far more difficult to persuade employees to participate when they know that they will be second-guessed and judged by the union, their co-workers and the accused.

Of course, it is also good to remember that employers have the same right to demand statements from the union, and employers should always consider requesting that the union produce any witness statements or recordings for the purpose of evaluating the merits of a grievance

NLRB Says its OK to Lie…Sometimes

Posted in Labor Law, NLRB


Bloc-Pic---Construction-Worker.jpgI Never Promised You a Weingarten

If you are a unionized employer, you almost certainly know that your employees have something called “Weingarten” rights, meaning that unionized employees may request (and must then receive) union representation as a condition of participation in any interview the employee reasonably believes may result in disciplinary action. The rule does not apply, however, where the employee could not reasonably believe that an interview may lead to discipline – e.g., run-of-the-mill shop-floor conversations, task-related instructions, training or corrections, or meetings in which previously determined discipline is actually imposed.

While Weingarten guarantees the presence of a union representative upon request, it does not give that representative the right to turn the interview into a full adversarial proceeding. The Supreme Court has ruled that employers still may investigate the issue at hand without interference, including the right to insist on hearing the employee’s account of the events rather than a sanitized version offered by the union representative. Still, recent National Labor Relations Board (NLRB) decisions have begun to authorize expanded rights for the union representative, including the right to “remind” the suspect employee of his story by writing out answers to the employer’s questions, and the right to direct the employee not to respond until the employer “clarified” the questions to the union representative’s satisfaction.

No Truth + No Union Rep = No Worries

The NLRB recently went one step (or perhaps two or three) further in the case of E.I. Dupont de Nemours & Co., where an employee with a history of dishonesty was questioned on multiple occasions by managers about an alleged work-related injury he claimed to have suffered. The employer denied his requests for union representation and then fired him for providing what the NLRB described as “seemingly inconsistent and dishonest answers. . .” to the employer’s questions.

The employee and union filed an unfair labor practice charge against the company, which the NLRB upheld. Essentially, they assumed that a union representative would have protected the employee from acting contrary to his best interest and therefore, the employee should not be held accountable for dishonesty or intemperate behavior taking place during an unlawful investigative interview. The employee was ordered reinstated with full back pay.

This decision is particularly significant, and not just because of the NLRB’s attenuated reasoning. In previous cases, employees did not necessarily get their jobs back if the NLRB concluded that an employee was suspended or discharged for reasons unrelated to the denial of the employee’s Weingarten rights. Now, the NLRB seems to tell us that any misconduct during an unlawful interview will be considered out of bounds for disciplinary action, and that the employer will need to be able to prove that they would have discharged the employee even absent the purported interview-related misconduct.

Bottom Line

It is now more important than ever that employers understand the protections afforded union employees and their representatives when planning to conduct workplace interviews. Employers must determine in advance whether the interview is or is not investigative, how they will respond to a demand for representation and how they will deal with the increasingly broad rights union representatives now have during interviews.

New DOL Guidance Says “Most” Workers (including Independent Contractors) Are Covered By FLSA

Posted in Wage & Hour

Contractors DatabaseThe U.S. Department of Labor (DOL) has now issued guidance in the form of an Administrator’s Interpretation (the Guidance) intended to curb the misclassification of employees as independent contractors.  The DOL contends that “most” workers qualify as “employees” under the Fair Labor Standards Act (“FLSA”) and therefore are subject by the Act’s minimum wage and overtime protections.  Treating such workers as independent contractors would therefore violate the FLSA.


The DOL contends that the use of independent contractors to perform work previously done by employees is on the rise.  They even suggest that some employers deliberately misclassify their workers this way to cut costs and avoid legal compliance.  The DOL recently has stepped-up scrutiny in this arena, recovering more than $79 million in back wages for more than 109,000 workers in various industries in 2014.

WHD Administrator’s Interpretation No. 2015-1

The Guidance notes that the FLSA is extremely broad and covers any entity that “suffers or permits” an individual to work.  Under the “economic realities test,” the following factors are generally used to determine whether a worker is an independent contractor or an employee:

  1. the extent to which the work performed is an integral part of the employer’s business;
  2. the worker’s opportunity for profit or loss depending on his or her managerial skill;
  3. the extent of the relative investments of the employer and the worker;
  4. whether the work performed requires special skills and initiative;
  5. the permanency of the relationship; and
  6. the degree of control exercised or retained by the employer.

The Guidance directs these factors to be considered in totality and according to the “overarching principle that the FLSA should be liberally construed to provide broad coverage for workers.”

The Guidance sets out contrasting examples of how each of these factors is to be evaluated in order to give effect to the broad coverage they claim is intended under the law.  A few highlights include:

Is the work an “integral” part of the business:

For a construction company that frames residential homes, carpenters are integral to the business – the company is in business of framing houses and that is what carpenters do.

In contrast, that company’s software developer might create programs that help track bids, schedule projects and maintain inventory.  Such work is beneficial but not integral to the company’s business.  Thus, this factor weighs in favor of independent contractor status.

The “managerial skill” factor:

A worker for an office cleaning service performs tasks outlined for him by the company.  He does not make the schedule, nor does he solicit additional clients, advertise his services, or seek out ways to reduce costs. His efforts to earn more depend solely upon being assigned more hours by the company.  There is no managerial skill involved, which indicates an employment relationship between the worker and the cleaning company.

If that same worker advertised his services, negotiated contracts with clients, set the cleaning schedule and brought in additional help when needed, this level of managerial skill would point toward an independent contractor status.

The “relative investment” factor:

The same cleaning company worker is issued all cleaning equipment and supplies for his jobs, and is assigned a vehicle for travelling to assignments.  Although the worker may occasionally bring his own preferred cleaning products to his jobs, the company’s investment into the work is clearly greater and therefore favors a determination of an employment relationship.

If the worker buys a van not suitable for personal use and uses it to travel to various worksites, rents space to store the vehicle, and purchases all the material, supplies and equipment he uses to clean his clients’ facilities, an independent contractor relationship is suggested.

The “control” factor:

A registered nurse is listed with a nurse registry to provide skilled nursing.  The registry interviewed the nurse and required her to undergo their multi-day training.  The registry then sends the nurse a list of potential clients each week and requires the nurse to fill out a form with them prior to contacting any clients. The registry sets the wage range, limits the available work days and must be contacted if the nurse will miss any work to which she was assigned.   This level of control points toward an employment relationship. ,

Another registered nurse might list with a different registry, which merely sends a list of potential clients.  This nurse then is free to work for as many or as few clients as she wishes, may negotiate her own wage rate and may determine her own schedule with the client. In this scenario, the degree of control exercised by the registry is not indicative of an employment relationship.

Bottom Line

This is just an administrative interpretation that does not have the force of law.  Nevertheless, it is a clear indication of how the DOL looks at the law and how they will decide claims of this type that are presented to them.  Moreover, we know that courts often look to the DOL’s interpretations for guidance in deciding cases in their jurisdictions.  Therefore, employers currently utilizing workers classified as independent contractors should revisit those arrangements to be very certain that they pass muster in an environment where employment status is so clearly the presumption in the eyes of the government regulators.