By Cynthia McNabb
Workers in Washington State, currently classified by their employer’s as “independent contractors” should be aware that the Washington Supreme Court has recently ruled that some of these workers may actually be “employees” under the Washington Minimum Wage Act and thus entitled to minimum wage and overtime benefits.
On July 19, 2012, the Washington Supreme Court announced a significant new rule on the issue of how workers are classified (as either employees or independent contractors) in the State of Washington for the purposes of minimum wage and overtime pay. The Court ruled that the definition of an “employee” in Washington’s Minimum Wage Act (MWA), RCW § 49.46.010(3), incorporated what is known as the “economic-dependence” test developed by federal courts in interpreting the Fair Labor Standards Act (FLSA).
The case derived from a class action lawsuit wherein the plaintiffs, delivery drivers for Fedex Ground, alleged that they were improperly classified as independent contractors and, as a result, were denied overtime pay. When the case, after a four-week trial, went to the jury, the jury was instructed to consider the common law “right-to-control” test in conjunction with the FLSA criteria used to evaluate economic-dependence between worker and employer.
The jury ruled that the drivers were independent contractors pursuant to the right-to-control test. The Plaintiffs appealed to the Court of Appeals, which ruled that the jury instructions were erroneous and prejudicial. The Supreme Court, on July 19, 2012, upheld the Court of Appeals ruling.
In issuing its ruling and rejecting the standard common law “right to control” test, the Court stated: “the relevant inquiry is ‘whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.” While the Court ruled that both the “right to control” test, (i.e. “whether the employer possessed the right to control the alleged employee’s physical conduct in the performance of his or her duties”) and the “economic-dependence” test were reasonable approaches, the Court ruled that legislative history of the MWA “decisively” favored the economic-dependence approach. Further, because the purpose of the right-to-control test “differs” from the purpose of the MWA in that the right-to-control test serves to reduce employer liability while the MWA was intended to protect against employers paying wages so low that employees could not survive, the economic-dependence test better matched the intent of the MWA.
In rendering this ruling, the Supreme Court acknowledged that this definition of employee is far more inclusive than the previous definition of employee found using the right-to-control test factors. Certainly, more workers in the State of Washington will now be entitled to the benefits of employment, such as minimum wage and overtime pay. It is anticipated that this ruling will generate an increase in wage and hour litigation in the State of Washington, including class action suits. Individual independent contractors interested in exploring their rights are encouraged to contact counsel to discuss how this ruling applies to their workplace
