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Independent Contractor or Employee? Kansas Supreme Court Draws Distinction Between Cases Under the FLSA and the KWPA

November 24, 2014

A recent case came down from the KS Supreme Court on styled Craig v. FedEx Ground Package System, Inc. which examined whether workers were independent contractors or employees.  Delivery drivers across the country brought numerous class actions in federal court against the package delivery service provider alleging they were employees, not independent contractors.  Those federal class actions cases were consolidated for pretrial purposes, and the federal district court for the Northern District of Indiana entered an order in favor of the service provider.  The drivers appealed.  On appeal, the U.S. Court of Appeals certified questions to the Kansas Supreme Court.

The Kansas Supreme Court stated in applying the “economic reality test” used to determine whether an individual is an employee or independent contractor under the Fair Labor Standards Act (FLSA), courts generally look at the following factors:  (1) degree of control exerted by alleged employer over the worker; (2) worker’s opportunity for profit or loss; (3) worker’s investment in the business; (4) permanence of the working relationship; (5) degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employer’s business.  The “economic reality test” also considers whether the alleged employer has the power to hire and fire employees, supervises and controls employee work schedules or conditions of employment, determines rate and method of payment, and maintains employment records.

When addressing state law claims under the Kansas Wage Payment Act (KWPA), Kansas Courts have used a “right to control” test and have examined a number of factors for determining whether a worker is an employee or an independent contractor.  Over time, the number of factors has expanded to 20.  These factors include:

(1) the employer’s right to require compliance with instructions;

(2) the extent of any training provided by the employer;

(3) the degree of integration of the worker’s services into the business of the employer;

(4) the requirement that the services be provided personally by the worker;

(5) the extent to which the worker hires, supervises, and pays assistants;

(6) the existence of a continuing relationship between the worker and the employer;

(7) the employer’s establishment of set work hours;

(8) the requirement that the worker devote full-time to the employer’s business;

(9) the degree to which the work is performed on the employer’s premises;

(10) the degree to which the employer sets the order and sequence of work;

(11) the requirement that the worker submit regular or written reports to the employer;

(12) the manner of payment to the worker, e.g., by the hour, day, or job;

(13) the extent to which the employer pays the worker’s business or travel expenses;

(14) the degree to which the employer furnishes tools, equipment, and material;

(15) the incurrence of significant investment by the worker;

(16) the ability of the worker to make a profit or suffer a loss;

(17) whether the worker can work for more than one firm at a time;

(18) whether the worker makes his or her services available to the general public on a regular and consistent basis;

(19) whether the employer has the right to discharge the worker; and

(20) whether the worker has the right to terminate the relationship at any time without incurring liability

In Craig, the Kansas Supreme Court noted the primary distinction between the “right to control test” used to determine whether individual is an employee or an independent contractor under the KWPA, and the “economic reality test”, used to determine whether the individual is an employee or independent contractor under the FLSA, is that under the FLSA, the right to control is not considered the single most important factor in determining the worker’s status.  In response to the certified questions posed in Craig, the KS Supreme Court held the drivers were employees, and NOT independent contractors.

For a complete copy of the Craig opinion, click here.

— Lawrence E. Nordling

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