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Independent Contractor vs Employee | Overtime Law Blog | FLSA Decisions

Overtime Law Blog | FLSA Decisions

Category Archives: Independent Contractor vs Employee
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10th Cir.: Employee Who Performed Work Afterhours for Employer Through His Separate Company Held to be Independent Contractor for Afterhours Work
Barlow v. C.R. England, Inc. Following an order granting the defendant summary judgment, the plaintiff appealed. As discussed here, the issue before the Tenth Circuit regarding the plaintiffs FLSA claim, was whether he was properly deemed to be an independent contractor for janitorial work her performed for his employer afterhours, while the same employer deemed him to be an employee for security work he performed during the day. In a decision lacking much by way of reasoning, the Tenth Circuit affirmed the decision of the court below and held that the defendants dual classification for the two different types of duties performed was valid. The Tenth Circuit laid out the pertinent facts as follows: In February 2005, Barlow began working as a part-time security guard at a Denver maintenance yard operated by England, a large trucking company. Barlow patrolled Englands grounds for about thirty hours a week, from 6:30 P.M. to 5:00 or 6:00 A.M. Friday through Sunday nights. Most of the yard was fenced in, accessible through an automatic overhead gate. Barlow also performed maintenance and ground work to try to reach 40 hours of work per week. After Barlow had been at England for about a year and a half, he asked the facilitys site manager, John Smith, for extra work. Smith, who had initially hired Barlow, was not satisfied with Englands janitorial
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contractor at that time, so he asked Englands personnel department about having Barlow take over. Smith was told he could not allow Barlow to work any more hours because the company would have to pay overtime. To get around this, Smith suggested Barlow create a company England could contract with. Barlow formed E & W Janitorial & Maintenance Services, LLC. Beginning in February 2007, Barlow cleaned for England on Mondays, Wednesdays, and Saturdays, pursuant to an oral agreement with Smith. On a few occasions, his girlfriend, a co-owner of E & W, filled in. England provided his cleaning supplies, but did not require Barlow clean in any particular order. England, the only company for which E & W worked, paid $400 a month for E & Ws services. Without much reasoning regarding this portion of the plaintiffs claim, the court held: We also agree with the district courts decision to grant summary judgment against Barlow regarding his FLSA claims. Barlow argues that he performed his janitorial work as an employee under the FLSA, and that he was therefore entitled to overtime pay. But applying the economic realities test of employee status, we conclude that Barlow was not a statutory employee for purposes of the FLSA. The economic realities test seeks to look past technical, common-law concepts of the master and servant relationship to determine whether, as a matter of economic reality, a worker is dependent on a given employer. Baker v. Flint Engineering & Const . Co., 137 F.3d 1436, 1440 (10th Cir.1998). The focal point in deciding whether an individual is an employee is whether the individual is economically dependent on the business to which he renders service, or is, as a matter of economic fact, in business for himself. Doty v. Elias, 733 F.2d 720, 72223 (10th Cir.1984) (emphasis added) (citations omitted). In applying the economic reality test, courts generally look at (1) the degree of control exerted by the alleged employer over the worker; (2) the workers opportunity for profit or loss; (3) the workers investment in the business; (4) the permanence of the working relationship; (5) the degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employers business. Baker, 137 F.3d at 1440. It also includes inquiries into whether the alleged employer has the power to hire and fire employees, supervises and controls employee work schedules or conditions of employment, determines the rate and method of payment, and maintains employment records. Id. None of the factors alone is dispositive; instead, the court must employ a totality-of-the-circumstances approach. Id. Some factors favor Barlow, while other factors favor C.R. England, but, ultimately, we agree with the district court that Barlow was an independent contractor. Barlow and his partner created a licensed,
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limited liability company in order to provide janitorial services. Cf. Rutherford Food Corp. v. McComb, 331 U .S. 722, 730 (1947) (classifying as employees speciality group of production line workers in part because [t]he group had no business organization that could or did shift as a unit from one slaughter-house to another). Barlow kept records for the company, opened a separate bank account, and filed a corporate tax return. The district court also noted Barlow had the freedom to decide how to accomplish his tasks, even if the company reviewed the ultimate work product. 816 F.Supp.2d at 1107. Indeed, little in the case indicates the relationship between Barlow and C.R. England materially differed from one the company would have with any other cleaning service except for the fact Barlow also happened to otherwise be an employee. This suggests Barlow was in business for himself as a janitor, and we therefore affirm the district courts decision to grant summary judgment.

Click Barlow v. C.R. England, Inc. to read the entire decision.

