FLSA2021-8 — Addressing whether certain distributors of a manufacturer's food products are employees or independent contractors under the FLSA. * WHD is withdrawing opinion letters FLSA 2021-4, FLSA2021-8, and FLSA 2021-9. These letters were issued prematurely because they are based on rules that have not gone into effect. This withdrawal is an official ruling of the Wage and Hour Division for purposes of the Portal-to-Portal Act, 29 U.S.C. § 259, and these letters may not be relied upon as statements of agency policy as of the date of withdrawal, January 26, 2021

U.S. Department of Labor Wage and Hour Division
Washington, DC 20210
FLSA2021-8
January 19
, 2021
Dear Name*:
This letter responds to your request for an opinion from the Wage and Hour Division (WHD) on
whether certain distributors of a manufacturer’s food products are employees or independent
contractors under the Fair Labor Standards Act (FLSA or
Act). We conclude based on the facts
you have furnished that the distributors are independent contractors.
B
ACKGROUND
Your request concerns a manufacturer of perishable food products that sells its products to
distributors for resale. You furnished us with nearly ten single-spaced pages of facts regarding
the distributors and the manufacturer-distributor agreement. We recount
the most relevant ones.
A.The basics of th e distribution agreement.
The manufacturer contracts with distributors to resell its products to retailers. Each distributor
serves a geographic area called a primary territory. The distributor agrees to use its “best efforts
to develop the full sales potential” of the territory, serve customers “consistent with good
industry practice,” and “maintain the established
reputation and goodwill” of the manufacturer’s
products. It is not, however, required to sell to particular customers, nor does it have minimum
purchase requirements. Distributors can enter into distribution agreements for more than one
territory. Distributors do not pay for the distribution rights granted by the agreement.
The contract is not exclusive for either party. The manufacturer contracts with multiple
distributors,
does not grant exclusive rights in a territory to any one distributor, and may engage
in direct sales to retailers (that is, may bypass the dist ributors). A distributor can distribute other
goods, including those of the manufacturer’s competitors, and for at least some distributors, the
manufacturer’s products make up less than half of their annual sales volume. Indeed, distributors
can sell wit hin anot
her distributor’s ter ritory; you state that “it is not unusual for a distributor to
se ll to a customer that a distributor in another territory has decided not to do business with (or to
a customer that refuses to do business with another distributor).”
The manufacturer must “provide the distributor specific compensation” if it changes the
distributor’s primary ter
ritory in a way that reduces the distributor’s sales, though you do not
state the specifics to us. The manufacturer may not, without the distributor’s consent, change the
primary territory to reduce the distributor’s weekly sales by more than 15 percent. The
manufacturer cannot
cancel the agreement except for breach or other good cause. It must give
the distributor 30 days to cure (10 days if the breach is of an obligation to pay). It can cancel
i
mmediately only in instances such as the distributor’s bankruptcy, fraud, or conviction of a
felony. The distributor can cancel the agreement by reasonable written notice.
Disclaimer: This opinion letter was withdrawn on January 26, 2021. This withdrawal is
an official ruling of the Wage and Hour Division for purposes
of the Portal-to-Portal Act,
29 U.S.C. § 259, and Opinion Letter FLSA2021-8 may not be relied upon as a
statement of agency policy as of the date of withdrawal.

