Recently I wrote about the risks posed by misclassifying employees as independent contractors. In an unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit (the federal appellate court that hears appeals from Texas) reversed a summary judgment awarded in favor of a company that had classified two cable splicers who performed post-Katrina telecommunications repair work for an AT&T contractor as independent contractors. In reversing the judgment for the company, the Court remanded the case to the trial court for a determination of the damages the "employees" are entitled to recover. A copy of the opinion can be accessed here.
Two cable splicers brought an action under the Fair Labor Standards Act seeking unpaid overtime that they were not paid due to their classification as independent contractors rather than employees. The individuals worked for the Driftwood Electrical Contractors for 11 months following Huricane Katrina. Theyworked twelve days on and one day off. Twelve-hour days were the norm. They were paid a fixed hourly wage for their work. Each day they reported to the BellSouth location to receive their assignments unless they had not completed their jobs from the prior work day. They were given prints describing the type of work needed and were instructed by BellSouth supervisors to follow certain general specifications. Neither cable splicer was trained by BellSouth or Driftwood and the splicers controlled the details of how they performed their assignment. During this 11 month period, the splicers worked exclusively for the Driftwood Electrical.
To emphasize how fact intensive the independent contractor/employee analysis is, consider the following: the cable splicers provided their own trucks, testing equipment, connection equipment, insulation equipment and hand tools totaling $16,000 and $50,000 in value. They were also responsible for their own vehicle liability insurance and employment taxes. The company, on the other hand, provided workers’ compensation insurance and liability insurance for the cable splicers’ work.
It appears that the most significant aspect in the Court’s determination that the individuals were employees rather than individual contractors was the fact that they worked exclusively for the company for 11 months rather than in a temporary, project-by-project, on-again-off-again relationship. Consequently, the Court concluded that as a matter of economic reality, the cable splicers were economically dependent on the company they worked for and were not in business for themselves. Therefore, they were employees rather than independent contractors and were entitled to be paid overtime for their work.