Employment laws provide rights, benefits, and protections to applicants and employees. But how do they apply to independent contractors, interns, and volunteers? Here we address the impact of major employment laws on non-employees.
The Fair Labor Standards Act (FLSA) requires that employers pay non-exempt employees at least the minimum wage for each hour worked and overtime pay whenever they work more than 40 hours in a workweek. The FLSA also provides certain rights to employees who are exempt from minimum wage and overtime. The FLSA generally doesn't cover non-employees, such as independent contractors.
Under the FLSA, bona fide independent contractors are not considered employees and therefore aren't entitled to minimum wage, overtime, and other FLSA protections. Note: A worker is presumed to be an employee unless the relationship meets applicable independent contractor tests. The federal Department of Labor (DOL) uses an "economic realities test" to determine whether an individual is an employee or an independent contractor for FLSA purposes. Under this test, an employee is someone who, as a matter of economic reality, is dependent upon the business to which he or she renders service. An independent contractor is generally not economically dependent upon the services they provide to one particular business. For further information on this test, see the DOL's July 2015 interpretation letter. Keep in mind that your state may apply different tests to assess independent contractor status.
Under the FLSA, bona fide unpaid interns are not considered employees and therefore aren't covered by the FLSA. To be considered an unpaid internship, the internship must meet all six of the following criteria:
- The internship is similar to training that would be given in an educational environment;
- The internship is for the benefit of the intern;
- The intern does not displace regular employees but works under close supervision of existing staff;
- The employer derives no immediate advantage from the activities of the intern (on occasion its operations may actually be impeded);
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If an internship meets all of these criteria, the intern wouldn't be entitled to minimum wage, overtime, and other FLSA protections. However, few internships will meet this criteria. When in doubt, pay interns at least the minimum wage and overtime when due.
Individuals who volunteer their services at non-profit organizations, not as employees and without contemplation of pay, are not considered employees of that organization and therefore aren't covered by the FLSA. Under the FLSA, individuals may not volunteer their services to for-profit employers in the private sector.
There may be situations when an individual is an employee of more than one entity, and each entity must comply with the FLSA (known as joint employment). For example, if you use a staffing agency to obtain temporary employees, you and the staffing agency may be joint employers for the purposes of the FLSA.
Equal Employment Opportunity:
Federal nondiscrimination laws protect employees and applicants from discrimination on the basis of their age, color, race, sex, religion, disability, national origin, and genetic information. Many states and local jurisdictions have similar laws, some of which offer protections based on additional characteristics and/or protect certain non-employees.
Note: Under certain circumstances and in some states, the law may offer non-employees, such as independent contractors, protection from discrimination or harassment.
To be considered a non-employee under federal nondiscrimination laws, the worker must meet various criteria. Here is a summary of federal tests (your state or local jurisdiction may have different tests).
Under federal nondiscrimination laws, a worker is presumed to be an employee (and therefore entitled to protection under EEO laws) unless the worker meets certain tests classifying them as an independent contractor. To determine whether the worker is a covered employee or independent contractor, the Equal Employment Opportunity Commission (EEOC) looks at factors such as whether:
- The employer has the right to control when, where, and how the worker performs the job
- The work does not require a special skill
- The employer rather than the worker furnishes the tools, materials, and equipment
- The work is performed on the employer's premises
- There is a continuing relationship between the worker and the employer
- The employer has the right to assign additional projects to the worker
- The employer sets work hours
- The worker is paid by the hour, week, or month rather than for the agreed cost of performing a particular job
- The work performed by the worker is part of the employer's regular business
- The worker is not engaged in his or her own distinct occupation or business
- The employer provides the worker with benefits
The factors outlined above suggest the worker is an employee and not an independent contractor.
For internships, the EEOC says its determination of whether an individual is an employee depends on whether the intern receives "significant remuneration" in some form, such as a pension, group life insurance, workers' compensation, or access to professional certifications. An intern who receives only some small benefit that is an "inconsequential incident of an otherwise gratuitous relationship" may not be considered an employee. However, individuals who apply and/or participate in a training or apprenticeship program are protected against discrimination with respect to admission and participation in the program, regardless of whether the individual is an employee. For paid interns, the EEOC uses the same test as it does for independent contractors.
Some states have enacted laws that expressly protect unpaid interns from discrimination and/or harassment even if they aren't considered employees under other employment laws. Check your state law to ensure compliance.
As with the FLSA, there may be situations in which more than one entity may be an individual's employer. This means that if each entity is considered an employer under the applicable EEOC test, both may be held liable for violations of federal nondiscrimination laws.
Before classifying an individual as an independent contractor, unpaid intern, or other non-employee, review federal and state guidance and apply all applicable tests consistently. When in doubt, err on the side of caution, classify these workers as employees, and provide them with the protections granted under all applicable laws.