Statutory Definitions of "Employer," "Employee," and "Independent Contractor"
Whether a franchisor is the employer of its franchisees and/or the "joint employer" of its
franchisees' employees hinges in large part on how the terms "employer" and
"employee" are defined under federal and state laws.
These laws, however, feature no uniform definition of the terms "employer" and
"employee." Instead, federal and state laws have varying, sometimes divergent,
definitions. So it is that the terms "employer" and "employee" are inconsistently defined
under the federal Fair Labor Standards Act (FLSA)123 and under state labor,
unemployment insurance, workers' compensation, and other laws, rules, and
regulations. Further, as the judiciary has noted, the varying definitions of "employer" and
"employee" are concurrently diminutive and broad, presumably to enable the judiciary to
apply those terms in an expansive and extensive fashion.[124]
The FLSA defines the term "employer" as including: "… Any person acting directly or
indirectly in the interest of an employer in relation to an employee…."[125] In turn, the
FLSA defines the term "employee" as meaning "any individual employed by an
employer" and further defines "employ" as "…to suffer or permit to work."[126]
By contrast, under the federal Americans with Disabilities Act (ADA), the term
"employee" is defined as "an individual employed by an employer,"127 but the term
"employer" is vastly different than under the FLSA, with the ADA defining "employer" as
meaning:
A person engaged in an industry affecting commerce who has fifteen or more
employees for each working day in each of 20 or more calendar weeks in the current or
preceding calendar year, and any agent of such person, except that, for two years
following the effective date of this subchapter, an employer means a person engaged in
an industry affecting commerce who has 25 or more employees for each working day in
each of 20 or more calendar weeks in the current or preceding calendar year, and any
agent of such person.[128]
Varying again are the definitions of "employment" and "employee" found in the federal
Internal Revenue Code, where the definition of the term "employment" consumes six
pages of very small font text (and is so detailed as to include in the definition "service
performed as the President or Vice President of the United States"). The definition of
"employee" is similarly broad and invokes "the usual common law rules applicable in
determining the employer-employee relationship."[129]
On the state level, too, the definitions of "employer" and "employee" vary within each
state depending upon the statutory scheme in question. The laws of New York and
California are representative. New York features varying definitions of the terms
"employer" and "employee" under its Labor Relations Act,[130] Minimum Wage Act,
[131] Disability Benefits Law,[132] Construction Industry Fair Play Act,[133] Labor and
Management Improper Practices Act,[134] and Unemployment Insurance Law.[135]
(This listing does not come close to exhausting the number of definitions of the term
