Journal of Law and Policy


The meaning of the term “employee” is critically important for the purposes of laws governing work relationships. This is because these laws, for the most part, cover only employees, and do not cover self-employed individuals, commonly referred to as independent contractors or independent entrepreneurs. Currently more than ten different tests are used to determine whether an individual qualifies as an “employee” for purposes of federal and state statutes. This multiplicity of tests has frequently left independent entrepreneurs and their clients uncertain whether their contractual relationships will be respected for purposes of applicable statutes. This exposes companies doing business with independent contractors to the risk of having to litigate the classification of an individual multiple times. Furthermore, many companies have become skeptical of doing business with independent contractors, and instead purchase services through other, less-efficient arrangements. This leads to fewer independent-contractor opportunities, which artificially depresses the earnings of legitimate independent contractors. Moreover, the wide variety in definitions of the term “employee” inhibits the government’s efforts to ensure proper worker classification. The current patchwork of definitions could be eliminated at the federal level by harmonizing the definition of the term “employee” for purposes of federal statutes. Harmonization would establish one definition of “employee” that would apply for purposes of all federal statutes. Thus, once an individual’s status relative to a company is determined for purposes of one federal statute, the individual’s status would be known for purposes of all federal statutes. While significant progress toward harmonization already has been made, it will remain elusive until Congress takes action to adopt a common-law test for the Fair Labor Standards Act, which is the only remaining New Deal statute that has not yet been amended to restore a judicially expanded definition for “employee” to its common-law meaning. The time for Congress to take this action is now.