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N.D.Miss.: Workers Who Performed Off-the-Clock After-Hours Work in Exchange for Food Were Employees Not Independent Contractors; Food Was Not Adequate Compensation for Work
Newsom v. Carolina Logistics S ervices, Inc. This case was before the court on the parties competing cross-motions for summary judgment. As discussed here, at issue was whether the defendants were liable to plaintiffs for after-hours off-the-clock side work they performed for defendant cleaning its warehouse. Although the court held that any issue of fact precluded summary judgment with regard to the amount of damages due, the court granted the plaintiff (who participated in the case) summary judgment as to liability and denied the defendants cross motion for summary judgment on liability. The court recited the following facts as relevant: Shortly after starting his work, Newsom [the plaintiff] made a special arrangement with his center manager, Alfred Taylor, whereby Newsom was permitted to clock out from work after his shift and clean CLSs warehouse in exchange for a banana box of food. The work consisted of sweeping, mopping, picking up trash, and using a floor cleaning machine to clean the entire warehouse. Newsom Decl. at 1. According to Newsom, he worked approximately four to four and-a-half hours after each shift. In October 2008, Newsom was transferred to CLSs Olive Branch, M ississippi center. There, Taylor remained his supervisor and allowed the banana-box program to continue. Not long after the move, Newsom found that he could not clean the new center alone and recruited Plaintiff Shanda Bramlett, another CLS employee, to assist him with the more arduous work. Taylor agreed to allow Bramlett to participate in the program, and Bramlett began assisting Newsom in M arch 2009. Bramletts work entailed sweeping floors, cleaning bathrooms, and performing other cleaning tasks. She claims that she worked an average of somewhere between two and three-and-a-half hours after each shift. Taylor assisted Newsom and Bramlett by moving pallets that
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obstructed their ability to clean the premises. From December 2010 through M arch 2011, no one was allowed to take anything from the warehouse. Nevertheless, for reasons unexplained in their depositions, both Newsom and Bramlett continued to perform their after-hours work, apparently without any guarantee of compensation.

Describing the issues at bar, the court explained: It is undisputed that Newsom and Bramlett worked for CLS off the clock in exchange for a banana box of food. This case turns on a simple legal question: Does Newsom and Bramletts after-hours work constitute a violation of the FLSA? The Plaintiffs advance a simple and persuasive argument why the Court should answer affirmatively. Put simply, the Plaintiffs maintain that, at all times pertinent to the present suit, they worked as CLS employees with CLSs knowledge and under CLSs supervision. Judging from the record, CLSs management appears to have initially adopted this view, at least with respect to Newsom, by sending him a check and an apology letter. Now at the summary-judgment stage of litigation, however, CLS takes a different view of the matter, offering two legal theories why the Plaintiffs cannot recover for their FLSA claims: (1) Newsom and Bramlett acted as independent contractors, not employees, when performing their after-hours work, and (2) even if Newsom and Bramlett were employees, they were properly compensated for their work with food.

Initially, the court rejected the defendants contention that the plaintiff performed his after-hours work for defendant as an independent contractor (as opposed to as an employee), thus requiring that all of plaintiffs hours be treated cumulatively each week for determining defendants overtime obligations. Rejecting the defendants second contention- that the banana box of food constituted sufficient wages, in lieu of actual wages- the court reasoned: CLS advances its second contention-that Newsom and Bramlett were compensated appropriately under the FLSA with a briefand incomplete-reference to the definition of wages in the statute, and therefore the Court will give this argument short shrift. Under the FLSA, the term wages can include board, lodging, and other facilities as CLS suggests. 29 U.S.C. 209(m). As an initial matter, it is unclear as to whether banana boxes of food fall within the categories of board, lodging, or other facilities. The statute does not mention food, sustenance, or any other similar term. M oreover, the statute continues that in order for board, lodging, and other facilities to constitute wages under the FLSA, they must be customarily furnished by such employer to employees . Id. (emphasis added). The Court declines to opine as to whether banana boxes of food are customarily furnished by CLS to its employees for cleaning services, and since CLS fails to make such an argument, the Court will dismiss it without prejudice. CLS may raise this argument subsequently with respect to damages, provided it advances the argument with cited legal authority.

Thus, the court granted plaintiff-Newsoms motion for summary judgment as to liability, and left open the issue of damages. Click Newsom v. Carolina Logistics Services, Inc. to read the entire M emorandum Opinion and Order.
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E.D.Pa.: Dukes Does Not Affect Courts Analysis On 216(b) Conditional Cert Motion; Defendants Motion to Reconsider Denied
Spellman v. American Eagle Exp., Inc.
