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Employee or independent contractor? It is a long-standing question that continues to challenge businesses that seek to properly classify workers. Many employers, like the exotic dance clubs in this case, rely on independent contractor agreements to defend their classifications. In a thorough review of an employee/independent contractor analysis, the 4th U.S. Circuit Court of Appeals reminded businesses that such analyses should run much deeper and the determinative issue is the economic realities of the underlying relationship.Several exotic dancers at two commonly owned and managed dance clubs in Prince George's County, Md., brought a lawsuit on behalf of themselves and other similarly situated dancers for nonpayment of minimum wages under federal and Maryland law. The clubs denied that the dancers were employees entitled to payment of minimum wages.The clubs had asked all dancers to sign a "Space/Lease Rental Agreement of Business Space" document that identified the dancers as independent contractors. The dancers were not paid any wages. Rather, compensation was limited to tips received directly from patrons. The lower court granted partial summary judgment in favor of the dancers, finding no material dispute that they were employees and, under the law, entitled to payment of minimum wages.The appeals court undertook an illustrative analysis of a Fair Labor Standards Act (FLSA) employee/independent contractor six-factor test, which looks at:
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