The Regulation of Employment

1. The freedom to contract is crucial to freedom of the market; an employee may choose to work or not to work for a given employer, and an employer may choose to hire or not to hire a given applicant.

2. The issue of whether someone is an employer or employee is a critical one when it comes to regulation and one that depends on a variety of factors. Business decisions made in one context, for instance, may give rise to liability when there may no liability in another (depending on factors such as the size of the business organization). In addition, defining an individual as an employee allows that person causes action that an independent contractor might not have.

3. The actual answer may vary, depending on the statute, case law, or other analysis to be applied. The courts, employers, and the government are unable to agree on one definition of “employee” and “employer,” so it varies, depending on the situation and the law being used. In addition, some statutes do not give effective guidance. For instance, the Employee Retirement Income Security Act (ERISA) defines employee as “any individual employed by an employer.” As one court said, this nominal definition is “completely circular and explains nothing.” The distinction is significant for tax law compliance and categorization, for benefit plans, for cost reduction plans, and for discrimination claims.

• Common-law agency test.

• IRS 20-factor analysis.

• Economic realities test

4.

• Violation of Public Policy

• Retaliatory Discharge

• Whistle-Blowing

States vary in terms of their recognition of the following exceptions to the doctrine of employment-at-will. Some states recognize one or more exceptions while others might recognize none at all. In addition, the definition of these exceptions also may vary from state to state.

• Bad faith, malicious, or retaliatory termination in violation of public policy.

• Termination in breach of the implied covenant of good faith and fair dealing.

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