Independent Contractor vs. Employee Status Under the FLSA

Whether you are an employee or an independent contractor makes all the difference under the Fair Labor Standards Act (FLSA). Employees are entitled to important protections, including:

• Overtime pay (time-and-a-half for hours over 40 in a workweek)
• Minimum wage protections
• Employer-paid payroll taxes (Social Security & Medicare)
• Workers’ compensation and unemployment benefits
• Employee benefits such as health insurance or retirement contributions (if offered)

Independent contractors, on the other hand, are considered self-employed business owners. They are not covered by the FLSA and do not receive overtime or minimum wage protections.

Misclassification is common. Employers in Atlanta and across Georgia often label workers as contractors to save money. If you’ve been classified as a contractor but treated like an employee, you may be owed significant back pay.

The FLSA does not rely on job titles, contracts, or tax forms to decide whether a worker is an employee or contractor. Instead, the U.S. Department of Labor (DOL) and courts apply the “economic reality test” - asking whether, as a matter of economic reality, the worker is dependent on the employer for work, or is truly in business for themselves.

Key factors - While no single factor is decisive, the economic reality test is based on the totality of circumstances, including:

1. Opportunity for profit or loss depending on managerial skill
   • Does the worker control their earnings through business decisions (e.g., hiring helpers, negotiating rates)?
   • Or do they simply receive a set rate of pay from the company?
2. Investments by the worker and the employer
   • Contractors typically make significant investments in tools, equipment, or facilities.
   • Employees usually rely on the employer’s resources.
3. Degree of permanence of the work relationship
   • Employees often have ongoing, indefinite relationships.
   • Contractors typically work project-by-project or for a set time.
4. Nature and degree of control
   • Does the employer set schedules, dictate how work is done, or closely supervise tasks?
   • Contractors generally control their own schedules and methods.
5. Integral part of the business
   • If the worker’s tasks are essential to the business, the worker is more likely to be an employee.
   • If the tasks are peripheral or specialized, the worker may be a contractor.
6. Skill and initiative required
   • Contractors often bring specialized skills and market their services to multiple clients.
   • Employees usually perform tasks under direction without independent business initiative.

Importantly, the test is about economic dependence. If workers depend on the company as their primary source of income, they are more likely employees under the FLSA.

• 1099 workers who perform the same duties as employees, but are denied overtime and benefits
• Delivery drivers, construction workers, or home health aides treated as contractors despite working full time for one company
• IT professionals or administrative staff given “independent contractor” agreements but working under close supervision
• Gig workers who depend entirely on one platform or company for their livelihood

For Workers:

• Loss of overtime pay and minimum wage protections
• Paying self-employment taxes that should have been covered by the employer
• No access to unemployment or workers’ compensation
• Denial of benefits such as health insurance or retirement contributions

For Employers:

• Liability for unpaid overtime and minimum wages under the FLSA
• Possible liquidated damages (doubling the amount owed)
• Responsibility for back taxes, unemployment contributions, and penalties
• Exposure to collective (group) lawsuits by misclassified workers

While the FLSA applies nationwide, Georgia also enforces its own laws offering the same protections. The Georgia Department of Labor often uses similar standards to determine whether workers are eligible for unemployment benefits.

For workers in Atlanta, Fulton County, DeKalb County, Cobb County, Gwinnett County, and throughout Georgia, both federal and state law may provide remedies if you’ve been misclassified as an independent contractor.

Our top Atlanta overtime lawyers have extensive experience handling independent contractor misclassification cases under the FLSA. We:

• Analyze your job duties, pay structure, and work relationship under the economic reality test
• File claims for unpaid overtime, minimum wages, and related damages
• Represent both individuals and groups of workers in collective actions
• Protect employees from retaliation when they assert their rights

If you believe you have been misclassified as an independent contractor and denied overtime pay or minimum wages under the FLSA, contact the leading Atlanta wage and hour attorneys at Fidlon Legal today for a confidential free case evaluation.