2

B. Distributors’ business operations.
A distributor is not required to assume a particular business form. However, corporate and LLC
distributors must underwrite their financial obligations with a personal guaranty, and those
distributors are not allowed to add owners without the manufacturer’s consent. Additionally,
such a distributor must obtain the manufacturer’s consent to assign, sell, or transfer its interest in
the distribution agreement.
Each distributor is responsible for furnishing its own delivery vehicles and warehouse space,
among other business expenses. However, just as a distributor may resell other companies’
goods, it may store or deliver other companies’ products in the same vehicles and warehouses it
uses for the manufacturer’s products.
Some actions by a distributor are required by the agreement. First, the distributor must have
vehicle and general business liability insurance at minimum specified levels with the
manufacturer as an additional insured. Second, you state that the distributor’s warehouse
facilities are subject to federal and state sanitation requirements, and regulations require that the
warehouse be registered with the FDA. The manufacturer has the right to inspect the warehouse
periodically. You also state that the distributor’s warehouse is “subject to access, location, and
sanitation requirements,” but, putting aside the requirements that you do identify, you do not say
whether these are general legal obligations applying to all warehouses (or food-storage facilities)
or are required by the agreement.
Distributors may organize and operate their businesses as they see fit. They are free to set their
own schedules; as described in Background ¶ D , they need not even be available to accept
deliveries from the manufacturer. A distributor may hire others to assist them with their work,
and may do so without the manufacturer’s consent. You state that the se workers are hired,
controlled, directed, and terminated by the distributor, not the manufacturer. You explain that
“some distributors are essentially ‘absentee owners’” and “not actively involved in the day-to-
day operations.”
C. The distribution business.
The income the distributors derive from the relationship is the profit on the resale of goods.
Distributors purchase products from the manufacturer and resell them to retailers. The purchase
is irrevocable; damaged or unsold products may not be returned. There is no minimum purchase
requirement. Distributors are not required to purchase products every week or to purchase
particular products, although the manufacturer may offer certain incentives. The manufacturer
furnishes suggested wholesale and retail prices for each product, but it does not require
distributors to resell at any particular price. The distributor must pay for the products in full
within seven days of receipt. The manufacturer and distributor settle their accounts every week;
the manufacturer pays the distributor if the centralized billings (discussed in Background ¶ D )
exceed the cost of the products purchased that week, and the distributor pays the manufacturer
the remaining purchase price if they do not.

3

D. What the manufacturer furnishes.
You state that the manufacturer makes available to the distributors several optional items and
programs (though you do not note whether it is required to do so by the distribution agreement):
• The manufacturer discounts its prices for distributors that participate in the
manufacturer’s promotions, but distributors are not required to participate.
• The manufacturer discounts its prices for distributors that display the manufacturer’s logo
or advertisements on their vehicles, but distributors are not required to do so. You state
that most do not.
• The manufacturer makes available to distributors clothing with its branding, but they are
not required to wear it. Some do, and some do not.
• The manufacturer suggests marketing and promotional techniques, but distributors are
not required to use them.
• The manufacturer offers “centralized billing” (essentially purchasing distributors’ “valid
sale invoices” and the connected payables and credit risk), but distributors may handle
their own billing (and retain their own credit risk).
• The manufacturer furnishes each distributor with a lock the distributor can use to secure a
warehouse (and which the manufacturer’s drivers can open to deliver goods to the
distributor), but the distributor can use its own lock (and deny such warehouse access to
drivers).
• The manufacturer makes available a two- to three-week orientation program for new
distributors, but they are not required to attend it.
Finally, you state that the manufacturer makes available a smartphone and tablet app that
distributors may use on their own devices “to submit their product orders” and “invoice their
customers.” But you do not say whether the app is the exclusive method by which they can do
so.
E. Contact with the manufacturer.
A manufacturer’s employee called a company rep is assigned to a geographic area containing
several distributors. Company reps are each distributor’s primary contact with the manufacturer
and are responsible for furnishing many of the items and services described above and may
furnish other sales assistance. Distributors are not required to accept any of the manufacturer’s
services or assistance that the company rep offers. Company reps also promote the
manufacturer’s brands and products to retailers that may operate in the distributor’s territory. A
distributor is not required to take advantage of sales opportunities created by company reps, nor
is it required to resell products to a retailer that would like to carry them. Company reps offer to
meet with each distributor at least once per year, but the distributor is not required to take the

4

meeting. Some distributors, you state, choose to have limited, or even no, contact with company
reps.
GENERAL LEGAL PRINCIPLES
The FLSA’s minimum wage and overtime pay obligations apply only to those workers it defines
as employees—individuals whom an employer suffers, permits, or otherwise employs to work.
1

The scope of employment under the FLSA is broad, but, as the Supreme Court has pointed out, it
was “obviously not intended to stamp all persons as employees.”
2
I ndependent contractors, for
example, are not “employees.”
3
Over its history, WHD has consistently construed who is an
employee under the FLSA to adhere to the Act’s definitions and judicial precedent interpreting
them. “An employee, as distinguished from a person who is engaged in business for himself or
herself, is one who, as a matter of economic reality, follows the usual path of an employee and is
dependent upon the business to which he or she renders service.”
4

