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Employers, Employees, or Independent Contractors?

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The North Carolina Wage and Hour Act was enacted at the same time as the federal Fair Labor Standards Act. Both laws address employee and employer rights and responsibilities regarding wages and paychecks. An employee is entitled to minimum wage and overtime at a rate of one and a half times the employee’s regular rate. However, independent contractors are not entitled to wage and hour protection, including overtime. If your employer is not paying you minimum wage or overtime by falsely labeling you as an independent contractor, contact overtime attorney Karl S. Gwaltney at 919.526.0450 or email at

Both the NCWAHA and the FLSA contain laws requiring employers to pay employees minimum wage and overtime. These laws also govern youth employment. Unlike the FLSA, the NCWAHA includes additional provisions unique to North Carolina which both employees and employers should be aware.

An employee is “any individual employed by an employer.” This distinction is most important for independent contractors who will not have claims under the NCWAHA or FLSA. Independent contractors are not afforded protection for wages and other benefits. For example, an independent contractor is not entitled to minimum wage and overtime protections whereas an employee must be paid both minimum wage and overtime absent certain exemptions. Therefore, determining whether a person is actually an independent contractor rather than an employee is very important. It’s important to note that a person is not simply an independent contractor because their employer says they are or because a 1099 tax form is issued rather than a W-2

Federal Courts use the “economic realities test” to determine whether a person is an employee or independent contractor. This test examines whether the worker is economically dependent on the business where he works or whether the worker is in business for himself. North Carolina’s public policy is to protect those who are dependent upon the business to which they render service. North Carolina considers the economic realities test but also examines the degree of control that the business exerts over the person in performing its work, the permanency of the worker’s relationship with the business, and the employee’s opportunity for either profit or loss in performing its responsibilities.

North Carolina courts analyzing whether a worker is an independent contractor or an employee, have considered whether the individual “(a) is engaged in an independent business, calling, or occupation; (b) is to have the independent use of his special skill, knowledge, or training in the execution of the work; (c) is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis; (d) is not subject to discharge because he adopts one method of doing the work rather than another; (e) is not in the regular employ of the other contracting party; (f) is free to use such assistants as he may think proper; (g) has full control over such assistants; and (h) selects his own time.” These factors are to be considered but the presence of each one is not necessary.

An employer is defined under the Wage and Hour act as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” This broad definition is helpful for employees because owners, managers, and even supervisors can be sued individually for failing to properly pay wages. To determine whether an individual will be liable for wage and hour violations, including unpaid minimum wage or overtime, courts look at various factors including whether the person (a) hired and fired employees; (b) determined the amount of pay employees should receive; (c) determined when employee’s should be paid; (d) supervised and controlled work schedules; (e) supervised and controlled work conditions; and (f) maintained records of employment.

If you have any questions about your employment status, including whether you are properly labeled as an independent contractor, contact the wage and overtime attorneys at Maginnis Law. Maginnis Law handles wage and hour issues dealing with overtime, minimum wage, unpaid bonuses, commissions, and any other employment problems with unpaid wages across the state of North Carolina. Wage attorney Karl S. Gwaltney can be reached at 919.526.0450 or through our contact page.