What Is an Independent Contractor?
An independent contractor is someone who runs his or her own business. Whether called contractors, freelancers, entrepreneurs, consultants, or any other name, independent contractors have two things in common: they are in business for themselves, and they don’t rely on a single employer to make a living. The classic example is the construction company you hire to come fix your home. As you are not hiring them as an employee, they are independent contractors. The classic employment situation is the person who works on the assembly line at the factory. The factory employee works when they are told, does the work they are told, goes home when they are told, and collects his paycheck from the same company every payday. From here, the lines between independent contractor and employee get muddied. Courts and employers have struggled for years to determine the best ways to differentiate between independent contractors and employees.
How to determine if you are an Independent Contractor or employee?
To determine whether a person is properly classified as an employee or as an independent contractor can be complex. Historically, the test to determine whether an individual could be classified as an independent contractor was different under federal wage and hour law than under Oregon’s wage an hour laws. Now the tests are at least named the same. Under both Oregon and federal law, the test to determine whether a person could be classified as an independent contractor is the “economic realities” test. The fact that Oregon adopted the economic realities test is important because it makes proving a person is an employee easier. Once the alleged independent contractor is classified as an employee, all the wage and hour laws apply. Oregon Wage Claims. For instance, employees are entitled to minimum wage, overtime, and must be timely paid all their wages. Late Pay. Further, the employer is limited on what they can deduct. So normal business expenses generally cannot be deducted from the employee. Deductions. Whereas, normal business expenses are often deducted from alleged independent contractors in Oregon. In addition, the employee likely is entitled to recover additional penalties, their costs, and their lawyer (attorney) fees in prosecuting a wage claim under Oregon or federal wage and hour law, whereas an independent contractor is unlikely to enjoy these benefits.
Why do companies try to label employees as Independent Contractors?
There are a multitude of reasons employers prefer to classify employees as independent contractors.
1. The employer may not want to pay employer taxes like social security, worker’s compensation, unemployment, etc.
2. Employers may not want to pay minimum wage. For instance, if you are paid on a piece rate basis and there is job site clean-up to do at the beginning and end of the shift, the employer may not want to pay for the time worked during clean-up.
3. Employers may not want to pay overtime wages. Knowing that completion of the job will take more than 40 hours of work, by disguising the employee as an independent contract, some business attempt to avoid payment of overtime wages.
4. Employers may want to deduct for regular business losses. For example, an employer may want to deduct for customers whose checks or credit cards do not clear. Employers are limited and cannot deduct ordinary business expenses. Whereas if the employer can allege the employee is an independent contractor, they may feel that they can get away with the deduction that would be unlawful to take from an employee.
Employee or Independent Contractor?
1. I work as a hair stylist for an Oregon business. I signed an independent contractor agreement. I purchase my own clippers and scissors. The owner of the salon sets all stylists schedules. The salon also sets prices for services, and determines what services can be offered. Salon has the right to hire and fire stylists. All sales run through the Salon’s register and the Salon pays me. Am I an employee or independent contractor?
If this were a real case, there would be even more facts to consider. Some of the facts usually assist in proving you were an independent contractor and some assist in proving you were an employee. But with these facts, it is certainly worth contacting the lawyers at Schuck Law because you likely are an employee and not an independent contractor under both Oregon and federal law.
2. I work as a delivery driver. I drive the company’s van, pick up goods for the company, drive them to the place the company tells me to drive.
You likely are an employee not an independent contractor. Again, lots of facts to learn, but it is worth your time to contact the lawyers at Schuck Law to find out. Fairly recently, the Ninth Circuit Court of Appeals (Ruled on federal case asserting Oregon wage claims) found drivers classified as independent contractor for FedEx were actually employees. Often employees classified as independent contractors for large corporations like FedEx assume that the employer must know something they don’t, this case shows that is not always the case. The Court focused its opinion in FedEx upon the level of control and dependence. For instance, the drivers were required to wear uniforms, drive specific types of trucks, have shelves specifically sized, pick up packages at specific times and places, etc. The Court also considered the level of control FedEx was able to exercise on the hours worked and the methods of performing work. Thus, while every situation is different, it may be worth looking into to determine whether you are an independent contractor or employee.