As reflected by this longstanding interpretation, the touchstone of employee versus independent
contractor status has long been “economic dependence.”
5
When determining economic
dependence, WHD considers five factors derived from Supreme Court precedent, as further
explained in a recent final rulemaking that is effective on March 8, 2021:
1. The nature and degree of control over the work;
2. The worker’s opportunity for profit or loss based on initiative or investment;
3. The amount of skill required for the work;
4. The degree of permanence of the worker’s relationship with the potential employer; and
5. Whether the work is part of an integrated unit of production.
6

Control and opportunity for profit or loss are the two “core factors” that are “the most probative”
when determining a worker’s status as employee or independent contractor.
7
Where the two
core factors point toward the same status, whether employee or independent contractor, there is a
substantial likelihood that is the worker’s correct status.
8
The three other factors are considered
but are more likely to affect the ultimate conclusion when the two core factors point in different
directions.
9
Further, “the actual practice of the parties involved is more relevant than what may
be contractually or theoretically possible.”
10

1
29 U.S.C. §§ 206(a), 207(a); id. § 203(e)(1), (g).
2
Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947).
3
See, e.g., Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947).
4
WHD Opinion Letter FLSA2019-6, at 3 (Apr. 19, 2019) (quoting and citing historical opinion letters).
5
See, e.g., Parrish v. Premier Directional Drilling, L.P., 917 F.3d 369, 379–80 (5th Cir. 2019); Saleem v. Corp.
Transp. Grp., Ltd., 854 F.3d 131, 138–40 (2d Cir. 2017); Keller v. Miri Microsystems LLC, 781 F.3d 799, 806–07
(6th Cir. 2015).
6
See 29 C.F.R. § 795.105(d) (effective March 8, 2021). See also Silk v. United States, 331 U.S. 704, 716 (1947)
(listing factors that are “important for decision”); Rutherford, 331 U.S. at 729 (analyzing Silk factors and also
considering that workers were “part of the [defendant’s] integrated unit of production).
7
29 C.F.R. § 795.105(c).
8
Id.
9
Id.; see also 86 FR 1201–02.
10
29 C.F.R. § 795.110.

5

WHD interprets the Act “neither expansively nor narrowly, but according to conventional canons
of statutory construction,” and gives it a fair, rather than narrow, reading.
11

OPINION
Based on the facts you have furnished, we conclude that the distributors are independent
contractors for purposes of the FLSA.
A. Core factors.
1. Control.
The control factor suggests independent contractor status to the extent that the distributor, as
opposed to the manufacturer, “exercises substantial control over key aspects of the performance
of the work.”
12
These include setting the work schedule; choosing assignments; working with
little or no supervision; and being able to work for others, including a potential employer’s
competitors.
13
The worker need not be solely in control of the work for this factor to suggest
independent contractor status.
14
Based on the facts provided in this case, each aspect identified
above suggests independent contractor status.
a. Schedule.
Distributors are free to set their own schedule to the point of not needing to be present to accept
shipments from the manufacturer and refusing meetings with the company rep. Indeed, they may
refuse to participate in company reps’ meetings with retailers, refuse to participate in the
manufacturer’s suggested marketing, and refuse to participate in the manufacturer’s promotions.
Distributors decide the beginning and end of their workdays, including when they make sales
calls, how often they make them, and in what order, for their own independent business reasons;
the manufacturer does not dictate their schedule. And though it would not be a recommended
business practice, a distributor could even stop doing business with a retailer that wanted the
distributor to operate on a different schedule.
b. Choosing assignments.
Distributors have almost complete discretion to choose assignments. Though each distributor is
assigned a territory in which to operate, it may choose the customers it serves in that territory and
may even sell to customers outside its territory. They may enter into distribution agreements for
additional territories. Distributors may solicit new customers, or not; they may expand service to
existing customers, or not; and they may discontinue serving particular customers, or not. They
are not required to purchase the manufacturer’s products in any given week. There is no
minimum purchase size. Their only “assignment” under the distribution agreement is the

11
Sec’y of Labor v. Bristol Excavating, Inc., 935 F.3d 122, 135 (3d Cir. 2019); see also Encino Motorcars, LLC v.
Navarro, 138 S. Ct. 1134, 1142 (2018).
12
29 C.F.R. § 795.105(d)(1)(i).
13
Id.; see also Saleem, 854 F.3d at 147.
14
See Parrish, 917 F.3d at 381–82.

