Definition of an Employee

Whether you count as an employee decides whether wage laws protect you at all. The federal Fair Labor Standards Act defines an employee very broadly as "any individual employed by an employer," and it defines "employ" to include to "suffer or permit to work." Courts read that language to reach workers who are economically dependent on a business, not just people on a traditional payroll.

Under the federal standard, courts look at the "economic reality" of the relationship: how much control the company has, whether the worker can earn more or lose money through their own skill and investment, how permanent the relationship is, and whether the work is an integral part of the company's business. No single factor decides the question, and the label in a contract does not control.

California uses a stricter rule for most jobs. Under California Labor Code section 2775, a worker is presumed to be an employee unless the hiring company proves all three parts of the "ABC test": the worker is free from its control, does work outside its usual course of business, and is customarily engaged in an independent trade or business. If the company fails any one part, the worker is an employee.

This definition drives a large share of wage class actions. Delivery drivers, truckers, installers, and gig workers often sue claiming they were treated as contractors but controlled like employees, which cost them overtime, expense reimbursement, and meal breaks. See our pages on misclassification lawsuits, unpaid overtime, and California wage and hour claims.