Dog and Laptop smallThere can be confusion between independent contractors, temporary employees, and permanent employees, often arising from:

  • Determining the eligibility of a worker requesting leave: is the worker an eligible employee covered under the FMLA, even as a temp, or is the worker properly classified as something else, such as an independent contractor?
  • Determining if the employer is a covered employer: employees are only covered by the FMLA if the employer has 50 or more employees. If an employer has 45 employees and 5 independent contractors, the employer is not a “covered employer.”

Independent Contractors
Only employees are eligible under the FMLA – not independent contractors. But even that seemingly bright line can be blurred.  The FMLA relies upon the expansive definition of “employ” – to suffer or permit to work – under the Fair Labor Standards Act. Per FLSA regulation 29 C.F.R. § 825.105, the determination of whether an employee is an employee or an independent contractor hinges on whether the employee is dependent on the business of the employer and not engaged in a business of his/her own, like a properly-classified independent contractor. As the Department of Labor noted in its recent Interpretation, most workers are employees under this broad definition, and the coverage is intended to be expansive. Much has been written about independent contractor misclassification and proper independent contractor classification has implications for FMLA leave.

Employee eligibility and independent contractors: The Court in Demers v. Adams Homes Northwest Florida considered whether the employee seeking leave was an eligible employee or an independent contractor. Colleen Demers, a sales agent, worked for a home builder, Adams Homes. She was terminated after informing Adams Homes that she was pregnant.  In determining whether Demers was an employee or an independent contractor, the Court considered the six-factor “economic realities” test followed in Fair Labor Standards Act analyses:

  • the degree of control exercised by Adams Homes
  • the relative investments of Adams Homes and Demers
  • the degree to which Demer’s opportunity for profit and loss was determined by Adams Homes
  • the skill and initiative required in performing the job
  • the permanency of the relationship
  • the degree to which the Demers’ tasks were integral to Adams Homes’ business.

The Court was persuaded that although the Demers and Adams Homes “Exclusive Marketing and Selling Agreement,” stated that it was not an employment contract. Demers had set up a corporation through which she was paid, and she provided her own health insurance, nonetheless she functioned as an employee. The court found significant the fact that Demers was required to obtain approval for vacation time, attend weekly staff meetings, and adhere to professional dress attire. Thus, the entire time Demers was an Adams Homes’ independent contractor had to be considered in determining if she was eligible for FMLA protection.

Covered Employer and Independent Contractors
The plaintiff in Holliday v. Vacationland Federal Credit Union was undisputedly an employee – but the parties disagreed as to whether the employer was a covered employer.  The employer had 49 employees – and 1 worker classified as an independent contractor. While the Court admitted that the relationship with that worker had elements of both an employment arrangement and that of an independent contractor, it found that, despite the employer’s classification, he was an employee.  As a result, the Credit Union was a covered employer and subject to the FMLA.

Temporary Employees
The FMLA addresses the topic of temporary employees under the “joint employer coverage” section of the regulations, stating when two or more businesses exercise some control over the work or working conditions of an employee, they may be considered “joint employers” for determining both employer coverage and employee eligibility. See FMLA regulation 29 C.F.R. § 825.106. The regulations are applicable when a temporary agency supplies employees to a company. In determining employer coverage, the FMLA states that jointly employed employees are counted by both employers, regardless of which maintains the employee on payroll. But, it is less clear how eligibility is determined for a jointly employed employee.

The regulations do provide some FMLA eligibility guidance for temporary workers who become permanent. While some employers try excluding the period of time when the employee was working through the temporary agency, starting the FMLA clock on the first day of permanent employment, few courts have addressed this topic and applied the joint employer provision of the FMLA regulations to employee eligibility criteria. While the joint employer provision in the FMLA regulations have scant little to say about how it applies to employee eligibility, the court in Mackey v. Unity Health System declared that the employee’s term of employment began when the temp agency assigned the worker to the client, not when the client employer hired her as a permanent employee.  We agree with the Mackey court, that an employer should begin to count hours and length of service eligibility requirements from the date an employee is placed at the employer by the temporary agency.

CLEARING IT UP: 3-STEP PROCESS
In assessing whether your non-traditional employee is FMLA eligible, considered these 3 steps:

3 steps

For details on employee eligibility under FMLA or state FML laws, along with useful notes and examples for your toughest leave administration questions, subscribe to a 30-day trial of LeaveAdvisor. We take the guesswork out of leave compliance.