Kara Sears
Employment law is a complex area that covers a wide range of issues, including unpaid wages, wrongful termination, discrimination, sexual harassment, unsafe working environments, and injuries sustained while on the job. A key aspect of employment law is determining whether an individual is an employee or an independent contractor, as this distinction has significant implications for legal protections and benefits. For instance, employees are generally afforded greater protections under the Fair Labor Standards Act (FLSA) than independent contractors, who are considered to be in business for themselves. When assessing whether an individual is an employee or an independent contractor, the economic realities of the working relationship are examined, including factors such as the degree of control exerted by the employer and the opportunity for profit or loss based on managerial skill. In addition to these considerations, employment law also encompasses cases where employers may be held liable for the actions of their employees, such as negligence or misconduct resulting in harm to another individual.
| Characteristics | Values |
|---|---|
| Common-law rules | Anyone who performs services for you is your employee if you can control what will be done and how it's done |
| The substance of the relationship, not the label, governs the worker’s status | |
| Full-time or part-time employment does not determine whether an individual is an employee or an independent contractor | |
| All information that provides evidence of the degree of control and the degree of independence must be considered | |
| Fair Labor Standards Act (FLSA) | An "employee" of the employer, meaning that there is an employment relationship between the worker and employer |
| If the worker is economically dependent on the employer for work, then the worker is an employee | |
| If the worker is in business for themself, then the worker is an independent contractor | |
| Opportunity for profit or loss depending on managerial skill | |
| Skill and initiative | |
| The place where work is performed, whether a worker is licensed by State/local government, and the time or mode of pay do not determine whether a worker is an employee or an independent contractor | |
| Employer liability | When an employee causes bodily harm to another, insurance companies and courts determine employer liability by assessing whether the injury happened within the course and scope of employment |
| Employers are not typically responsible for independent contractors they hire to perform work-related tasks | |
| Employers have costs of doing business, and employee negligence, recklessness, and misconduct are some of those costs | |
| Employers can be liable for damages related to the victim's injuries if an employee harms another person intentionally or negligently | |
| Employment cases | Unpaid wages, wrongful termination, discrimination, sexual harassment, failing to keep employees safe at work, injuries on the job, and more |
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What You'll Learn
Common law: Control and independence
Common law tests are used to determine whether a worker is an employee or an independent contractor. This distinction is critical for businesses as they have different tax obligations toward employees and independent contractors.
The IRS uses three major factors as evidence to prove a worker's employment status: behavioural, financial, and the type of relationship between the parties.
Behavioural control refers to whether the company controls or has the right to control what the worker does and how they do their job. This is also known as the "right-to-control test" and is considered the most important factor in determining a worker's status. Even if an employee has freedom of action, if the employer has the right to control the details of how services are performed, they are considered a common-law employee.
Financial control refers to which business aspects of the worker's job are controlled by the payer, such as how the worker is paid, whether expenses are reimbursed, and who provides equipment and tools.
The type of relationship refers to whether the worker receives certain employee benefits, such as health insurance, sick leave, vacation pay, or retirement contributions. It also considers whether the worker is performing a key aspect of the business and whether the relationship is intended to continue indefinitely or is for a specific project or period.
If it is still unclear whether a worker is an employee or an independent contractor, Form SS-8 can be filed with the IRS, which will review the facts and circumstances and make an official determination.
Some states use the ABC Test, which is a stricter test with three factors that must all be met for a worker to be classified as an independent contractor: the worker buys their own equipment, sets their own schedule, and has an independent business that was in existence at the time the work was performed.
Case law has also evolved to deal with skilled workers who have a high degree of independence in how they carry out their roles. For example, in Walker v Crystal Palace, a professional footballer was deemed an employee as the manager of the club exercised sufficient control over him, even though he could not tell him when to pass or shoot.
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Independent contractors vs employees
The distinction between independent contractors and employees is important for determining employer liability and tax requirements.
Under common-law rules, a worker is considered an employee if the employer has the right to control what will be done and how it will be done. This is the case even when the employee is given freedom of action and the employer-employee relationship is not explicitly labelled as such. The degree of control and independence must be examined, including factors such as the worker's hours, methods, and materials used. If an employer only looks at the end result, the worker is likely an independent contractor.
A notable case is Viscaino v. Microsoft Corp (1997), where Microsoft hired "independent contractors" to work on software programs. These workers had assigned desks and phone numbers, and were treated as employees, but without the benefits. The court ruled against Microsoft, finding that these workers were indeed employees.
The ABC test, used in some jurisdictions, assumes that all workers are employees, and the hiring entity must prove that the workers are independent contractors by satisfying three conditions:
- The worker is free from the control and direction of the hiring entity in connection with the work.
- The worker performs work that is outside the usual course of the hiring entity's business.
- The worker is customarily engaged in an independently established trade, occupation, or business similar to the work performed.
Worker classification has legal consequences. For example, employers may be liable for the actions of their employees if they control the relationship between the worker and the customer. In the case of personal injury, employers may be held financially responsible for their employee's negligence or misconduct under the doctrine of Respondeat Superior ("let the master answer"). However, employers are typically not responsible for the actions of independent contractors.
Additionally, tax requirements differ between employees and independent contractors. Employers must pay FICA (social security) and FUTA (unemployment insurance) taxes for their employees but are generally exempt from these taxes if the workers are independent contractors.
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Employer liability for employee actions
Employers can be held liable for their employees' actions or negligence under the doctrine of respondeat superior, which translates to "let the master answer" or "let the superior answer". This type of liability is imposed without any fault on the part of the employer. In other words, employers are responsible for their employees' actions because they direct their workers' actions.
