When does a family member or friend who works in a small business become an “employee” for purposes of overtime liability under the Fair Labor Standards Act (“FLSA”)? Two women in Asheville became romantically involved, and moved in together. One woman joined the other’s dog grooming business, and helped her run it for the four years their relationship lasted. When the women’s personal relationship ended, their business arrangement did as well, and the plaintiff sued her former partner, alleging among other things, that she was due overtime under the FLSA. The defendant contended that this business arrangement did not meet the definition of employment under the FLSA.

The Fourth Circuit Court of Appeals (which includes North and South Carolina) affirmed summary judgment on the FLSA claim for the defendant. While the FLSA’s definition of employee is unclear, courts look to economic realities to determine whether the arrangement meets the commonly accepted notion of employment. In this case, the parties worked together for a shared economic future, not in a bargained exchange of labor for wages. The plaintiff had substantial financial control over the business more akin to a partnership. While the plaintiff may have claims for compensation under North Carolina law, the Fourth Circuit refused to recognize this relationship as requiring FLSA overtime pay.