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In one of the first decisions, post-Dukes, to clarify what affect the Suprem e Courts recent decision will hav e on conditional certification of FLSA cases, the answer appears to be not m uch. In Dukes, the Suprem e Court held that the trial court had inappropriately certified a class of ov er a m illion wom en em ploy ed by Wal-m art, based on claim s of gender bias. The Suprem e Court reasoned that the plaintiffs had not m et their burden to dem onstrate the requisite com m onality required by FRCP 2 3 . In the wake of Dukes, there was m uch speculation as to whether courts would extend the reasoning in Dukes to cases seeking conditional certification of collectiv e actions under 2 1 6 (b) of the FLSA. In one of the first decisions rendered on this issue, the answer appears to be a resounding no. This case was before the court on the defendants m otion seeking reconsideration of the courts prior order conditionally certify ing a class of driv ers em ploy ed by defendant. Plaintiffs alleged that defendant, a trucking com pany , im properly m isclassified all of its driv ers as independent contractors, when they were really em ploy ees. Holding that plaintiffs had m et their lenient burden of proof as so-called stage one, the court conditionally certified a nationwide class of driv ers, all of whom had been classified as independent contractors. Following the Dukes decision, the defendant sought reconsideration of the order conditionally certify ing the class. Deny ing the m otion, the court explained that the differences between FRCP 2 3 , the class action prov ision under which Dukes was decided and 2 1 6 (b), the opt-in prov ision for FLSA collectiv e actions render Dukes inapplicable in the context of an FLSA collectiv e action. As such, the court denied defendants m otion. The court reasoned: The instant case is a collectiv e action brought pursuant to the FLSA, 2 9 U.S.C. 2 1 6 (b). Unlike Rule 2 3 class actions. the FLSA requires collectiv e action m em bers to affirm ativ ely opt in to the case. See 2 1 6 (b). To determ ine whether the proposed group of plaintiffs is sim ilarly situated, and therefore qualified to proceed as a conditional collectiv e action, a district court applies a two-step test. See Smith v. Sovereign Bancorp, I nc., No. 03 2 4 2 0, 2 003 U.S. Dist. LEXIS 2 1 01 0 (E.D.Pa. Nov . 1 3 , 2 003 ). In the first step, which is assessed early in the litigation process, the plaintiff at m ost m ust m ake only a m odest factual showing that the sim ilarly situated requirem ent is satisfied. See Bosley v. Chubb Corp., No. 04 4 59 8, 2 005 U.S. Dist. LEXIS 1 09 7 4 , at *7 9 (E.D.Pa. Jun. 3 , 2 005). The Plaintiffs hav e m ade this m odest factual showing, and this Courts analy sis is not affected by Dukes. The second step of the collectiv e action certification process will be conducted at the close of class-related discov ery , at which tim e this Court will conduct a specific factual analy sis of each em ploy ees claim to ensure that each proposed plaintiff is an appropriate party . Harris v. Healthcare Servs. Grp., I nc., No. 06 2 9 03 , 2 007 U.S. Dist. LEXIS 552 2 1 , at *2 (E.D.Pa. Jul. 3 1 , 2 007 ). At this second stage, AEX m ay argue that Dukes s analy sis of what constitutes a com m on question is persuasiv e to this Courts analy sis of whether an FLSA collectiv e action should be certified. In the interim , AEXs m otion for reconsideration is denied. Click Spellm an v . Am erican Eagle Exp., Inc. to read the entire Order.
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N.D.Ga.: Exotic Dancers Are Employees Not Independent Contractors; Entitled to Minimum
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Wages and Overtime

Clincy v. Galardi Sout h Ent erprises, Inc. This case was before the court on num erous m otions. As discussed here, the judge granted plaintiffs m otion for sum m ary judgm ent and denied defendants cross m otion, holding that plaintiffs- exotic dancers or stripperswere defendants em ploy ees, not independent contractors. As such, plaintiffs were entitled to m inim um wages and ov ertim e pursuant to the Fair Labor Standards Act. Significantly , none of the plaintiffs were paid any direct wages by the club in which they worked. Instead, they paid defendants for the right to perform in their club. The plaintiffs each were required to sign independent contractor agreem ents as a prerequisite to beginning work for the defendants. Further, the defendants claim ed that the dancers were independent contractors because they were paid directly by custom ers and did not receiv e pay checks. They also claim ed that the club did not profit from the dancers and that the dancers did not necessarily driv e the clubs business. Howev er, based on ev idence that the defendants set the prices for tableside dances and how m uch of their gross receipts dancers were required to turn ov er in the form of house fees and disc jockey fees, as well as the fact that the defendants set specific schedules for the dancers, created rules of conduct (subject to discipline), check-in and check-out procedures and otherwise controlled the m ethod and m anner in which plaintiffs worked, the court held that the defendants were plaintiffs em ploy ers under the FLSA. Although not a groundbreaking decision, it is significant because the m ajority of strip clubs around the country continue to disregard court decisions that hav e held that m ost strippers, em ploy ed under circum stances sim ilar to those in the case, are actually em ploy ees. Click Clincy v . Galardi South Enterprises, Inc. to read the entire Order.
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E.D.Va.: Plaintiff Alleged Actionable Retaliation Claim, Where Asserted Former Employer Denied Him Work as Independent Contractor In Retaliation for Testimony in Co-Employees Case
Boscarello v. Audio Video Sy st ems, Inc. In this Fair Labor Standards Act (FLSA) retaliation action, a form er em ploy ee sued his form er em ploy ers alleging that defendants retaliated against him , in v iolation of 2 9 U.S.C. 2 1 5(a)(3 ), by refusing to prov ide him work as an independent contractor following his subm ission of an affidav it supporting a current em ploy ees FLSA claim against the em ploy ers. The case was before the court on defendants m otion to dism iss, for failure to state a claim . At issue on defendants m otion was whether a form er em ploy ee states a v alid FLSA retaliation claim where, the alleged retaliation consists of the em ploy ers refusal to prov ide its form er em ploy ee work as an independent contractor, work that the em ploy er was not contractually obligated to prov ide, but which the em ploy er indicated would be prov ided. Following Fourth Circuit precedent, the court held that the Plaintiff had indeed stated a v alid cause of action.
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Click Boscarello v . Audio Video Sy stem s, Inc. to read the entire Opinion.
