In an FLSA overtime decision that should convince businesses across all industries to scrutinize the classification of workers they call “independent contractors,” the Eleventh Circuit issued an opinion this week reversing a Florida court’s determination that a service provider for a cable company properly classified its installation and repair “technicians” as contractors rather than employees. [here]
In Scantland v. Jeffry Knight, Inc., the Eleventh Circuit suggested the district court missed the forest for the trees by rigidly applying the familiar six-factor test for independent contractor status. Instead, the appellate court reasoned, the lower court should have kept sight of the overarching and determinative inquiry of “whether the total of the testing” establishes that the alleged employees “are so dependent on the business with which they are connected that they come within the protection of the FLSA or are sufficiently independent to lie outside its ambit.”
In its review of the big picture, the appellate court made several observations about the relationship between the service provider company and its technicians, including that:
- The company provided the technicians with training, exercised some control over their daily schedules, provided them daily work assignments, set (and could unilaterally change) the codes that determined their pay, conducted quality control assessments of the technicians’ work, could provide remedial training for poor training, and levied “chargebacks” for various infractions of the business’s requirements.
- The technicians were dependent on the company to provide them work, could not negotiate or otherwise determine the rates they were paid for that work, and were otherwise limited in their ability to control the profits and losses related to their work for the company’s customers.
- Though technicians were required to have vehicles, auto and commercial general liability insurance, and tools and safety equipment, that did little to detract from their economic dependence on the company because most already owned a vehicle when they came to work for the company and owned (or came to own) their own tools and equipment.
- Most technicians acquired their skills directly through the company’s training program, followed by ride-alongs with experienced technicians; in other words, they were dependent upon the company to equip them with the skills necessary to do their jobs.
- A “permanence of relationship” existed between the company and technicians. The technicians worked for the company for almost 5 years, on average. Their contracts were for year terms and automatically renewed. They worked long weeks and could not turn down the company’s work orders—in reality, they did not have time to seek work from other customers. Thus, not only was their relationship permanent, it was also exclusive.
- The service the technicians provided was an integral part of the company’s business. Describing installation services as its “backbone,” approximately two-thirds of the company’s business consisted of installation and repair services. With the technicians’ work impacting such a large portion of its business, the company exercised careful control over how the technicians provides services to its customers.
Weighing all of these factors, and viewing them in the light most favorable to the technicians, the court concluded that the economic realities required it to determine the technicians followed “the usual path of an employee,” not an independent contractor.
It is important to note that this appellate court decision does not mean that the cable company loses this case. It means only that––unless the parties settle––the case will go to trial.
Nevertheless, the court’s opinion should serve as a caution to any business that uses workers it classifies as independent contractors. Businesses should consider the six-factor test and compare the workers’ situations to those that the court analyzed in this case. And don’t lose the forest for the trees. If a worker looks and acts like an employee, then — in reality — she probably is one.