UC, Berkeley, School of Law 590 Simon Hall Berkeley, CA 94720 T: 510.643.1076 F: 510.643.

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MEMORANDUM TO: FROM: DATE: RE: Worker Cooperative Coalition Policy Advocacy Clinic November 24, 2013 DLSE Definition of Employee

Question: When will the Department of Labor Standards Enforcement (DLSE) consider workers in a worker cooperative employees for the purpose of enforcing minimum wage laws? Analysis: The DLSE will consider a worker-member in a worker cooperative an employee if they find that the cooperative: (1) exercises control over the wages, hours, or working conditions of the worker; (2) suffers or permits the worker to work; or (3) engages the worker, creating a common law employment relationship.1 This is to say that the DLSE recognizes and regulates common law employment relationships as well as certain other relationship that fall outside of the common law definition. The legal standards for these categories are discussed next. Exercises Control over Wages, Hours, or Working Conditions: Exercising control over means that the employer has the power or authority to negotiate and set an employees pay rate, hours, or working conditions at the job site.2 It does not encompass a situation where the company is merely physically involved in preparing an employees paycheck, time stamp, or tax materials.3 Suffers or Permits the Worker to Work: To suffer or permit the worker to work means that the employer ha[s] the power to either cause him to work or prevent him from working.4 This test is broader than the common law power to hire or fire test. Merely allowing a worker to continue to work for the employer will create an employment relationship. This test was intended to encompass the use of child labor in a relationship that may or may not have been considered a common law employment relationship.5 Engaging the Worker / Common Law Employment Test: A common law employment relationship generally obtains when the employer controls the details of the workers work.6 The determination of whether an employer controls the details of a workers work is a factual one. The most important factor tends to be whether the employer has the power to hire and fire the employee at will.
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Futrell v. Payday California, Inc., 190 Cal. App. 4th 1419, 1429 (2010). See also IWC Wage Order No. 1-2001, 2(D) & (F), available at http://www.dir.ca.gov/IWC/IWCArticle1.pdf. 2 Futrell at 1432. 3 Id. 4 Id. at 1434. 5 Id. 6 Id.