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Pennsylvania Laborers Like New Law That Defines Employees, Pittsburgh Post-Gazette Reports
The Pittsburgh Post-Gazette reports that a new law defining who is an em ploy ee (v ersue independent contractor) is being greated enthusiastically by Pennsy lv ania workers: Union laborers are claim ing v ictory now that Gov . Ed Rendell has signed a law aim ed at curtailing construction com panies ability to skirt taxes and cut its own costs and liability by labeling its workers independent contractors. By classify ing their workers as independent contractors instead of em ploy ees, com panies can av oid pay ing unem ploy m ent com pensation and workers com pensation taxes. Av oiding those taxes, according to labor groups, reduces em ploy er costs and allows such com panies to underbid contracting com panies that are following the letter of the law. The new law form erly House Bill 4 00 and now Act 7 2 is called the Construction Workplace Misclassification Act. Contracting com panies that v iolate the act could be subject to fines and crim inal prosecution. Theres also an acting in concert prov ision, which would penalize any one who knowingly hires a contractor that is in v iolation of the act. It really will start to separate responsible contractors from irresponsible contractors, said Jason Fincke, executiv e director of the Builders Guild of Western Pennsy lv ania, a labor m anagem ent and contractor association group. The point of the law isnt to elim inate the use of independent contractors in the construction industry , he said. If theres a serv ice that y ou need that y ou dont norm ally prov ide, y ou would get som eone to do that for y ou, Mr. Fincke said. Thats a legitim ate independent contractor. The law applies to the construction field only , to the regret of the Team sters, who had hoped the law would be expanded to include truck driv ers (and other kinds of workers) as well. The Team sters hav e been fighting with Moon-based FedEx Ground, which classifies its driv ers independent contractors. FedEx say s its driv ers are sm all business owners because they own their own equipm ent. To read the entire article go to Pittsburgh Post-Gazette.
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White House Backs Bill To Close Independent Contractor Tax Loophole; RTT News Reports
RTTNews.com is reporting that:
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Sen. John Kerry , D-Mass., and Rep. Jim McDerm ott, D-Wash., released a statem ent Wednesday noting that the White House has endorsed their legislation to close a tax loophole currently allowing businesses to m isclassify workers as independent contractors. Kerry and McDerm ott said that the Fair Play ing Field Act of 2 01 0 would protect workers from losing benefits and protections as the result of the tax loophole. Vice President Joe Biden said, When em ploy ees are classified as independent contractors, whether by design or because the rules are unclear, they are denied access to critical benefits and protections, at significant cost to gov ernm ent at all lev els. For these reasons, stopping worker m isclassification is a priority for the Presidents Middle Class Task Force, which I chair, and I applaud Senator Kerry and Congressm an McDerm ott for introducing this bill, he added. In addition to prov iding guidance about worker classification, the bill would also increase the penalties for the failure to deduct and withhold incom e taxes and the em ploy ees share of FICA taxes. To read the entire article, click here.
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S.D.Ind.: Exotic Dancers Are Employees, Not Independent Contractors; Plaintiffs Motion for Summary Judgment Granted
Morse v. Mer Corp. Before the Court were the parties cross m otions for sum m ary judgm ent. Plaintiffs, exotic dancers, alleged that they were em ploy ees of Defendant, the owner of the adult entertainm ent facility where they worked. Defendant alleged that Plaintiffs were independent contractors and thus, not cov ered by the Fair Labor Standards Act (FLSA). The Court granted Plaintiffs m otion and denied Defendants m otion. Reciting the facts pertinent to its inquiry , the Court explained: The Plaintiffs in this case were all exotic dancers at Dancers Showclub, an establishm ent owned and operated by the Defendant, in Indianapolis, Indiana. To be hired by the Defendant, an indiv idual had to go to the club, com plete an audition application, prov ide sufficient identification, and perform an audition by dancing to two or three songs. Indiv iduals who passed their auditions and were hired by the Defendant were giv en a copy of the Entertainer Guidelines (Docket No. 58 Ex. 3 ). Many of these guidelines, such as those prohibiting the Plaintiffs from leav ing with m ale patrons and those banning fam ily and significant others from the club while the Plaintiffs were perform ing, were put in place to keep the Plaintiffs safe and to ensure that the Plaintiffs followed the law. The Defendant classified the Plaintiffs as independent contractors. Accordingly , the Defendant nev er paid any of the Plaintiffs a wage or other com pensation. Instead, the Plaintiffs earned their incom e by collecting tips from custom ers. The Defendant did not m onitor the Plaintiffs incom e.

