According to the Court’s opinion, the employer provided
consumer installation services for two satellite internet providers. The plaintiff was hired as an independent
contractor technician/installer by the employer and was paid by the job based
on a percentage of what the employer was paid by its two customers. He worked six days each week and had
completed an installation certification course provided by the employer before
he was hired. He filed this lawsuit
after he resigned and went to work directly for one of the customers.
In determining whether the plaintiff’s classification
as an independent contractor was appropriate, the Court noted that “‘employees are those who as a
matter of economic reality are dependent upon the business to which they render
service.’” Although no single factor is
controlling, the Court identified the following eight factors and discussed six
of them:
·
The
permanency of the relationship between the parties;
Generally, independent contractors have variable or
impermanent working relationships with the principal company because they
“often have fixed employment periods and transfer from place to place as
particular work is offered to them, whereas ‘employees’ usually work for only
one employer and such relationship is continuous and indefinite in duration. .
. . . If a worker has multiple jobs for different companies, then that weighs
in favor of finding that the worker is an independent contractor.
However, “even
short, exclusive relationships between the worker and the company may be indicative
of an employee-employer relationship.”
Moreover, it is irrelevant whether the parties have a written contract
because the FLSA was meant to “defeat,” not implement, contracts. Employees – like independent contractors –
may work for multiple employers without losing the protection of the FLSA. Unlike employees, contractors have more
control over which days they work and how long they work each day.
In this case, the Court found mixed indications about the
working relationship. Although the
plaintiff worked exclusively for the employer for 20 months and claimed to have
so many time-consuming assignments that he did not have time to work for anyone
else, there was no exclusivity requirement and he could largely set his own
schedule. Accordingly, there were
disputed issues of fact to be resolved by a jury.
·
The
degree of skill required for the rendering of the services;
The principle
factor in this analysis is whether the worker’s “profits increased
because of the ‘initiative, judgment[,] or foresight of the typical independent
contractor,’ or whether his work ‘was more like piecework.’” The Court found “ample
evidence” that the technicians were skilled and required specialized training
and certification, including knowledge of electrical codes, how to operate
power tools and computer software.
Nonetheless, he acquired his skills through the employer and those
skills only increased his efficiency and did not affect the amount of his
profits. Accordingly, there were
disputed issues of fact to be resolved by a jury, according to the majority.
It is also important to ask how the worker acquired his
skill. . . . If a worker learned his craft through formal education, an apprenticeship,
or years of experience, then it is more likely that the worker’s compensation varies
with his unique skill and talent. On the other hand, if the worker’s training
period is short, or the company provides all workers with the skills necessary
to perform the job, then that weighs in favor of finding that the worker is
indistinguishable from an employee.
·
The
worker’s investment in equipment or materials for the task;
“The capital investment factor is most significant if it
reveals that the worker performs a specialized service that requires a tool or
application which he has mastered or that the worker is simply using implements
of the [company] to accomplish the task.”
Nonetheless, the Court adopted a new standard in this case: mandating a
comparison of “the worker’s investment in the equipment to perform his job” and particularly, “whether that capital
investment is evidence of economic independence” with the employer’s “total
investment, including office rental space, advertising, software, phone systems,
or insurance.” This is surprising
because most small companies will never match the investment or overhead of a
large corporate customer which retained them.
In conducting this new analysis, the Court disregarded worker purchases
which are commonly purchased by employees, such as cars and laptops. In examining the facts, the Court noted that
while the worker invested in some equipment, the employer’s investment was
greater. Accordingly, there were disputed issues of fact to be resolved by a
jury.
·
The
worker’s opportunity for profit or loss, depending upon his skill
The trial
court found that the plaintiff had control over this economic success because
he controlled the size of his region, how many jobs he took each day, and whether
to hire assistants. Surprisingly, the
Court disagreed. Although it conceded that the plaintiff sometimes brought
assistants which helped him to finish jobs quicker and might have helped him
complete more jobs each day, it concluded that “hiring employees carries
additional costs that would have affected [his] ability to earn a greater
profit” and there was no evidence that even with assistants, “he could complete
more than four installations each day.” Nonetheless, the Court acknowledged that the
plaintiff sometimes made extra income from outside, but related, activities. Accordingly,
there were disputed issues of fact to be resolved by a jury.
·
The
degree of the alleged employer’s right to control the manner in which the work
is performed
While the Court acknowledged that the employer never
controlled or monitored the manner in which the work was performed on a
day-to-day basis, never provided step-by-step guides or uniforms or logos, and the
worker could refuse and rearrange assignments, the Court found that other
factors created a disputed issue of fact.
For instance, the Court considered how long it took the worker to drive
to assignments and perform the work. In
addition, the employer required and provided certain certification
courses. The employer also required to
be notified when each project began and ended, and to receive photos of the
completed work and shared customer feedback with the worker. The employer also
required the worker to guarantee the quality of work and repair any problems
identified within 30 days without additional charge. The employer also controlled how much the
consumer paid.
·
Whether
the service rendered is an integral part of the alleged employer’s business.
This factor undeniably weighed in favor of employment status
since the installation and repair on satellite dishes is the employer’s primary
business.
Although the Court initially identified the following two
additional factors, it did not discuss them.
·
Whether the business had “authority to
hire or fire the plaintiff,” and
·
Whether the defendant-company
“maintains the plaintiff’s employment records.”
Instead, it
considered the following factors as weighing in favor of employee status even
though none of it was required by the employer:
·
The
plaintiff did not obtain an federal employer identification number;
·
He wore a
logo hat of the employer’s primary customer (which he purchased from the
employer) and identified himself as a representative of that company (instead
of as an independent contractor); and
·
He had
no business cards.
NOTICE: This summary is designed merely to inform and alert you
of recent legal developments. It does not constitute legal advice and does not
apply to any particular situation because different facts could lead to
different results. Information here can be changed or amended without
notice. Readers should not act upon this information without legal advice. If
you have any questions about anything you have read, you should consult with or
retain an employment attorney.
