5. Whether the relationship is permanent or indefinite; and
6. The nature and degree of control
exercised by the employer.
As the Administrator notes, none
of these single factors is controlling,
and they merely serve as a guide to
help enforcement agencies and courts
recognize when a worker is an employee.
That said, in practice, the first, second
and sixth factors are generally the most
important considerations. So how are
these three factors applied?
Integral part of your business: If the work
performed is integral to the business,
the worker is more likely to be economically dependent on the employer. For
example, in a restaurant, a cook is integral
to the business and more likely to be an
employee, as compared to the individual
who repairs or updates the POS system.
Opportunity for profit or loss: If a worker’s
managerial skill can affect his/her
opportunity for profit or loss, this points
to a worker being in an independent
trade or business. Here, the question
is not whether choosing to work more
hours means more revenue, which is true
for both employees and independent
contractors, but whether there are opportunities to make decisions that could
result in a loss or different profit margin.
Nature and degree of control over the worker: In
order to be an independent contractor,
the worker must actually control meaningful aspects of the work so that it is
reasonable to view the worker as being
independent. That the worker can determine the number of hours worked and
might not be subject to close supervision,
is not determinative as that can also be
true for a trusted part-time employee.
Again, while these factors tend to be
more important than the other factors,
whether a worker is deemed an employee
or an independent contractor will be
based on the totality of the relationship.
Even if there is a significant degree of
control over the worker, if the work is not
integral to the business, the worker has
an opportunity for loss, there is a proportionate investment by the worker and the
work requires special skills, the worker is
likely an independent contractor.
So what does this all mean?
As a franchisee, you are considered, for enforcement purposes, as an
employer of“low-wage workers.”As
such, you are more likely to be selected
for investigation and must be especially
diligent in your efforts to properly classify
employees and independent contractors
with whom your franchise has a relationship. In his July 2015 interview, the
Administrator stated that the Interpretation is directed toward businesses like
yours as a warning: If your business relies
upon independent contractors to support
its business endeavors — even when
those relationships are “advantageous for
workers and businesses”— you should
not be surprised