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None of the Plaintiffs had set work schedules. They were free to com e to work on whatev er dates and tim es they chose. They were also free to dev elop their own clientele and could generate business by adv ertising on the internet. The Plaintiffs dancing rotation was set on a first com e, first serv ed basis. Once at work, the Defendant preferred that the Plaintiffs work at least a six-hour shift. At som e point during her shift, each Plaintiff was required to pay a House Fee to the Defendant. The House Fee was based on when a Plaintiff checked in to work. The Entertainer Guidelines suggest that the Plaintiffs pay a tip out to the bar and the disc jockey (DJ) at the end of ev ery shift. The suggested gratuity is ten percent to the bar and fiv e percent to the DJ. Howev er, this is not a requirem ent, and the Plaintiffs were not prohibited from working if they failed to pay the recom m ended tip out. According to the Entertainer Guidelines, the Plaintiffs were to charge a m inim um of $2 0 for VIP dances. Som e Plaintiffs charged m ore than $2 0 for VIP dances and, according to the Defendant, no Plaintiff was ev er disciplined for charging less than $2 0 for a VIP dance. A Plaintiffs success as an exotic dancer was based, in large part, on her ability to entice interaction with her custom ers. Discussing and apply ing the relev ant law, the Court explained: The Plaintiffs filed this collectiv e action lawsuit alleging that the Defendant v iolated the Fair Labor Standards Act (FLSA), 2 9 U .S.C. 2 01 , by failing to pay them a m inim um wage. The parties agree that the relev ant inquiry is whether the Plaintiffs were em ploy ees or independent contractors. This determ ination of a workers status is a question of law. Secy of Labor v. Lauritzen, 83 5 F.2 d 1 52 9 , 1 53 5 (7 th Cir.1 9 85). For purposes of social welfare legislation, such as the FLSA, em ploy ees are those who as a m atter of econom ic reality are dependent upon the business to which they render serv ice. I d. at 1 53 4 (quoting Mednick v. Albert Enters., I nc., 508 F.2 d 2 9 7 , 2 9 9 (5th Cir.1 9 7 5)). To determ ine the parties econom ic reality , the Sev enth Circuit do[es] not look to a particular isolated factor but to all the circum stances of the work activ ity . I d. The six factors considered by courts in this circuit are: (1 ) the nature and degree of the alleged em ploy ers control as to the m anner in which the work is to be perform ed; (2 ) the alleged em ploy ees opportunity for profit or loss depending upon his m anagerial skill; (3 ) the alleged em ploy ees inv estm ent in equipm ent or m aterials required for his task, or his em ploy m ent of workers; (4 ) whether the serv ice rendered requires a special skill; (5) the degree of perm anency and duration of the working relationship; [and] (6 ) the extent to which the serv ice rendered is an integral part of the alleged em ploy ers business. I d. at 1 53 5. There is no analogous Sev enth Circuit case law, and the only federal appellate court to exam ine the issue of whether exotic dancers are em ploy ees or independent contractors was the Fifth Circuit in Reich v. Circle C. I nvestments, I nc., 9 9 8 F.2 d 3 2 4 (5th Cir.1 9 9 3 ). Like the Plaintiffs in the instant litigation, the exotic dancers in Circle C claim ed that they were em ploy ees, not independent contractors. After apply ing the Fifth Circuits v ersion of the econom ic realities test, the court of appeals agreed. Sim ilarly , here the Court applied the v arious factors to determ ine that Plaintiffs were indeed em ploy ees, and not independent contractors: A. The Defendant s cont rol as t o t he manner in which t he work is performed. With respect to the control factor, the Fifth Circuit explained that the club exercise[d] a great deal of control
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ov er the dancers . Circle C, 9 9 8 F.2 d at 3 2 7 . The dancers were required to com ply with weekly work schedules, which Circle C com pile[d]. I d. Dancers who were tardy were fined. Circle C set the prices for table and couch dances. Although dancers could choose their own costum es and their own m usic, both the costum e and the m usic had to m eet standards set by Circle C. I d. Circle C also extensiv ely controlled the dancers conduct by prom ulgating rules including: [N]o flat heels, no m ore than 1 5 m inutes at one tim e in the dressing room , only one dancer in the restroom at a tim e, and all dancers m ust be on the floor at opening tim e. I d. Dancers who v iolated the code of conduct were fined. The Plaintiffs in the instant case are subject to a broad range of control by Defendant when it com es to the m anner in which their work is perform ed. Docket No. 57 at 8. When they are hired, the Plaintiffs receiv e and rev iew a copy of the Entertainer Guidelines. These guidelines require that, am ong other things, the Plaintiffs: work at least a six hour shift; charge at least $2 0 for all VIP dances; refrain from inv iting significant others or fam ily m em bers to the club while the Plaintiffs are working; and av oid walking with a lit cigarette, chewing gum , drinking any thing from a bottle, or hav ing a cell phone on the club floor. Docket No. 58 Ex. 3 9 -1 0, 1 2 , 1 5. Another v ersion of the Entertainer Guidelines prohibits the Plaintiffs from frequenting the club on day s when they are not working. See Docket No. 58 Ex. 6 1 3 . The Defendant claim s that the Entertainer Guidelines were of no real im port, Docket No. 6 4 at 1 2 , because there was no written record of v iolations. Docket No. 6 5 Ex. 2 at 2 7 , lines 1 8-2 0. Further, certain v iolations such as chewing gum on the floor were not punished. I d. at 3 6 , lines 3 -1 0. In addition, the Defendant argues that som e of the Entertainer Guidelines were included to ensure that the Entertainers