The Explainer – Employed to ride a bike?

Dear Explainer,
A good friend of mine recently got a contract offer from a bike team. While I am happy for her, I was floored when I learned that she would only get about $5000 a year for her efforts. Five thousand dollars a year? How can they sign someone up for what has to be less than the minimum wage? Even though she’s just happy for the chance to ride, how can that even be legal?
Marianne J
Westchester, New York

Dear Explainer,
A good friend of mine recently got a contract offer from a bike team. While I am happy for her, I was floored when I learned that she would only get about $5000 a year for her efforts. Five thousand dollars a year? How can they sign someone up for what has to be less than the minimum wage? Even though she’s just happy for the chance to ride, how can that even be legal?
Marianne J
Westchester, New York

Dear Marianne,
You raise an interesting question. In order to answer it, I need to start off by saying that I am not a lawyer. I don’t even play one on TV. Mine should in no way be construed as legal advice. Talk to a real lawyer if you want a professional’s analysis of this question.

That said, I’ll try to answer this one in general terms.

First off, let’s try to decide what hours actually apply against that $5000 figure. For one thing, that $5000 is probably compensation for a defined season, undoubtedly significantly less than a full year. Furthermore, most of a cyclist’s time over the course of that season is probably spent training. That may not qualify.

Actual racing time isn’t all that significant, but that isn’t all that counts. There is, of course, travel and time spent on-site between events. Those would qualify, but how much would those tally up to? What the heck, for the purposes of our example, let’s just assume that your friend puts in time roughly equivalent to that put in by a full-time worker, about 2000 hours a year. That means she earns $2.50 an hour. Ouch.

The minimum wage law to which you refer is also known as the Federal Fair Labor Standards Act (FSLA), which requires a minimum wage of $6.55 an hour. That’s scheduled to go up to $7.25 in July of 2009. The FSLA serves as the baseline when it comes to wages, since states and even cities can – and do – enact higher minimums and those actually trump the federal law. Oregon, for example, has a minimum wage that will hit $8.40 an hour on January 1, 2009.

While the FSLA does not allow an employee to “contract away” minimum wage protections, those rules only apply to actual employees. They do not generally apply to independent contractors. Without the benefit of seeing your friend’s contract, we have to assume that she is defined as an independent contractor and providing services – namely racing her bike – for an agreed-upon rate.

Employee or contractor?
Now, just because an employer calls someone a contract worker doesn’t automatically make it so. The federal or state departments of labor view each case in context and apply tests to determine a worker’s relationship with those who are paying him or her.

There are a number of cases out there in which so-called contract workers convinced the courts that they were, indeed, employees and subject to the full protections of the FSLA and a host of other laws not applicable to contractors. One case that comes to mind is Donovan v. DialAmerica. The Third Circuit Court of Appeals applied something known as an “economic realities” test to the question of whether at-home workers were, in fact, employees.

DialAmerica was a magazine subscription service that relied on telephone salespeople to persuade consumers to renew or start magazine subscriptions. When DialAmerica hired its “home researchers,” they had to sign an “independent contractor’s agreement.” These home researchers were then given a box of 500 cards with names to be “researched,” with the understanding that the cards would be returned within a week. The workers were free to choose the weeks and hours they worked; DialAmerica had little supervision over the workers, but placed certain conditions on how the work process was to be conducted, including stipulating the method for reporting back the results on each card and the ink to be used when doing so. DialAmerica also employed “distributors,” who gave the cards with names to the home researchers and then returned completed cards to the company. The Department of Labor sued DialAmerica for paying the home researchers and distributors less than the minimum wage for the work they did, arguing that they were employees under the Fair Labor Standards Act.

The court agreed, concluding that the “economic reality” of the relationship was that the workers were economically dependent upon DialAmerica for continued employment. The court said that independent contractors would typically not rely on a single employer for continued employment at any one time, but would work for, and be compensated by, many different employers.

The Internal Revenue Service, too, has a way of classifying whether a worker is an employee, posing a series of questions that include:

• Whether the employer provides instruction.
• Whether the employer provides training.
• Whether worker has to render the services personally.
• Whether the employer hires, supervises and pays assistants to the worker.
• Whether the employer sets the work schedule.
• Whether work is performed on the employer’s premises.
• Whether the employer requires work to be performed in a particular sequence.
• Whether employee is required to submit reports.
• Whether employee can quit without being liable to employer.
• Whether the employer pays business or travel expenses.
• Whether the employer provides significant tools, materials or equipment.

Again, this isn’t a definitive list to which all answers must be in the affirmative, but it does provide a general guideline to make the argument.

Let’s make another assumption for the purposes of our discussion. Let’s say that your friend does ultimately qualify as an employee. Does that mean that she then qualifies for that hefty sum of $7.25 an hour? Probably not. The FSLA does provide exemptions to wage and hour rules for a host of employees, including managers, administrators and professionals. (They also have a category for so-called “creative professionals,” which is the one that always trips up journalists when they try to get paid for all of that overtime they put in.)

That “professional” exemption is the killer. Athletes in general could qualify for that “professional” exemption, meaning that even minimum wage rules don’t apply.

Is it fair? Maybe, maybe not, although when The Explainer was in his 20s, he would have given his right arm to get a team kit, a bike, travel money and even a tiny salary to race bikes. It would sure have beat that crappy job he had to hold down just to support his cycling jones … but that’s another story.


“The Explainer” is a regular feature on VeloNews.com. If you have a question related to the sport of cycling that our editors might be able to answer, feel free to send your query to WebLetters@CompetitorGroup.com and we’ll take a stab at answering. Not all letters will be published and some questions may be combined with those of other readers. Please include your full name and hometown.