A recent decision by a Texas federal court, in Chapman v. ASUI Healthcare of Texas Inc., underscores the importance for healthcare entities of carefully assessing the nature of their relationship with workers to determine whether they may be classified as independent contractors.

After having worked at ASUI for a number of years, the plaintiffs brought suit for unpaid wages and overtime under the FLSA, claiming they were misclassified as independent contractors instead of employees. To determine whether the plaintiffs were properly classified as independent contractors, the district court used the traditional five-factor “economic realities” test, assessing: (1) the degree of control exercised by ASUI; (2) the extent of the relative investments of the plaintiffs and ASUI; (3) the degree to which the plaintiffs’ opportunity for profit or loss was determined by ASUI; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship. The court found that each of these factors reflected that the plaintiffs were employees under the FLSA, not independent contractors.

To learn more about the decision and its potential implications for employers, please continue reading at Littler's Healthcare Employment Counsel blog.