behav ior conform ed with the law and to keep both the patrons and Entertainers safe. Docket No. 6 4 at 1 5. Finally , the Defendant asserts that Circle C is distinguishable because the Plaintiffs in this case were free to work on the dates and tim es that they chose and thus they largely set their own schedules. Despite the Defendants argum ents otherwise, this case is analogous to Circle C. The Defendant in the instant case regulated the Plaintiffs behav ior with a written code of conduct. Although the Defendant claim s that the rules in the Entertainer Guidelines were nev er enforced, there is nothing in the record indicating that any one inform ed the Plaintiffs of this fact. The Defendant cannot claim that it did not im pose a significant am ount of control on the Plaintiffs by arguing, with absolutely no ev identiary support, that the rules did not actually apply . While it is true that the Plaintiffs in the instant case could set their own work schedules, once at the club, the Defendant asked the Plaintiffs to work for a certain am ount of tim e. The Plaintiffs could request m usic, but the m usic was ultim ately controlled by the Defendant. See Docket No. 58 Ex. 5 at 4 6 , lines 8-1 4 . The Plaintiffs could pick their own costum es; howev er, as in Circle C, the Defendant had ultim ate v eto power. See id. 4 6 -4 7 . Further, the Defendant prohibited the Plaintiffs from being at the club in their free tim e and also prohibited the Plaintiffs fam ilies and significant others from com ing to the club while the Plaintiffs were working. Docket No. 58 Ex. 6 1 3 , 1 6 . Finally , the Defendants argum ent that m any of the rules were im posed to protect the Plaintiffs and to ensure com pliance with the law is unav ailing. See Circle C, 9 9 8 F.2 d at 3 2 7 (rejecting Circle Cs attem pt to downplay its control). In short, all of the parties adm issible ev idence indicates that the Defendant exerted a significant am ount of control ov er the Plaintiffs. Thus, although the Defendant exercises less control than the club in Circle C, the Defendants conduct still indicates that the Plaintiffs were em ploy ees. B. The Plaint iffs opport unit y for profit or loss. As to the opportunity for profit and loss, in Circle C the Fifth Circuit noted that although a dancers initiativ e, hustle, and costum e significantly contribute to the am ount of her tips, Circle C, 9 9 8 F.2 d at 3 2 8, the dancers
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were not responsible for drawing custom ers to the club in the first place. Circle C is responsible for adv ertisem ent, location, business hours, m aintenance of facilities, aesthetics, and inv entory of bev erages and food. I d. The court concluded that [g]iv en its control ov er determ inants of custom er v olum e, Circle C exercises and high degree of control ov er a dancers opportunity for profit. I d. Therefore, [t]he dancers are far m ore akin to wage earners toiling for a liv ing, than to independent entrepreneurs seeking a return on their risky capital inv estm ents. I d. (quoting Brock v. Mr. W Fireworks, I nc., 81 4 F.2 d 1 04 2 , 1 051 (5th Cir.1 9 87 )). In the instant case, a Plaintiffs only opportunity for loss com es in the form of a House Fee that she is required to pay for each shift, the am ount of which ranges from $0.00-$3 0.00. Docket No. 57 at 1 2 . All other potential risks of loss, be they food and bev erage related or liability -related, are borne solely by Defendant . I d. at 1 3 . Sim ilarly , an entertainer has no real opportunity to profit. At best she can increase her earnings by taking care of herself, working harder, and enticing social interaction with her custom ers. I d. The Defendant tacitly acknowledges that this was one way in which the Plaintiffs could enhance their profits. Howev er, the Defendant refuses to acknowledge that this argum ent has been rejected by ev ery court that has considered it. See, e.g ., Harrell, 9 9 2 F.Supp. at 1 3 50; Priba Corp., 89 0 F.Supp. at 59 3 . The Defendant also em phasizes that the Plaintiffs were allowed to adv ertise and m arket them selv es by using My Space, Facebook, and sim ple word of m outh. Docket No. 6 4 at 1 7 . This m ay be true, but the sim ple fact rem ains that, like the club in Circle C, the Defendant is prim arily responsible for drawing custom ers into the club. See Circle C, 9 9 8 F.2 d at 3 2 8. Thus, the second factor also tips in fav or of em ploy ee status. C. The Plaint iffs invest ment in equipment or mat erials. In Circle C, the Fifth Circuit noted that a dancers inv estm ent is lim ited to her costum es and a padlock. Circle C, 9 9 8 F.2 d at 3 2 7 . Although the court acknowledged that som e dancers spend a significant am ount of m oney on their costum es, the court concluded that [a] dancers inv estm ent in costum es and a padlock is relativ ely m inor to the considerable inv estm ent Circle C has in operating a nightclub. I d. at 3 2 8; see also Harrell, 9 9 2 F.Supp. at 1 3 50. Circle C owns the liquor license, owns the inv entory of bev erages and refreshm ents, leases fixtures for the nightclub owns sound equipm ent and m usic, m aintains and renov ates the facilities, and adv ertises extensiv ely . Circle C, 9 9 8 F.2 d at 3 2 7 . Thus, this factor indicated that the dancers were em ploy ees. The instant case is m arkedly sim ilar to Circle C. The Plaintiffs do not m ake any capital inv estm ent in Defendants facilities, adv ertising, m aintenance, security , staff, sound sy stem and lights, food, bev erage, and other inv entory . Docket No. 57 at 1 4 . The Plaintiffs only inv estm ent is in their costum es and their general appearance (i.e. hair, m akeup, and nails). I d. at 1 5. Thus, as in Circle C, this factor tips in fav or of em ploy ee status. D. Special skills required. The Fifth Circuit concluded that the dancers in Circle C do not need long training or highly dev eloped skills to dance at a Circle C nightclub. 9 9 8 F.2 d at 3 2 8. Indeed, m any of Circle Cs dancers had nev er before worked at a topless dance club. I d. Other courts hav e consistently held that little skill is necessary to be a topless dancer. See, e.g., Harrell, 9 9 2 F.Supp. at 1 3 51 ; Priba Corp., 89 0 F.Supp. at 59 3 ; Jeffcoat v. Alaska Dept. of Labor, 7 3 2 P.2 d 1 07 3 , 1 07 7 (Alaska 1 9 87 ) (apply ing federal courts econom ic realities analy sis). In the instant case, the Defendant claim s that although the entertainers are not trained dancers, they m ust
