No, not at all. The FBO can charge the customer as much as it likes, and pay its instructors as little as they will accept. However, if a business has employees, that business is required by the IRS to withhold the employees portion of social security and medicare taxes, and then pay a matching amount as the employers share, and send it to the government. They are also required to pay unemployment taxes and usually workers compensation insurance. States also collect taxes or fees from employers based at least partly of wages paid. Employers like to pretend that their employees are independant contractors to get out of these extra expenses and paperwork. When the IRS notices that workers have been misclassified they go after the employer for back employment taxes, penalties, and interest. However, they have to notice first. Many employers get away with this scam for years, and sometimes forever.

There is a long checklist of things that the IRS uses to determine whether or not someone is an independant contractor, some of which were mentioned earlier is this thread.

If the flight instructor collected all the money that was charged for flight instruction, then that would be one data point on the checklist saying that he might be an independant contractor.

If the student is charged a combined rate for dual flight instruction, and pays with a rubber check, does the flight instructor get his pay docked for the amount attributable to the flight instruction? If so, this would indicate independant contractor status. If the boss eats this kind of loss, then probably an employee.

Joe