What the ‘Economic Reality Test’ Is and How It May Impact Your Unpaid Overtime Case in Georgia

For many people who need to pursue legal action for unpaid overtime, one of the biggest hurdles they must clear is establishing that they are employees and not independent contractors, as independent contractors are not entitled to overtime pay under the Fair Labor Standards Act. Success in this regard involves utilizing the “economic reality test” established under federal law. Utilizing this test to your maximum benefit can be critical to your success, so it is vitally important that you have an experienced Atlanta unpaid overtime lawyer on your side from the very start.

To get an idea of this “economic reality test” in action, there’s this recent FLSA case from the federal court for the Northern District of Georgia. The plaintiffs were maintenance workers who alleged that, over an extended period, they were deprived of substantial amounts of overtime pay.

The group of handymen did maintenance work for an entity created to provide maintenance and property rehab services to a residential property management company. R.K., one of the workers, alleged that he “worked an average of ’60-plus hours a week'” during the period from April 2018 to January 2019 but did not get paid any overtime.

The crux of the case was whether, during that April 2018-January 2019 window of time, the workers were independent contractors or employees of the maintenance company.

To support his claim of employee status, R.K. alleged that he could not decline work orders sent to him from the maintenance company, and a manager specifically told him that “if he did not like the work assigned to him, he could see himself out the door because his ‘job was to perform the work'” assigned to him. R.K. was also allegedly encouraged to wear shirts with the maintenance company’s logo on them.

This proof was enough to allow R.K to defeat the company’s motion seeking a summary judgment. The judge, in ruling for the worker, noted that deciding the “employee versus independent contractor” issue requires the court to consider the “economic reality” of the “relationship between the alleged employee and the alleged employer.”

The Factors Seek to Determine Whether or Not ‘Economic Dependence’ Exists

This “economic reality” test involves several factors, including: “(1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed;(2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; [and] (6) the extent to which the service rendered is an integral part of the alleged employer’s business.”

The above list, by the way, is not a completely exhaustive set of criteria. The key is to look at all the factors and make a holistic determination about whether or not “economic dependence” exists.

The more control the defendant has, the greater the economic dependence. In R.K.’s case, the company had substantial control. The company required R.K. to work exclusively for it from 8:00 am – 6:00 pm every Monday through Friday. Some of the other repairmen alleged that they were referred to as “in-house handymen.” The repairmen also allegedly were required to attend mandatory weekly meetings, had their movements tracked by the company using GPS, and were forbidden from hiring subcontractors to help them do their jobs. The company also enforced policies that said that, if the repair person did not have their GPS on or if they did not submit to the company pictures of their completed work, they didn’t get paid.

All of that pointed toward a high degree of control, which is the hallmark of an employee-employer relationship. This meant that the repairmen had raised a viable claim that they were employees and had been illegally deprived of overtime pay.

If you’ve wrongfully denied overtime pay, you may be entitled to significant compensation, but winning an unpaid overtime lawsuit involves detailed knowledge of the law, the procedures, and the proof required.  Look to the Atlanta unpaid overtime attorneys at the law firm of Parks, Chesin & Walbert to provide the effective legal representation you deserve. Our firm has a long track record of fighting to get workers what they’re owed, and we’re ready to get to work for you. Contact us through this website or at 404-873-8048 to schedule a consultation.


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