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possess special skills in com m unicating, listening, and (to som e m inor extent) counseling in order to be successful. Docket No. 6 4 at 2 1 . According to the Defendant, an Entertainer m ust be a peculiar com bination of a custom er serv ice representativ e and counselor: she m ust hav e excellent listening skills, the ability to read another persons affect and discern from that dem eanor his particular conv ersational or em otional needs, and the ability and willingness to fulfill those needs in a purely non-sexual way . I d. at 2 1 -2 2 . This argum ent is unconv incing, especially because nothing in the record indicates that the Defendants hiring process included an assessm ent of a prospectiv e dancers com m unication or counseling skills. Hav ing exam ined all of the parties adm issible ev idence, the Court is conv inced that this factor indicates that the Plaintiffs are em ploy ees. E. The degree of permanency of t he working relat ionship. The Circle C court noted that m ost dancers hav e short-term relationships with Circle C. Circle C, 9 9 8 F.2 d at 3 2 8. Although not determ inativ e, the im perm anent relationship between the dancers and Circle C indicates non-em ploy ee status. I d. Howev er, the court concluded that [t]he transient nature of the work force is not enough here to rem ov e the dancers from the protections of the FLSA. I d. at 3 2 8-2 9 . Thus, despite the fact that this factor tipped in fav or of independent contractor status, the court was conv inced that the econom ic realities of the relationship indicated that the dancers were em ploy ees. I d. at 3 2 9 . In the case presently before this Court, the Plaintiffs argue that the Defendant considered the relationship between the parties to be ongoing. See Docket No. 57 at 1 6 -1 7 . Thus, according to the Plaintiffs, their situation is m aterially different from the lim ited-duration relationship ty pical to independent contractors. I d. at 1 7 . Howev er, the Defendant subm itted adm issible ev idence indicating that m ost of the dancers only worked at the Defendants club for six m onths. Docket No. 6 5 Ex. 6 3 . Thus, as in Circle C, this factor tips in fav or of independent contractor status. F. The ext ent t o which t he Plaint iffs service is int egral t o t he Defendant s business. The Fifth Circuit does not include this factor in its econom ic realities analy sis. Howev er, other district courts hav e considered this issue and hav e concluded that [e]xotic dancers are obv iously essential to the success of a topless nightclub. Harrell, 9 9 2 F.Supp. at 1 3 52 ; see also Jeffcoat, 7 3 2 P.2 d at 1 07 7 . Although the Defendant claim s that no m ore than ten percent of its profits cam e from the dancers, and thus, the Entertainers are not a v ital part of its business, Docket No. 6 4 at 2 4 , this assertion is belied by the Defendants own deposition testim ony . Manager Jam es Nicholson stated that [p]robably less than one percent of the clubs custom ers go to the club solely for food and drink. Docket No. 58 Ex. 1 at 2 7 , line 2 0. When asked what would happen if the club lim ited the use of dancers at the facility , Nicholson stated: The sam e thing if McDonalds got rid of ham burgers, all right? We wouldnt be that business. I d. at 2 7 , lines 2 1 -2 5; id. at 2 8, line 1 . The Defendants argum ent that the dancers are non-essential form s of extra entertainm ent, like telev isions at a sports bar is sim ply unconv incing. Robert W. Wood, Pole Dancers: Employees or Contractors? TAX NOTES, Nov . 9 , 2 009 , at 6 7 3 , 6 7 5. Indeed, the Defendants own m anager apparently does not believ e this assertion. The Plaintiffs are critical to the Defendants current business m odel. Thus, this factor indicates that the Plaintiffs are em ploy ees, and not independent contractors. Hav ing considered all of the parties adm issible ev idence and v iewing the ev idence in the light m ost fav orable to the Defendant, the Lauritzen factors indicate that the Plaintiffs are em ploy ees.
FEBRUA RY 1 2 , 2 0 1 0 5 :0 9 PM
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Companies Slash Payrolls By Calling Workers Independent Contractors; Costly To IRS And States, L.A. Times Reports
The LA Tim es reports that the Internal Rev enue Serv ice and 3 7 states are cracking down on com panies that try to trim pay roll costs by illegally classify ing workers as independent contractors, rather than as full em ploy ees, The Associated Press has learned. The practice costs gov ernm ents billions in lost rev enue and can leav e workers high and dry when they are hurt at work or are left jobless. Many who hav e studied the problem believ e its worsened during the econom ic downturn, fueling ev en m ore aggressiv e recov ery efforts by states. The article points out that [t]y pically , unless workers fight for and win a ruling that they should hav e been treated as full em ploy ees, they arent able to collect workers com pensation for the injury or unem ploy m ent benefits when left jobless. To read the full article click here. To read m ore about the legal factors that determ ine whether som eone is m isclassified as an independent contractor v s em ploy ee, and industries where m isclassification is ram pant click here.
