U.S.

Department of Labor
Wage and Hour Division
(Revised May 2014)

Fact Sheet #13: Am I an Employee?: Employment Relationship

Under the Fair Labor Standards Act (FLSA)

This fact sheet provides general information concerning the meaning of "employment relationship"
and the significance of that determination in applying provisions of the Fair Labor Standards Act
(FLSA).

Determining Whether an Employment Relationship Exists: Is a Worker an Employee or

Independent Contractor?
In order for the FLSA’s minimum wage and overtime provisions to apply to a worker, the worker must
be an “employee” of the employer, meaning that an employment relationship must exist between the
worker and the employer. The FLSA defines “employ” as including to “suffer or permit to work”,
representing the broadest definition of employment under the law because it covers work that the
employer directs or allows to take place. Applying the FLSA’s definition, workers who are
economically dependent on the business of the employer, regardless of skill level, are considered to
be employees, and most workers are employees. On the other hand, independent contractors are
workers with economic independence who are in business for themselves.
A number of “economic realities” factors are helpful guides in resolving whether a worker is truly in
business for himself or herself, or like most, is economically dependent on an employer who can
require (or allow) employees to work and who can prevent employees from working. The Supreme
Court has indicated that there is no single rule or test for determining whether an individual is an
employee or independent contractor for purposes of the FLSA. The Court has held that the totality of
the working relationship is determinative, meaning that all facts relevant to the relationship between
the worker and the employer must be considered.
While the factors considered can vary, and while no one set of factors is exclusive, the following
factors are generally considered when determining whether an employment relationship exists
under the FLSA (i.e., whether a worker is an employee, as opposed to an independent contractor):
1) The extent to which the work performed is an integral part of the employer’s
business. If the work performed by a worker is integral to the employer’s business, it is more
likely that the worker is economically dependent on the employer and less likely that the worker is
in business for himself or herself. For example, work is integral to the employer’s business if it is a
part of its production process or if it is a service that the employer is in business to provide.
2) Whether the worker’s managerial skills affect his or her opportunity for profit and
loss. Managerial skill may be indicated by the hiring and supervision of workers or by investment
in equipment. Analysis of this factor should focus on whether the worker exercises managerial
skills and, if so, whether those skills affect that worker’s opportunity for both profit and loss.
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 3) The relative investments in facilities and equipment by the worker and the
employer. The worker must make some investment compared to the employer’s investment (and
bear some risk for a loss) in order for there to be an indication that he/she is an independent
contractor in business for himself or herself. A worker’s investment in tools and equipment to
perform the work does not necessarily indicate independent contractor status, because such tools
and equipment may simply be required to perform the work for the employer. If a worker’s
business investment compares favorably enough to the employer’s that they appear to be sharing
risk of loss, this factor indicates that the worker may be an independent contractor.
4) The worker’s skill and initiative. Both employees and independent contractors may be
skilled workers. To indicate possible independent contractor status, the worker’s skills should
demonstrate that he or she exercises independent business judgment. Further, the fact that a
worker is in open market competition with others would suggest independent contractor status.
For example, specialized skills possessed by carpenters, construction workers, and electricians are
not themselves indicative of independent contractor status; rather, it is whether these workers
take initiative to operate as independent businesses, as opposed to being economically
dependent, that suggests independent contractor status.
5) The permanency of the worker’s relationship with the employer. Permanency or
indefiniteness in the worker’s relationship with the employer suggests that the worker is an
employee, as opposed to an independent contractor. However, a worker’s lack of a permanent
relationship with the employer does not necessarily suggest independent contractor status
because the impermanent relationship may be due to industry-specific factors, or the fact that an
employer routinely uses staffing agencies.
6) The nature and degree of control by the employer. Analysis of this factor includes who
sets pay amounts and work hours and who determines how the work is performed, as well as
whether the worker is free to work for others and hire helpers. An independent contractor
generally works free from control by the employer (or anyone else, including the employer’s
clients). This is a complex factor that warrants careful review because both employees and
independent contractors can have work situations that include minimal control by the employer.
However, this factor does not hold any greater weight than the other factors. For example, a
worker’s control of his or her own work hours is not necessarily indicative of independent
contractor status; instead, the worker must control meaningful aspects of the working
relationship. Further, the mere fact that a worker works from home or offsite is not indicative of
independent contractor status because the employer may exercise substantial control over the
working relationship even if it exercises less day-to-day control over the employee’s work at the
remote worksite.
There are certain factors which are immaterial in determining the existence of an employment
relationship. For example, the fact that the worker has signed an agreement stating that he or she is
an independent contractor is not controlling because the reality of the working relationship – and not
the label given to the relationship in an agreement – is determinative. Likewise, the fact that the
worker has incorporated a business and/or is licensed by a State/local government agency has little
bearing on determining the existence of an employment relationship. Additionally, the Supreme Court
has held that employee status is not determined by the time or mode of pay.
Requirements Under the FLSA
When an employer-employee relationship exists, and the employee is engaged in work that is subject
to the FLSA, the employee must be paid at least the Federal minimum wage of $7.25 per hour,
effective July 24, 2009, and in most cases overtime at time and one-half his/her regular rate of pay
for all hours worked in excess of 40 per week. The FLSA also has youth employment provisions which
regulate the employment of minors under the age of eighteen, as well as recordkeeping
requirements.

Where to Obtain Additional Information

For additional information, visit our Wage and Hour Division Website:
[Link] and/or call our toll-free information and helpline,
available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).

This publication is for general information and is not to be considered in the same light as official
statements of position contained in the regulations.

U.S. Department of Labor 1-866-4-USWAGE

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200 Constitution Avenue, NW Contact Us
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