Class 1: Introduction & Who Is an Employee/Employer

Topics Overview:

• Foundations of Employment Law: The balance between private ordering (freedom of contract in the workplace) and public regulation that imposes limits to protect workers. This course centers on how far employers and employees can structure their relationship as they wish, and where the law steps in to impose obligations or prohibit certain arrangements.   
• As you begin this course, consider your instinctive view about the role of government in the workplace. Do you tend to believe that government should take a hands-off approach and allow employers and employees to freely define the terms of their relationship? Or do you lean toward the view that government should impose rules to protect workers, even if doing so limits contractual freedom? You will encounter this question repeatedly throughout the class, and I hope your perspective may evolve as we move through the material.
• Defining “Employee” vs. “Independent Contractor”: Tests used to determine who qualifies as an employee (and thus gets legal protections) as opposed to an independent contractor. We examine the traditional common-law control test (who controls the manner and means of the work), the “economic reality” test under the Fair Labor Standards Act (FLSA) (whether the worker is economically dependent on the hiring entity or in business for themselves), and modern reforms like the “ABC” test adopted by some states. The ABC test presumptively considers all workers to be employees and only deems a worker an independent contractor if each of three conditions is met (roughly: A – the worker is free from the hiring company’s control, B – the work falls outside the company’s usual business or places of business, and C – the worker has an independent business in that trade).
• Who Is the Employer? Understanding business entity relationships and when multiple entities can be considered joint or co-employers. We discuss scenarios like parent/subsidiary companies or staffing agencies, and legal standards (e.g. the joint employer doctrine) determining when an employee can hold more than one entity responsible as their “employer.”
• Importance of Coverage and Scope: These definitions matter because many employment laws apply only to those in an “employment” relationship. We introduce the concept that certain statutes cover only employers of a minimum size or in certain sectors – foreshadowing topics like discrimination law thresholds and exclusions for domestic workers, volunteers, etc.

Required Readings:

• Casebook  Introduction to the employment relationship, “Who is an Employee?”  – including discussion of the FLSA’s broad “suffer or permit to work” standard and the Dynamex decision’s adoption of the ABC test.
• Complaint in California v. Uber and Lyft Please note how this complaint alleges facts and law relating to the issues we are studying.  California Lawsuit against Uber & Lyft
• Simpkins v. DuPage Housing Authority
• Secretary of Labor v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987)(focus on Judge Easterbrook’s concurring opinion)

Supplemental Materials:

• (Not required, but if you are really interested!!) Gig Economy Developments: For a modern perspective, review law review commentary on gig workers – e.g., Means & Seiner, “Navigating the Uber Economy,” 49 UC Davis L. Rev. 1511 (2016) (proposing new tests)
• Illinois Specific: Illinois Law distinguishes employees from independent contractors in certain contexts with an ABC test. For details, see Illinois Department of Employment Security fact sheet on worker classification.

Hypothetical Questions & Model Responses:

Hypothetical: ABC Corp hires Sam as a “consultant” to deliver packages using ABC’s vehicles. ABC sets Sam’s routes and work hours. Sam is paid per delivery, receives no benefits, and signed an “independent contractor” agreement. After an injury on the job, Sam seeks workers’ compensation and overtime pay.

Model Response: Despite the contract label, courts would likely find Sam is an employee, not an independent contractor. Under the economic reality test, Sam depends on ABC for work and is not running an independent business (ABC controls his routes and schedule). Under Illinois law, the ABC test would also presume Sam is an employee since (A) ABC exercises control over his work, (B) he’s working in ABC’s core business (package delivery), and (C) he has no separate delivery enterprise. Thus, Sam would be entitled to workers’ comp and overtime protections as an employee. Simply calling someone a “consultant” in a contract does not override the legal substance of the relationship. 

For brownie points, compare and contrast different tests (i.e., those used in the FLSA or for discrimination claims).

Hypothetical: XYZ, Inc. uses a staffing agency to supply IT technicians. Jane is placed at XYZ through the agency. She works at XYZ’s office under XYZ’s supervisors, but her paycheck comes from the agency. When Jane experiences sexual harassment at XYZ, who is liable as the employer?

Model Response: Both XYZ and the staffing agency may be considered Jane’s employers. This is a joint employer scenario – XYZ directs her daily work and thus functions as an employer, even though a staffing firm is the nominal employer. Under federal guidelines, an entity that controls the terms and conditions of employment can be held liable as a joint employer. Jane could file a complaint against XYZ (the worksite employer) and possibly the agency as well, since each exercised some employer responsibilities. Illinois law (Illinois Human Rights Act) similarly permits joint employer liability in such situations, ensuring that companies cannot evade accountability by using third-party staffing firms.

Have you ever worked as an “independent contractor”?   Try applying the test for yourself and the duties you had.     

Federal vs. Illinois Law:

Federal law and Illinois law both recognize similar concepts of employee status, but there are important differences in application. Federal law (like the FLSA) uses the economic reality/multi-factor test, which can lead to different outcomes in close cases and has been criticized as unpredictable. Illinois law in many cases mirrors the federal approach, but Illinois has shown willingness to implement stricter standards in specific areas. For example, Illinois’ Unemployment Insurance Act employs an ABC test for determining independent contractor status, which is more favorable to finding an employment relationship (making it harder for companies to classify workers as contractors). Additionally, when determining coverage under discrimination or leave laws, Illinois often casts a wider net: the Illinois Human Rights Act (IHRA) covers employers with fewer employees in certain contexts than federal law does. (Under federal Title VII, a company must have 15 employees to be covered, but the IHRA applies to employers with 1 or more employees for harassment, retaliation, pregnancy, and disability claims, and generally to those with 15 for other protected classes.) In short, Illinois tends to be at least as worker-protective as federal law, and often more so by closing loopholes that allow avoidance of “employer” status.

Impacts on Employers and Employees:

• For Employers: These definitions determine an organization’s responsibilities. Illinois employers must be careful when classifying workers – misclassification can lead to liability for back wages, taxes, and penalties. Joint employer doctrines mean that using temp agencies or subcontractors won’t always shield a business from legal responsibility. Employers benefit from clear, written agreements and mindful practices if they truly intend a contractor relationship, but must align with legal tests (e.g., not exercising too much control over an “independent” worker).
• For Employees: A worker’s status as an “employee” is often the gateway to legal protections – minimum wage, overtime, anti-discrimination laws, health and safety regulations, etc. Employees have substantially more rights and remedies than independent contractors. Thus, workers have an interest in being classified properly; misclassified contractors may be missing out on benefits like unemployment insurance or the ability to unionize. In Illinois, workers can turn to state agencies (like the Illinois Department of Labor or IDES) which actively investigate misclassification in sectors like construction and trucking.

Additional Commentary & Resources:

• Practical Tip: The Illinois Attorney General’s Workplace Rights Bureau provides resources and has an ongoing initiative against misclassification. Both employers and individuals can find guidance on who is an employee under various Illinois laws on the Illinois Dept. of Labor website.