By: Claudia D. Orr, Attorney, Plunkett Cooney
The Yin and the Yang of Federal Law These Days
While the National Labor Relations Board (NLRB) seems more employer-friendly under the Republican administration, some of the federal appellate courts, including our own Sixth Circuit Court of Appeals, remain pro-employee.
Let’s start with some good news from the NLRB. In SuperShuttle DFW, Inc, the NLRB returned to its long-standing practice of relying on the common-law test for determining independent contractor status. In so doing, it overruled FedEx Home Delivery which had significantly diminished the importance of finding the worker had an entrepreneurial opportunity for financial gain.
In SuperShuttle DFW, the NLRB found that the franchisees that ran airport shuttle services had significant entrepreneur opportunity as a result of their leasing or ownership of vehicles, methods of compensation, and unfettered control over their daily work schedules and working conditions. All of these factors together resulted in a significant opportunity for economic gain. By increasing the significance of this factor, the NLRB made it easier to show workers are independent contractors, rather than employees.
By comparison, the Sixth Circuit recently decided that workers who performed security services were employees of Off Duty Police Services, Inc. (ODPS) and not independent contractors in a case under the Fair Labor Standards Act (FLSA). Acosta v Off Duty Police Services, Inc.
In this case, ODPS provided security services and traffic control (such as sitting in a car with lights flashing near a construction zone) around Louisville, Kentucky. Some of the workers were off-duty police officers who were paid more than those who were not. Many of the workers had provided services for ODPS for years.
When a customer had an assignment, workers with the right experience were called and they could accept or decline the job. If a worker declined, he/she might be “punished” by not being offered assignments for a period of time.
Off-duty police officers used their police cruisers, and those workers who were not were required to buy police style vehicles such as a Crown Victoria, which they could also use when not working. The non-police officers’ average investment ranged between $3000 and $5000.
Off-duty police officers wore their police uniforms and those who were not wore police-style uniforms with ODPS brand patches. All were required to comply with specific grooming standards.
When a worker accepted a job, they were told where and when to report and to whom and they were provided with equipment such as stop/go signs, reflective jackets, etc. It was rare, however, that any of the workers were supervised while on duty.
When the assignment was over, the workers submitted invoices that reflected the number of hours they worked. Sometimes, workers were paid “by the job”. ODPS claimed all of its workers were independent contractors. Because of this, none received overtime pay under the FLSA. Hence the lawsuit. The lower court found that the police officers were independent contractors, but the non-sworn were employees and entitled to overtime pay.
When the appellate court’s analysis begins by saying: “The FLSA is ‘a broadly remedial and humanitarian statute…designed to correct ‘labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers” you pretty much know how the court is going to rule.
Under the FLSA, the test to determine employment status is one of economic reality and not the common law control test as applied by the NLRB.
The economic reality test looks at (1) the permanency of the relationship; (2) the degree of skill required for the work; (3) the worker’s investment in equipment, etc.; (4) the worker’s opportunity for profit and loss based on his skill (similar to the entrepreneur factor used by the NLRB); (5) the alleged employer’s right to control how the work is performed; and (6) whether the service rendered is integral to the alleged employer’s business.
The appellate court found the following (and not in this order): (1) many of the workers had been with ODPS for years, even decades; (2) very little skill and training was required for the specific tasks; (3) ODPS provided workers with basic equipment, and although non-police officers had a limited investment of up to $5,000 (and the off-duty police officers even less), that paled in comparison to the ODPS annual business expenses; (4) while working more hours would increase the pay, the worker’s exercise of managerial skill would not increase (or decrease) their pay because the worker earned a set hourly wage regardless of the skills exercised; (5) ODPS had policies, procedures, grooming standards and conduct rules, told workers when, where and to whom they would report and exercised some supervision (although more so over the non-police officers than the off-duty officers); and (6) ODPS could not function without the officers and so the work was integral to its business.
While many of the workers were not economically dependent on their ODPS work and held other employment, that fact was not decisive. The relationship was not “the kind of itinerant work that independent contractors ordinarily perform.” The court indicated that “[t]he weight of these factors must be balanced in light of the FLSA’s ‘strikingly broad’ definition of ‘employee’…Taking all these factors into consideration with an eye on the ultimate question of economic dependence, ODPS’ workers…were employees entitled to overtime wages under the FLSA.”
When an employer, such as ODPS, has inadequate recordkeeping of hours worked, the employee has the initial burden of showing he in fact performed work for which he was not properly compensated. This is satisfied if he “produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.”
Then the burden shifts to the employer to come forward with evidence “of the precise amount of work performed or with evidence to negative [sic] the reasonableness of the inference to be drawn from the employee’s evidence.” This is often difficult if not impossible to do without accurate time records, as ODPS discovered. Simply put, “[c]ourts will not punish employees for their employer’s failure to comply with the FLSA’s recordkeeping requirements.”
Does your company have any “independent contractors” who have worked for it for years? Does it provide equipment or an office for the work? Does it tell the worker when to work and how the work should be performed? If so, that worker may be misclassified. If you need assistance with determining whether a worker is an employee or independent contractor, consult an experienced employment attorney, such as the author.
This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. She can be reached at email@example.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html
Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. March 2019.