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obligation to use their “best efforts” to maximize sales in their territory, furnish appropriate
customer service, and uphold the manufacturer’s reputation.
c. Supervision.
The distributors organize and operate their businesses largely free from supervision by the
manufacturer: no one from the manufacturer is monitoring the distributors in any consistent way;
distributors control the terms of their customer relationships; distributors do not have to
personally perform the services; and they determine major aspects of their businesses, including
vehicles, facilities, equipment, whether to engage employees (including hiring and firing them
and setting the terms and conditions of their employment), and whether to have a uniform and
branding requirement—all without the manufacturer’s consent. Distributors can refuse to
participate in the manufacturer’s marketing and promotions, and they can refuse to meet with the
manufacturer’s company rep—all without repercussions from the manufacturer. As you note,
some distributors themselves are essentially absentee owners with little active participation in the
day-to-day business of the distributorship.
The manufacturer places some requirements on the distributors’ operations by, for example,
requiring particular insurance coverage that lists the manufacturer as an additional insured;
retaining the right to inspect warehouses; and, in some cases, requiring a personal guarantee to
underwrite a distributor’s financial obligations and requiring the manufacturer’s consent to
changes in a distributor’s ownership. Because you do not state whether they are required by the
distribution agreement or not, it is also possible that the manufacturer supervises the distributor
by requiring particular methods of ordering and invoicing; requiring the distributor to conform to
particular health and safety standards; and locate their warehouses in particular areas. However,
many of the foregoing requirements are typical of contractual relationships between businesses
(as opposed to employers and employees) and do not constitute control that makes the
distributors more or less likely to be employees under the Act.
15
Any remaining supervision by
the manufacturer is limited and outweighed by the distributors’ own supervision over the work.
d. Opportunity to work for others.
Distributors can—and many do—work with others. The distribution agreements are not
exclusive. As you state, several distributors also distribute the manufacturer’s competitors’
products, and some distributors realize less than 50 percent of their sales from the manufacturer’s
products.
2. Opportunity for profit or loss.
The opportunity for profit or loss factor suggests independent contractor status to the extent the
distributor has one or both of:

15
See 29 C.F.R. § 795.105(d)(1)(i) (“Requiring the individual to comply with specific legal obligations, satisfy
health and safety standards, carry insurance, meet contractually agreed-upon deadlines or quality control standards,
or satisfy other similar terms that are typical of contractual relationships between businesses (as opposed to
employment relationships) does not constitute control that makes the individual more or less likely to be an
employee under the Act.”).

7

• the opportunity to earn profits or incur losses based on its exercise of initiative (such as
managerial skill or business acumen or judgment); and
• management of its investment in or capital expenditure on, for example, helpers or
equipment or material to further its work.
16

The factor suggests employee status if the distributors cannot affect their earnings or can do so
only by working longer or faster.
17
Based on the facts furnished, the opportunity for profit or
loss factor suggests independent contractor status.
As we explained in our recent rulemaking, investment and opportunity for profit or loss should
be considered in tandem, rather than separately, because “economic investment, by definition,
creates the opportunity for loss,” and “investors take such a risk with an eye to profit.”
18
We
also explained that it is the worker’s investments alone, not those investments in comparison to
the potential employer’s, which matter when considering investment. “Comparing their
respective investments does little more than compare their respective sizes and resources,” and
such a comparison “does not illuminate the worker’s economic dependence or independence.”
19

After all, “[l]arge corporations can hire independent contractors, and small businesses can hire
employees.”
20

The only compensation distributors receive related to the manufacturer’s products is the
difference between the purchase price and the sales price. The distributors have discretion to
determine: which and how many products to purchase; which customers to solicit, serve, or no
longer serve; the prices that they seek to charge; what types of vehicles and storage space to
invest in; and which assistants, if any, (and technology) to employ to assist them. Their
investments in this regard are substantial and are capital in nature as they indicate a business
beyond distributing just the manufacturer’s products. They have discretion in pursuing or
declining marketing plans, promotional or placement deals, and billing arrangements, including
the amount of advice and billing and marketing assistance that they accept from the
manufacturer. Poor decisions on these various fronts have economic consequences on the
distributors; wise decisions on those fronts increase the distributors’ profits. In short, a
distributor’s income is driven not solely by the number of hours the distributor works or how fast
it works; it is driven by the management of investments and the exercise of initiative, managerial
skill, and business acumen.
B. Other factors
This does not quite end our analysis. In unusual circumstances, the probative value of the other
three factors—skill required for the work, permanency of the relationship, and integration of the

