Legal Clinic

Do Employers Have FMLA Obligations to Independent Contractors?

Question: Our company has utilized a particular independent contractor for the past 20 years. He now claims that he needs to take time off to address a serious medical condition. Are we required to save his job for him when he returns? Also, is our staffing company -- the company that sent him to us -- required to provide Family and Medical Leave Act leave benefits to this long-term independent contractor? We are unsure of our and the staffing company's obligations.

Thursday, December 13, 2012
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Answer: The answer to your question turns on who is the actual "employer" for this individual, and whether your company and the staffing agency may be considered "joint employers" under the FMLA.

First, you must determine whether or not the "independent contractor" fits the legal definition of an independent contractor or whether he would legally be considered an employee with regard to your company. An independent contractor is someone "engaged in a business of his/her own," unlike an employee who "follows the usual path of an employee and is dependent on the business which he/she serves." 29 C.F.R. § 825.105(a). To determine whether this individual would legally be considered an independent contractor or an employee, courts have used the "economic realities" test, which was developed under the FLSA. See, e.g., Nichols v. All Points Transp. Corp. of Mich. Inc., 364 F. Supp. 2d 621 (S.D. Mich. 2005). This test requires the examination of: (1) the permanency of the relationship; (2) the degree of skill required for the particular job; (3) the worker's capital investment; and (4) the opportunity for profit or loss.

Your company should also consider which company has the right to control both the work he performs as well as the method by which he completes the work. Other necessary considerations include which company has the right to discharge the worker and who supplies the worker with tools and a place to work. Additionally, if your company pays this individual's wages and provides health benefits, it is likely that he is not an independent contractor, but rather, an employee. No one factor or set of factors is dispositive, so all factual circumstances must be considered in making this determination. Moreover, a statement or agreement labeling an individual as an independent contractor is not dispositive.

If this individual is in fact an independent contractor with regard to your company, then there is no applicable law requiring you to preserve his job for him while he is out on medical leave. If, however, he would legally be considered an eligible "employee," and your company is a covered employer, you will be required to return him to his present position when he returns from medical leave, pursuant to the FMLA. 

If your company has 50 or more employees within a 75-mile radius, your company must provide all eligible employees, i.e., employees who have worked for the company for at least 12 months and worked a total of 1,250 hours over the past 12 months, up to 12 workweeks of unpaid leave during any 12-month period for the birth and care of a newborn child; to adopt or assume care for a foster child; to care for an immediate family member, such as a spouse, child or parent, with a serious health condition; or to take medical leave due to a serious health condition. Accordingly, if your company is considered this individual's employer and your company provides FMLA leave to other employees, this individual will likely be entitled to FMLA leave from your company. 

If, however, the staffing agency pays this individual's wages and provides his benefits, has control over the work this person performs, or has the right to select and discharge employees, the staffing agency will likely be considered his employer and will be responsible for providing this individual FMLA leave. 

The more likely scenario is that your company and the staffing company will be considered joint employers with respect to FMLA rights and responsibilities. Accordingly, your company could also be bound by the FMLA with respect to this individual. The FMLA applies to any person who acts, directly or indirectly, in the interest of an employer with respect to employees and successor in interest of an employer. 29 C.F.R. § 825.104(a). Although there is nothing in the FMLA statute that refers to joint employment, the regulations provide that "[w]here two or more businesses exercise some control over the work or working conditions of the employee," a joint employment relationship may exist under the FMLA.  29 C.F.R. § 825.106(a). According to the regulations, if the individual "performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek," a joint employment relationship will likely exist. Your company and the staffing agency may be considered joint employers even though they are distinct entities, if your company and the agency: (1) share this individual's services or interchange employees; (2) act in each other's interest with regard to this individual; or (3) share control over this worker. 29 C.F.R. § 825.106(a)(1), (2), and (3). 

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For example, several courts have found that, whenever a temporary or leasing agency provides employees to another employer, a joint employment relationship exists. 29 C.F.R § 825.106(b)(1); see also Grace v. USCAR, 521 F.3d 655 (6th Cir. 2008) (Joint employers were not entitled to summary judgment where they claimed a termination was the result of a restructuring, but there was a genuine issue of material fact as to whether the restructuring would have occurred had a contract employee not taken leave due to her disability under the FMLA); Miller v. Defiance Metal Prods. Inc., 989 F. Supp. 945 (N.D. Ohio 1997) (Time during which employee worked at company's facility as employee of temporary agency was to be used to determine length of her employment with the company for purposes of determining employee's FMLA eligibility).

Although the staffing agency will likely be considered this individual's "primary" employer, especially if the agency has the authority to hire, discharge and assign the employee, both entities will have responsibilities under the FMLA. 29 C.F.R. § 825.106(c). Only the primary employer is responsible for providing required notices, providing FMLA leave and maintaining health benefits. 29 C.F.R. § 825.106(c); see also Mahoney v. Nokia, Inc., 444 F. Supp. 2d 1246 (M.D. Fla. 2006), aff'd, 236 F. App'x 574 (11th Cir. Fla. 2007).  The primary employer is also mostly responsible for job restoration.  29 C.F.R. § 825.106(e). As a secondary employer, however, your company would be responsible to accept this individual upon return from FMLA leave as long as your company continues to use an employee from the staffing agency, and the agency chooses to place this employee with your company. 29 C.F.R. §§ 825.106(e); 825.220(a)(2). As a secondary employer, your company would also be prohibited from interfering with this employee's FMLA rights and also from discriminating against him for protected activities under the FMLA, even if your company is not otherwise a covered employer, as defined above, under the FMLA. 

*Proskauer Associate Noa Baddish assisted the author with this article.

Keisha-Ann G. Gray is senior counsel in the Labor & Employment Law Department of Proskauer in New York and co-chair of the Department's Employment Litigation and Arbitration Practice Group.

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