One of the most commonly litigated issues in employment law is whether an individual is an employee or an independent contractor. The distinction between employees and independent contractors is critical for several reasons. Most importantly, independent contractors do not enjoy the same state and federally-protected rights that employees are provided under Title VII of the Civil Rights Act of 1964, the Texas Commission on Human Rights Act, the Fair Labor Standards Act, the Age Discrimination in Employment Act, etc. In addition, employers need not provide unemployment insurance, workers' compensation coverage or federal income tax withholdings to independent contractors. So, the question is, how is it determined whether or not an individual is an employee? Well, the answer depends on what laws are being enforced, and in what court. Several different "tests" exist depending on the issues and location of a particulars lawsuit. Texas common law focuses on the "right to control" test. Texas courts focus mainly on an alleged employer's ability to control the individual in determining whether the individual is an employee. Among the factors considered is the alleged employer's control over:
(1) when and where to begin and stop work;
(2) the regularity of hours;
(3) the amount of time spent on particular aspects of work;
(4) the tools and appliances used to perform the work; and
(5) the physical method or manner of accomplishing the end result.
The TCHRA, looking to federal law, utilizes a "hybrid test." The Texas Commission on Human Rights Act ("TCHRA") protects employees from discrimination on the basis of race, color, disability, religion, sex, national origin and age in essentially the same fashion as Title VII, the ADA and the ADEA. Because the TCHRA is based upon and provides similar protections as these federal laws, Texas courts look to federal courts for guidance in interpreting the TCHRA. The Fifth Circuit Court of Appeals uses a hybrid "economic realities/common law control" test to determine whether an individual is an employee. When considering control, the courts focus on whether the employer has the right to hire, fire, supervise and set the schedule of the alleged employee. The economic realities component focuses on whether the employer paid the employee and set the terms and conditions of employment. The FLSA looks to the "economic reality" of the relationship. The Fair Labor Standards Act ("FLSA") requires employers pay a guaranteed minimum wage as well as overtime pay to all its non-exempt employees. Court interpretations of the FLSA's definition of "employees" is particularly broad, and covers some workers who may otherwise not qualify under traditional agency law. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992). In making the determination of employee v. independent contractor, courts examine whether, as an "economic reality," the worker is dependent upon the alleged employer or instead is in business for himself. Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008). As you can imagine, figuring out whether an individual is an employee or an independent contractor is a fact-intensive inquiry that requires special knowledge and experience in the field of employment law. Seeking out a board-certified employment attorney to determine your potential rights (if an individual) or potential liabilities (if an employer) is critical. AWR