Respondeat superior only applies when an employee harms someone while performing duties within the scope of their employment. This means that the act was substantially motivated by a purpose to serve the employer and was committed within the authorised time and space limits of the employment. The central question in most cases is whether or not the employee's conduct was within the scope of employment.
For example, a hospital could be held liable for injuries caused by a nurse giving a patient the wrong medication, so long as the nurse was acting within the course and scope of their employment. Similarly, a company could be held liable if an employee, while engrossed in a phone conversation with a senior partner, hits a pedestrian.
However, if an employee's actions were entirely for personal purposes and "substantially deviate" from their employment duties, then the employer may not be held liable. For instance, if an employee commits fraud for personal gain, the employer is not liable.
Employers can protect themselves by having the right kinds of insurance in place, such as employment practices liability insurance (EPLI) and employer's liability insurance. Additionally, performing background checks and carefully screening workers can help reduce liability and avoid legal trouble.
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Employment law specialisations
Employment law is a complex and dynamic area of law that governs the relationship between employers and employees. It covers a wide range of issues, including workplace rights, collective bargaining, employment standards, and labour relations. Lawyers specialising in employment law need to have a strong understanding of the legal doctrines and statutory frameworks that regulate these relationships.
Some of the key specialisations within employment law include:
Employment Discrimination Law
This area of law focuses on cases involving workplace discrimination, harassment, and unfair treatment of employees. Employment discrimination lawyers may represent clients who have been subjected to discriminatory practices based on factors such as race, gender, religion, or disability. They work to ensure that employees' rights are protected and that employers comply with anti-discrimination laws and regulations.
Labour Relations and Collective Bargaining
Labour relations lawyers specialise in handling union-related issues and collective bargaining agreements. They may represent either employers or employees in negotiations, mediations, or disputes involving labour unions. These lawyers need to have a strong understanding of labour laws and the rights of both parties in the collective bargaining process.
Employee Benefits and Compensation
Lawyers specialising in this area focus on retirement plans, health benefits, compensation structures, and other employee benefits. They advise clients on designing, implementing, and complying with benefit plans and programmes. Additionally, they may represent employees or employers in disputes related to benefit claims, denial of benefits, or violations of benefit laws.
Workplace Health and Safety
This specialisation focuses on laws and regulations pertaining to occupational health and safety in the workplace. Lawyers in this field advise employers on compliance with health and safety standards, risk management, and accident prevention. They may also represent clients in cases involving workplace injuries, safety violations, or disputes related to workers' compensation claims.
Digital Workplaces and Privacy
With the rise of remote work and digital workplaces, this specialisation focuses on the legal issues arising from new ways of working. This includes data privacy, cybersecurity, and compliance with regulations such as the General Data Protection Regulation (GDPR) in the UK. Lawyers in this field help organisations navigate the complex landscape of protecting sensitive information, ensuring secure digital environments, and complying with evolving digital workplace regulations.
Employment law is a diverse and ever-evolving field, and these specialisations often intersect with other areas of law, such as technology law, corporate law, and business law. Employment lawyers need to stay abreast of legal developments and adapt their expertise to meet the changing needs of employers, employees, and the modern workplace.
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Discrimination and termination
Thompson v. North American Stainless, LP
This case involved a claim of gender-based discrimination. Eric Thompson's fiancée, Miriam Regalado, filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging gender-based discrimination by her supervisors. North American Stainless fired Thompson three weeks after becoming aware of the charge, in retaliation for the complaint. Thompson then filed a complaint, stating that the company violated section 704(a) of Title VII. The U.S. Supreme Court ruled unanimously in favor of Thompson, finding that Title VII's anti-retaliation provisions cover a broad range of employer conduct.
Pennsylvania State Police v. Suders
This case addressed sexual harassment in the workplace and the circumstances under which an employee can sue their employer without filing an internal complaint. Vicky Suders, a state police officer, faced discrimination and sexual harassment from her supervisors. Before her resignation, her supervisors accused her of theft, put her in handcuffs, and questioned her. Suders decided not to file an internal complaint, as the equal opportunity representative was unsympathetic. She filed a lawsuit claiming that the discrimination forced her to quit. The District Court initially granted a summary judgment to the state police since Suders did not use the internal procedures. However, the 3rd Circuit Court of Appeals overturned the decision, and the U.S. Supreme Court ruled in Suders' favor, holding that employees in similar situations could file a lawsuit without first filing an internal complaint.
Kasten v. Saint-Gobain Performance Plastics Corp.
This case involved retaliation against an employee for making a complaint about the location of time clocks. Kevin Kasten noticed that his employer placed time clocks away from the area where employees put on their required protective gear. Kasten claimed that the company's placement of time clocks was improper and resulted in his termination. The Supreme Court's ruling in this case has made it easier for workers to file wrongful termination claims.
These cases highlight the rights of employees and the importance of anti-discrimination laws in the workplace. They also demonstrate the potential for legal recourse when employees face discrimination or are wrongfully terminated. It is essential to consult with legal professionals to understand specific laws and protections in different jurisdictions.
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Frequently asked questions
An employee is economically dependent on their employer for work, whereas an independent contractor is in business for themselves.
The degree of control the employer has over the work performed, the economic realities of the worker's relationship with the employer, and the opportunity for profit or loss depending on managerial skill.
Yes, under the doctrine of Respondeat Superior, an employer can be held financially responsible if an employee causes harm to another person while performing duties within the scope of their employment.
Unpaid wages, wrongful termination, discrimination, sexual harassment, failing to provide a safe work environment, and injuries on the job.
State and federal government offices, such as the Division of Labor Standards Enforcement and the Equal Employment Opportunity Commission (EEOC), can provide assistance. Legal aid agencies, such as Legal Aid at Work, also offer resources and attorneys specializing in employment law.
