Court Explores the “Functional Equivalent” of an Employee Test

November 17, 2004

In a very favorable trend for corporations, courts are increasingly likely to treat as employees for privilege purposes those independent contractors who are the “functional equivalent” of employees. Some courts are now beginning to address how to establish this protection.

In Freeport-McMoran Sulphur, LLC v. Mike Mullen Energy Equipment Resource, Inc., Civ. A. No. 03-1496 c/w 03-1664 SECTION: “A” (4), 2004 U.S. Dist. LEXIS 10048 (E.D. La. June 2, 2004), one of the parties claimed that a former twenty-five year employee who was now a full-time consultant to the company should be treated as an employee for privilege purposes. The court found that the company had not established entitlement to the protection, because it had not proven that the consultant “holds himself out to be or is perceived by others” to be a company representative, was the “intimate link” between the company and an important company project, or had any equity interest in the project. Id. at *15. The court held that the company’s “general contentions regarding [the consultant’s] length of time and association with [the company] or the fact that he works in [its] office and assists with the development of the [pertinent] project f[e]ll short of the findings” required to earn the protection. Id.

Now that courts are beginning to “put meat on the bones” of the “functional equivalent” doctrine, corporations should work in advance to satisfy these judicial tests.