Donovan v. DialAmerica Marketing, Inc.
757 F.2d 1376 (3d Cir. 1985)


  • A major aspect of DialAmerica’s business was getting magazine renewal subscriptions from people whose subscriptions were about to expire.
    • The publishers would supply DialAmerica with the names and addresses of subscribers, and DialAmerica would then locate the phone numbers.
  • There were two groups of workers at issue in this case:

(1) Home-researchers: This group would research the phone numbers.
(2) Distributors: This group would give the research work to other home researchers.

  • The Secretary of Labor alleged that DialAmerica was failing to comply with minimum-wage and record-keeping provisions of the FLSA.
  • Note: Both groups of workers signed “Independent Contractor” documents.

The District Court held that the two groups of workers were independent contractors and not employees, thus not subject to the FLSA.

What are the specific factors in determining whether a worker is an “employee” for FLSA purposes?


(1) The degree of the employer’s right to control the manner in which the work is to be performed;
(2) The employee’s opportunity for profit or loss depending upon his managerial skill;
(3) The employee’s investment in equipment or materials required for his task, or his employment of helpers;
(4) Whether the service rendered requires a special skill;
(5) The degree of permanence of the working relationship; and
(6) Whether the service rendered is an integral part of the alleged employer’s business.

There’s also one general consideration – the “economic reality” test:

  • This test asks whether the workers are dependent upon the business to which they render service.
    • The test does not concern whether the workers depend on the money they earn – it examines whether the workers are dependent on the business for continued employment.

Here, the court held that the home researchers were employees, but the distributors, in a close call, were independent contractors.

  • Affirmed in part and reversed in part.

(1) Home researchers:

  • The investment of these workers was not great.
  • The opportunity for profit and loss was small.
  • The skills required were few.
  • There was a degree of permanence because the workers didn’t transfer their services from place to place and each worked for the defendant for ling periods of time.
  • Locating phone numbers was an integral part of the business.
  • The workers were only able to work when defendant needed their services – i.e., economically dependent.
  • The fact that one works at home is not dispositive of the issue of “employee” status under the FLSA.

(2) Distributors:

  • The distributors were subject to minimal oversight or control over their distribution activities.
  • Moreover, they faced a real opportunity for either a profit or loss in their operations, depending upon the amount of their investment and their skills in management.
  • Finally, their work as distributors was not an integral part of DialAmerica’s business and thus was less likely to be performed by an ‘employee’ of DialAmerica.”