Economic Realities Test Determines Whether the Person was an Employee or Independent Contractor The economic realities test seeks to determine whether “as a matter of economic reality” the person is sufficiently dependent upon the alleged employer that the relationship should be considered an employment relationship over an independent contractor. The test is supposed to be highly favorable to a finding that the person is an employee and not an independent contractor. To determine whether a person is an employee or independent contractor under the FLSA, federal courts consider a six factor test to help it determine whether, as a mater of economic reality, the person is economically dependent upon the alleged employer. The federal wage and hour factors under the FLSA are:
1. The nature and degree of control the alleged employer has over the employee;
2. Risk of profit and loss. Who bears this risk;
3. Investments in the business;
4. Skills. Easier for attorney to be independent contractor than clean up crew at construction site;
5. How exclusive or permanent the relationship; and
6. How integral is the work performed to the putative employer’s business.
The case in which Oregon adopts the economic realities test uses 13 factors to determine whether the person was an independent contractor or employee. As more cases filter through the Oregon Courts, the correct list of factors to consider in the economic realities test will likely be clarified. However, in the end, the court/jury is charged with one job, to determine whether as a matter of economic reality the individuals “are dependent upon the business to which they render service.” If they are dependent, then they should have been classified as employees.
All Wage Claims Apply to Oregon Employees misclassified as an independent contractor has all the same wage and hour rights as any other employees. Thus, the employee could sue for unpaid wages, minimum wages, overtime wages, wrongfully deducted wages, late pay penalty wages, or any other Oregon wage claim discussed on this website.
Mis-classification of an employee as an independent contractor is an Oregon problem
Not too long ago, in Portland, Oregon, a local barber shop called the Modern Man classified its barbers as independent contractors. The barbers picketed the employer’s shop when they were not being paid. The local news reported the wage dispute with the barber shop. Brad Avakian, then the Commissioner of the Oregon Bureau of Labor & Industries, posted the following:
Barbers at Modern Man can contact our agency with claims — we’ll investigate and determine whether they should be classified as employees, not independent contractors. (Posted on Wednesday, June 3, 2015)
The purpose of determining whether the barbers were independent contractors was to provide better protection to the workers under Oregon’s Wage & Hour laws. This is because Oregon’s wage and hour laws provide employees with the right to sue for their unpaid wages, overtime wages, minimum wages, deducted wages, etc. They also allow the employee to recover their attorney fees. So there are a host of very powerful laws to protect the worker once they are classified as employees.
What the Commissioner’s post failed to mention, is that the employees could also contact wage and hour lawyers (attorneys), like those at Schuck Law, who could also assist in obtaining the employee’s unpaid wages. In addition, severe penalties can be levied against the employer where it fails to pay the employee minimum wages, overtime wages, or fails to timely pay wages at the end of employment, Late pay. These penalties can exceed the amount of wages due and can equal 30 days of wages each. They are calculated by multiplying the hourly rate by 8 hours per day, for up to 30 consecutive days, or until the wages due are paid. In addition, the employee can recover their attorney (lawyer) fees. This allows Schuck Law to take cases for its clients and make the employer pay their lawyer fees for them in addition to the claims for wages and penalties.
Oregon Wage Claim Lawyers (Attorneys).
The wage claim attorneys (lawyers) at Schuck Law, LLC focus their law practice on Oregon wage claim lawsuits. Our Oregon wage claim lawyers (attorneys) regularly prosecute Oregon wage and hour claims, Oregon minimum wage claims, Oregon overtime wage claims, Oregon wrongful deduction wage claims, Oregon vacation (or PTO) pay wage claims, and wage claims asserting that final wages were not timely paid on termination (quit or fired). In addition to the unpaid wages and damages outlined above, our Oregon wage claim lawyers (attorneys) may also sue to recover the employee’s costs, disbursements, and attorney fees incurred in prosecution of the Oregon wage claim lawsuit. This allows the Oregon wage claim lawyers (wage and hour attorneys) at Schuck Law, LLC to take most wage claim lawsuits on a contingency fee basis. This means, with minor exceptions that are within your control, that our Oregon wage claim attorneys (lawyers) only get paid their attorney fees if they recover wages, wage damages, or penalty wages for you.
Our Oregon wage claim attorneys (lawyers) prosecute Oregon wage claims throughout Oregon, including but not limited to, Portland, Astoria, Beaverton, Portland, Bend, Clackamas, Coos Bay, Grants Pass, Hillsboro, Portland, Hood River, Klamath Falls, Lake Oswego, Oregon City, Portland, Madras, McMinnville, Medford, Milwaukie, Portland, Newberg, Oregon City, Portland, Sandy, St. Helens, Portland, Tillamook, and West Linn.
Google By David Schuck