16
See id. § 795.105(d)(1)(ii).
17
See id.
18
86 FR 1186, quoting Saleem, 854 F.3d at 145 n.29 (cleaned up).
19
86 FR 1188.
20
Karlson v. Action Process Serv. & Private Investigation, LLC, 860 F.3d 1089, 1096 (8th Cir. 2017), quoted in 86
FR 1188.

8

work into a unit of production—may require a contrary finding even if the two core factors point
toward the same status. These are not unusual circumstances.
Skill is roughly neutral. It suggests employee status when the work “requires no specialized
training or skill” or the worker depends on the potential employer for “skills or training
necessary to perform the job.” It suggests independent contractor status when the work “requires
specialized training or skill that the potential employer does not provide.”
21
On the one hand, the
manufacturer offers orientation, training, and continued assistance to the distributors, but on the
other hand, they may freely decline it. Some of the distributors’ tasks do not seem to require
much, if any, specialized training or skill, but others are more complicated, if not necessarily
specialized, tasks that the distributor is required to perform without assistance from the
manufacturer. Based on the facts furnished, this factor does not point strongly toward employee
or independent contractor status.
Permanence may slightly weigh in favor of employee status. A worker is more likely to be an
employee when the work relationship is “by design indefinite in duration or continuous” and
more likely to be an independent contractor when it “is by design definite in duration or
sporadic.”
22
We infer from your statements regarding the distributors’ tendencies to expand into
new territories and their growth through recruiting new customers that at least some distributors
tend to have continuous relationships with the manufacturer. The agreement’s limits on the
manufacturer’s ability to terminate also suggest an indefinite or continuous relationship. We
cannot say that a distributor’s ability to end the relationship by reasonable written notice suggests
status either way. You did not furnish information regarding the actual lengths of the
relationships between the distributors and the manufacturer and the reasons for those lengths,
which is also relevant to the permanence factor.
23
However, even if that information favored
employee status, it would not change our ultimate conclusion that these distributors are
independent contractors.
Integration suggests that the distributors are independent contractors. As we stated in our recent
rule, this factor analyzes not whether the distributors’ work is important to the manufacturer’s
business, but whether it “is segregable from the [manufacturer]’s production process.”
24
The
distributors play no role in the production of the manufacturer’s perishable food products;
instead, they purchase and resell those products. The distributors have almost unlimited rights to
exclude the manufacturer from every aspect of their operations. The distributors work in their
own facilities and vehicles, to which they can deny the manufacturer access. Finally, a
distributor may refuse to serve a retailer that wants to sell the manufacturer’s products—even if
the manufacturer wants the retailer to do so. In sum, the distributors are consumers of the
manufacturer’s products rather than integrated into its production process, and they negotiate
with the manufacturer over the terms and conditions of those purchases as motivated by their
own business considerations. These facts suggest that the distributors’ businesses are segregated
from the manufacturer’s production of its goods.

21
29 C.F.R. § 795.105(d)(2)(i).
22
Id. § 795.105(d)(2)(ii).
23
See 86 FR 1192–93.
24
29 C.F.R. § 795.105(d)(2)(iii).

9
CONCLUSION
We conclude based on the facts you furnished that the distributors are independent contractors.
Both of the core factors, control and opportunity for profit or loss, point to independent
contractor status, and the non-core factors do not indicate a reason to disagree with that
conclusion.
This opinion is based exclusively on the facts you have presented and on your representation that
you do not seek this opinion for any party that WHD is currently investigating or for use in
litigation that began before your request. This letter is an official interpretation by the
Administrator of WHD for purposes of the Portal-to-Portal Act and may be relied upon in
accordance with section 10 of that Act, notwithstanding that after any such act or omission in the
course of such reliance, the interpretation is “modified or rescinded or is determined by judicial
authority to be invalid or of no legal effect.”
25

We trust that this letter responds to your inquiry.
Sincerely,
Cheryl M. Stanton
Administrator
*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C.
§
552(b)(7).
25
See 29 U.S.C. § 259.