What are the tests for determining employee vs. worker classification status?


The well known 20-point test6 for determin-


ing worker classification has evolved into the control test as to whether the business or practice has the right, even if not exercised, to direct or control the means and details of the work.7


The control test is determined by an analysis of three categories: behavioral control, financial control and relationship of the parties.8


Behavioral Control: Considers whether the Associate is subject to the scheduling and patient assignment policies of the practice or is subject to a restrictive covenant.


Financial Control: Considers whether the practice bills the patients, sets and collects the fees, compensates the Associate or pays the operating expenses.


Relationship of the Parties: Provides that an independent contractor agreement between the practice and the Associate is not suf- ficient evidence for determining a worker’s status.9


It is the substance of the relation-


ship, not the label, that governs the worker’s status.10


one case,11


However, the IRS acknowledged in where a professional athlete had


worked for his corporation and the athlete’s corporation entered into an agreement with the athlete’s professional team and also entered into an employment agreement with his own corporation, that the athlete was an independent contractor. Following the Sergeant case strategy may be helpful, but the IRS still can argue against it.12


On June 7, 2017, the Department of Labor’s Wage and Hour Division (WHD) withdrew Administrator’s Interpretation No. 2015 1 (A1).13


alities test includes a multifactor analysis and provides a much broader scope of employee classification than the control test used by the IRS.


The inquiry by the WHD under the FLSA is whether the worker is economically depen- dent upon the employer or truly in business for him or herself. If the worker is economi- cally dependent on the employer, then the worker is an employee. If the worker is in business for him or herself and economically independent from the employer, then the worker is an independent contractor.


Is the Work an Integral Part of the Employ- er’s Business? If the work performed is the primary work of the employer’s business, the worker is an employee. In a dental practice, the primary work is providing dental treat- ment.


Does the Worker’s Managerial Skill Affect the Opportunity for Profit or Loss? The ability to work more hours does not separate employees from independent contractors. The focus is on managerial skill and a work-


er’s decision to hire, purchase equipment, advertise, rent space and manage timetables reflect the worker’s opportunity for profit or loss.


How Does the Worker’s Relative Investment Compare to the Employer’s Investment? The worker’s investment should be compared with the employer’s investment to determine whether the worker is an independent busi- ness. The worker’s investment also should not be relatively minor when compared to the employer.


Does the Work Performed Require Special Skills and Initiative? Technical or special skills do not indicate that workers are in business for themselves. Only a worker’s business skills, judgment and initiative help to determine whether a worker is in business for him or herself.


Is the Relationship Between the Worker and the Employer Permanent or Indefinite? Permanency or indefiniteness suggests that the worker is an employee.


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When issued on July 15, 2015, A1 pro- vided guidance on the application of the Fair Labor Standards Act (FLSA) in the identifica- tion of employees who are misclassified as independent contractors. At the time, WHD entered into a memorandum of understand- ing with many states, as well as the IRS, to as- sist in ultimately curtailing misclassification.


While A1 has been withdrawn, WHD has not released any further guidance on worker clas- sification. Thus, there is no basis to believe that WHD’s application of its “economic realities test” has changed. The economic re-


ISSUE 1 | JAN/FEB 2020 | focus 23


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