Full-Time Employee: Legal Status Beyond the Hours

An employee who works the number of hours per week that their employer defines as full-time (often 30-40 hours). They are typically eligible for company benefits.
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What Is a Full-Time Employee?

A full-time employee is a worker who meets two critical criteria: they work the number of hours your company defines as full-time, AND they are legally classified as an employee rather than an independent contractor.

The second part is where things get legally complex. Being a "full-time employee" is really about the fundamental nature of the employment relationship.

Under federal law, particularly the Fair Labor Standards Act, an employee is someone who is economically dependent on their employer for work, as opposed to being in business for themselves. Full-time employees typically work a standard number of hours per week and are entitled to benefits such as health insurance, retirement plans, and paid time off.

Legal Definition of "Employee"

Black's Law Dictionary defines an employee as "a person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed".

This definition centers on control. For an employee, the employer has the right to direct both what work gets done and how it gets done. In contrast, independent contractors control their own methods and processes.

The Fair Labor Standards Act doesn't explicitly define "employee," so courts and the Department of Labor have developed tests to determine worker status based on the "economic reality" of the relationship. The key question: is the worker economically dependent on the employer, or are they in business for themselves?

Employee vs. Independent Contractor

Properly distinguishing between employees and independent contractors is one of the most critical classification decisions employers make. The consequences of misclassification can include back wages, overtime pay, tax penalties, and fines.

The DOL's Six-Factor Test

As of March 2024, the Department of Labor uses a six-factor "economic reality" test to determine worker classification under the FLSA:

1. Opportunity for profit or loss depending on managerial skill

2. Investments by the worker and the potential employer

3. Degree of permanence of the work relationship

4. Nature and degree of control

5. Extent to which the work performed is an integral part of the employer's business

6. Skill and initiative

No single factor is determinative. Courts and the DOL consider the totality of circumstances, weighing all factors together.

Why Classification Matters

Employee classification determines what rights and protections workers are entitled to, such as minimum wage, overtime pay, workers' compensation, and unemployment benefits.

Employees receive:

Independent contractors do not receive:

Misclassifying an employee as a contractor can expose employers to significant penalties, back wages, and tax liabilities.

Full-Time Employee Rights and Protections

Full-time employees enjoy extensive legal protections that part-time employees and contractors may not:

Wage and Hour Protections

Under the FLSA, all employees (full-time or part-time) must be paid at least the federal minimum wage for all hours worked. Non-exempt employees must receive overtime pay of at least one and one-half times their regular rate for hours worked beyond 40 in a workweek.

Anti-Discrimination Laws

Full-time employees are protected against discrimination under federal laws including:

These protections apply equally to full-time and part-time employees, but full-time employees may have additional access to benefits and job-protected leave.

Family and Medical Leave Act

Eligible full-time employees can take up to 12 weeks of unpaid, job-protected leave per year for specified family and medical reasons. Eligibility requires working 1,250 hours in the previous 12 months for an employer with 50+ employees within 75 miles. Full-time employees are more likely to meet those standards than part-time employees.

Health and Safety

The Occupational Safety and Health Act (OSHA) protects all employees, regardless of status, from hazardous working conditions. Employers must provide a workplace free from recognized hazards.

Whistleblower Protections

The FLSA and numerous other federal laws prohibit employers from retaliating against employees who report violations, file complaints, or participate in investigations.

Employer Obligations to Full-Time Employees

Hiring someone as a full-time employee creates significant legal obligations beyond those owed to contractors:

Payroll Taxes

Employers must withhold and pay:

These obligations don't exist for independent contractors, who handle their own taxes.

Workers' Compensation Insurance

Nearly all states require employers to carry workers' compensation insurance for employees, providing coverage for work-related injuries and illnesses.

Unemployment Insurance

Employers must pay into federal and state unemployment insurance programs, which provide benefits to eligible employees who lose their jobs through no fault of their own.

ACA Health Insurance (Applicable Large Employers)

Employers with 50 or more full-time equivalent employees must offer affordable health insurance to full-time employees (30+ hours per week) and their dependents or face penalties (covered in detail in our full-time hours article).

Record-Keeping Requirements

The FLSA requires employers to maintain specific records for each employee, including:

These records must be preserved for specified time periods and made available for DOL inspection.

Compliance with Employment Laws

Employers must comply with all applicable federal, state, and local employment laws, including:

Classification Best Practices

Proper classification protects both employers and workers from costly mistakes:

Review Classification Regularly

Don't just classify workers once and forget about it. Relationships evolve. A contractor whose role has expanded to work exclusively for you under close direction may have become an employee under the economic reality test.

Document the Relationship

For contractors, maintain written agreements that:

For employees, ensure you have:

Don't Let Workers Self-Select

Workers cannot simply choose to be contractors if the economic reality shows they're employees. The law determines status based on the actual working relationship, not what the parties call it.

Ensure Contracts Match Reality

If your contract says someone is a contractor but you:

...then they're likely an employee regardless of what the contract says. Tax authorities and courts will look at the actual relationship, not the label.

Consult Legal Counsel

Worker classification is highly fact-specific and the consequences of getting it wrong are severe. When in doubt, consult with an employment attorney or HR professional who can evaluate the specific circumstances.

Full-Time Employee Benefits

While the law doesn't require most benefits for full-time employees, offering a competitive package is essential for attracting and retaining talent.

Typical full-time employee benefits include:

The key distinction: these are typically offered to full-time employees but not part-time employees or contractors, making full-time employee status valuable beyond just the hourly commitment.

State-Specific Considerations

While federal law provides a baseline, states can and do impose additional requirements:

California's ABC Test

California uses a more stringent ABC test for many purposes, which presumes all workers are employees unless the employer proves:

This test is significantly harder to meet than the federal economic reality test.

State Benefit Mandates

Some states require specific benefits for full-time employees:

Always check your state's requirements in addition to federal obligations.

Common Classification Mistakes

Mistake #1: Assuming Skilled Workers Are Contractors

Just because someone has specialized skills doesn't make them a contractor. Many professionals have advanced skills but are still employees because they work under employer direction and control.

Mistake #2: Relying Solely on Contracts

A written agreement calling someone a contractor doesn't override the economic reality of the relationship. Courts and agencies will examine the actual working conditions, not just the paperwork.

Mistake #3: Using 1099s for Regular Staff

Issuing a 1099 doesn't make someone a contractor. If the working relationship meets the definition of employment, the IRS and DOL will reclassify the worker regardless of tax forms.

Mistake #4: Treating Employees Like Contractors

Don't convert employees to contractors to avoid benefits or taxes. If the relationship doesn't change fundamentally, the classification shouldn't either.

Mistake #5: Letting Workers Choose

"She wanted to be a contractor" is not a defense. Worker preference doesn't override legal classification requirements.

The Bottom Line

A full-time employee is more than someone who works full-time hours. It's a specific legal status that comes with rights, protections, and obligations distinct from contractors or part-time workers.

Proper classification requires careful analysis of the economic reality of the relationship using the DOL's six-factor test. Getting it right protects your business from costly penalties while ensuring workers receive the protections they're entitled to under law.

When building your workforce, understand the difference between hiring employees and engaging contractors, maintain proper documentation, review classifications regularly, and consult with legal counsel when situations are ambiguous. The investment in proper classification pays dividends in compliance, reduced legal risk, and a stable, protected workforce.

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