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4 . THE DEGREE OF PERMANENCE OF THE WORKING RELATIONSHIP
This factor weighs in favor of the worker being an employee when the work relationship is :
• Indefinite in duration ;
• Continuous ; or
• Exclusive of work for other employers .
On the other hand , this factor weighs in favor of an independent contractor classification when the work relationship is :
• Definite in duration ;
• Nonexclusive ;
• Project-based ; or
• Sporadic based on the worker being in business for themselves and marketing their services or labor to multiple entities .
Such conditions may include regularly occurring fixed periods of work ; however , seasonal or temporary work by itself would not necessarily indicate independent contractor classification .
Where a lack of permanence is due to operational characteristics that are unique or intrinsic to particular businesses or industries and the workers they employ rather than the workers ’ own independent business initiative , this factor is not necessarily indicative of independent contractor status unless the worker is exercising their own independent business initiative .
5 . THE WORKER ’ S INVESTMENT IN EQUIPMENT OR MATERIALS REQUIRED FOR THE TASK
This factor considers whether any investments by a worker are capital or entrepreneurial in nature . Costs to a worker of tools and equipment to perform a specific job , costs of the worker ’ s labor and costs that the potential employer imposes unilaterally on the worker are not evidence of capital or entrepreneurial investment and , therefore , indicate employee status .
Investments that are capital or entrepreneurial in nature , indicating independent contractor status , generally support an independent business and serve a business-like function . Such investments may include :
• Increasing the worker ’ s ability to do different types of or more work ;
• Reducing costs ; or
• Extending market reach .
A worker ’ s investments should be considered relative to the potential employer ’ s investments in its overall business . If the worker is making similar investments as the potential employer , even on a smaller scale , it suggests that the worker operates independently , indicating independent contractor status .
6 . THE EXTENT TO WHICH THE SERVICE RENDERED IS AN INTEGRAL PART OF THE EMPLOYER ’ S BUSINESS
This factor considers whether the work performed is an integral part of the potential employer ’ s business . This factor does not depend on whether any individual worker is an integral part of the business but rather whether the function they perform is integral to the business .
This factor weighs in favor of the worker being an employee when the work they perform in relation to the potential employer ’ s principal business is :
• Critical ;
• Necessary ; or
• Central .
In contrast , this factor weighs in favor of the worker being an independent contractor when the work they perform is not critical , necessary , or central to the potential employer ’ s principal business .
ADDITIONAL FACTORS
The ERT allows additional factors beyond the six factors discussed above to be considered if they are relevant to the overall question of whether the worker is in business for themselves or is economically dependent on the employer for work .
Certain facts are not relevant to whether an employment relationship exists , including :
• What the worker is called — a worker may be an employee under the FLSA regardless of the title or label they are given ;
• Whether a worker is paid off the books or receives a Form 1099 ; or
• Whether the worker agrees verbally or in writing to be classified as an independent contractor , including by signing an independent contractor agreement .
Additionally , such facts as the place where work is performed , whether a worker is licensed by a state or local government , and the time or mode of pay do not determine whether a worker is an employee or an independent contractor under the FLSA .
EMPLOYER COMPLIANCE CONSIDERATIONS
A worker ’ s coverage by a particular law or entitlement to a particular benefit often depends on whether they are an employee or an independent contractor . In general , employment laws , labor laws , and related tax laws do not apply to independent contractors . Employers who misclassify employees may be liable for expensive fines and litigation if a worker should have been classified as an employee and did not receive a benefit or protection they were entitled to by law .
MORE INFORMATION
Please contact Spectrum Insurance Group for additional information on appropriate worker classification . +
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