"Independent Contractor" labeling to avoid paying minimum wage

The local newspaper distributor pays its delivery “contractors” .10/paper Mon-Sat and .18/paper on Sunday. A typical contractor delivers about 300 papers and takes four hours to do so, except Sunday, which takes five (the time includes prepping the papers at the depot: bagging, inserts, etc.). So in return for a 29-hour workweek, the contractor earns $234. The typical route covers 15-20 miles, and since it’s very stop-and-go, the actual gas used on such a route, rather than the IRS mileage reimbursement figure, is more accurate:

Gross Earnings $234
Gas: 1.5 gallons/day, $3.50/gallon: $37.00
Net: $197

This equates to $6.97/hour, or well below the state minimum wage of $8.80. Furthermore, the “contractor” is liable for the self-employment tax penalty, which means he loses roughly 7% of his income by paying the “employer” portion of FICA, etc. The newspaper, by calling its employees “independent contractors,” saves itself not only from having to pay employment taxes, but from having to conform to minimum wage laws. YET, the work is employment, not an independent contractor relationship, under the following guidelines:

http://www.irs.gov/newsroom/article/0,,id=173423,00.html

The newspaper directly controls not only when and where, but also how the work should be done: 'contractors" are given a very narrow time frame to deliver the paper and told specifically how to do it, including specific placements for each customer (porch, driveway, etc.).

Now, there are a lot of desperate people out there, busting their butts for chump change because they can’t get a decent job elsewhere (or they don’t calculate how little they are earning). So the relationship is clearly voluntary, but my question is:

Is it legal?

Interesting question. IMHO, on the facts stated, probably not. This appears, though, to be a particularly unsettled question of law. A quick google search turns up the following articles about the law in California, Pennsylvania and Connecticut. See also here. Broadly speaking, it seems the historical view has been to accept independent contractor characterization of newspaper deliverers, but this may be changing. Importantly, employee vs. independent contractor status depends on context. I was unable to find anythng (in a quick search) directed to the minimum wage issue.