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Sixth Circuit Court Of Appeals Rules Jury Will Determine Whether Worker Is An Employee Or Independent Contractor

The Sixth Circuit Court of Appeals' decision on March 25, 2015, in Keller v Miri Microsystems LLC provides crucial guidance to workers and businesses regarding the misclassification of a worker's status as independent contractor rather than employee.

Independent contractors are not entitled to overtime pay. The court noted that the Fair Labor Standards Act ("FLSA") is "strikingly broad and 'stretches the meaning of employee'" to include individuals who might not qualify as an employee under agency principles. A company's mere use of the label "independent contractor" does not exclude a worker from FLSA protection. Rather, the analysis requires employers to consider the economic realities of the relationship. The Sixth Circuit, in reversing the trial court's grant of summary judgment for the employer, held that the Keller, a cable and satellite installer, had raised a genuine issue of material fact whether he is an employee or an independent contractor and that it is in the jury's province to "review the evidence and weigh the factors to decide whether the plaintiff-worker is economically dependent upon the defendant-company."

The Keller decision is a crucial reminder to employers and employees to be aware of the multiple factors used in classifying workers as independent contractors versus employees, including: 1) behavioral control-does the employer control the worker's work e.g. assignments, hours of work, location of work, supervision over worker?; 2) financial control does the employer have the right to control certain business aspects e.g. who owns the equipment, who incurs expenses/reimbursement, what is the method of payment, wages v flat rate?; and 3) type of work relationship long term relationship v short duration/project based, benefits provided. It is important to review, as well, the IRS Circular E.

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