The Court focused its attention on the permanency of the relationship. In analyzing the application of the permanency of the relationship factor, the court noted that it must look to the length and regularity of the working relationship between the parties. An independent contractor will have projects of a fixed duration, and have other projects of fixed duration for other businesses, while an employee will work for one employer for a continuous and indefinite period. The ODPS workers accepted jobs intermittently, but many of the workers worked for ODPS for years. The Court noted that the sworn officers maintained day jobs in law enforcement, but that they “worked consistently” with ODPS, with regular hours over the course of the years. The Sixth Circuit rejected the District Court’s observation that the sworn officers had “other employment and sources of income,” and were not “economically dependent upon ODPS.” Herein lies the heart of the matter.
The Sixth Circuit admonished that “economic dependence” is not a factor by itself, but rather is a conclusion based on analysis of all six factors, including permanency. More importantly, the Court noted that the fact that the worker has other sources of income does not determine whether the worker is an employee or independent contractor. Modern workers have more than one source of income to make ends meet, notes the Court. “An income-based rule” the Sixth Circuit announced, “would deny that economic reality.” Such a rule would fail to protect the most vulnerable workers by encouraging low wages and misclassifications. Because these workers did not go from project to project for different entities, but instead worked regularly, consistently and for years for ODPS, they were employees, regardless of whether this was their side job.
The Court then balanced the factors, finding that five of the six factors supported a finding that the sworn officers were employees and not independent contractors. The Court then cited, again, the remedial and humanitarian purpose of the FLSA, noting that it must apply the economic reality test with that purpose in mind.
But the Sixth Circuit did much more in this regard. The Court applied the factors to the modern employment market, and to the economic reality that workers often have more than one source of income. The Court’s holding seeks to protect those workers by providing employee status. This requires employers to be thoughtful about their classification process, and requires another look around the workplace to ensure proper classification. Policies and procedures should account for the Sixth Circuit’s definition of the economic reality test in light of the modern employment market. It will not be enough to say that the work provided is merely a “side job.” Independent contractors who have been classified as such, paid by the hour, and worked for the employer for years are likely misclassified. This is particularly true, as in the case of ODPS, where the worker is providing services integral to the operation of the business. It is interesting that the Sixth Circuit did not link the two factors, but certainly the fact that the services were integral and that the contractors provided them for years demonstrate a clear economic reality: the workers, even though these were side jobs, needed the income and were providing key services. In other words, they were employees.
These two factors together present a practical framework for employers to analyze whether they are properly classifying workers: if the work is integral to the operation, and the worker has provided those services regularly and consistently, regardless of the fact that the work represents a “side gig”, the worker is an employee. The Sixth Circuit’s opinion provides guidance for employers moving forward, and for workers challenging the classification of their side jobs without the benefit of employee status.