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5th Cir.: Cable Installers Are Employees, Not Independent Contractors; Summary Judgment For Employer Reversed
Cromwell v. Drift wood Elec. Cont ract ors, Inc. The trial court in this case prev iously granted the Defendant-em ploy er sum m ary judgm ent finding that the Plaintiff-em ploy ee-cable installers were independent contractors and not em ploy ees. The 5th Circuit rev ersed on appeal, finding that although its a close call, Plaintiffs were em ploy ees, thus entitled to the protections of the FLSA. The Court cited the following facts as relev ant to its inquiry : [Plaintiffs] prov ided cable splicing serv ices for Driftwood for approxim ately elev en m onths, and were required to work twelv e-hour day s, thirteen day s on and one day off. They were paid a fixed hourly wage for their work. BellSouth was Driftwoods custom er on the restoration project. AT & T appears to hav e had nothing to do with the facts of this case. Crom well and Bankston reported to BellSouths location ev ery m orning to receiv e their assignm ents, unless they had not com pleted their jobs from the prior workday , in which case they were perm itted to check in by phone. Crom well and Bankston were giv en prints describing the ty pe of work that needed to be perform ed for each assignm ent and were instructed by BellSouth superv isors to follow certain general specifications. Driftwood and BellSouth representativ es checked on the progress of work, but did not
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train Crom well and Benson or control the details of how they perform ed their assigned jobs. Crom well and Bankston prov ided their own trucks, testing equipm ent, connection equipm ent, insulation equipm ent, and hand tools, totaling ov er $50,000 for Crom well and approxim ately $1 6 ,000 for Bankston, while BellSouth supplied m aterials such as closures and cables. Crom well and Bankston were responsible for their own v ehicle liability insurance and em ploy m ent taxes, but Driftwood prov ided workers com pensation insurance and liability insurance for Crom well and Bankstons work. Apply ing the relev ant law, the Court stated, [t]o determ ine if a worker qualifies as an em ploy ee under the FLSA, we focus on whether, as a m atter of econom ic reality , the worker is econom ically dependent upon the alleged em ploy er or is instead in business for him self. Hopkins v. Cornerstone Am., 54 5 F.3 d 3 3 8, 3 4 3 (5th Cir.2 008). To aid in that inquiry , we consider fiv e non-exhaustiv e factors: (1 ) the degree of control exercised by the alleged em ploy er; (2 ) the extent of the relativ e inv estm ents of the worker and the alleged em ploy er; (3 ) the degree to which the workers opportunity for profit or loss is determ ined by the alleged em ploy er; (4 ) the skill and initiativ e required in perform ing the job; and (5) the perm anency of the relationship. I d. No single factor is determ inativ e. I d. The ultim ate conclusion that an indiv idual is an em ploy ee within the m eaning of the FLSA is a legal, and not a factual, determ ination. Brock v. Mr. W Fireworks, I nc., 81 4 F.2 d 1 04 2 , 1 04 5 (5th Cir.1 9 87 ); see also Beliz v. W.H. McLeod & Sons Packing Co., 7 6 5 F.2 d 1 3 1 7 , 1 3 2 7 & n. 2 4 (5th Cir.1 9 85) (citing and reconciling cases). Therefore, we rev iew the determ ination that [plaintiffs] were not em ploy ees as we rev iew any determ ination of law, which is de nov o. Donovan v. American Airlines, I nc., 6 86 F.2 d 2 6 7 , 2 7 0 n. 4 (5th Cir.1 9 82 ). Because there are no disputes of m aterial fact, we also conclude that the district court was correct to resolv e the m atter on sum m ary judgm ent. The defendants-appellees argue that the facts of this case are sim ilar to those in Carrell v. Sunland Const., I nc., in which we held that a group of welders were independent contractors under the FLSA. 9 9 8 F.2 d 3 3 0 (5th Cir.1 9 9 3 ). In Carrell, we noted that sev eral facts weighed in fav or of em ploy ee status, including that the defendant dictated the welders schedule, paid them a fixed hourly rate, and assigned them to specific work crews. I d. at 3 3 4 . Howev er, we held that the welders were independent contractors because the welders relationship with the defendant was on a project-by -project basis; the welders worked from job to job and from com pany to com pany ; the av erage num ber of weeks that each welder worked for the defendant each y ear was relativ ely low, ranging from three to sixteen weeks; the welders worked while aware that the defendant classified them as independent contractors, and m any of them classified them selv es as self-em ploy ed; the welders were highly skilled; the defendant had no control ov er the m ethods or details of the welding work; the welders perform ed only welding serv ices; the welders supplied their own welding equipm ent; and the welders inv estm ents in their welding m achines, trucks, and tools av eraged $1 5,000 per welder. I d. In Carrell, we distinguished our prior decision in Robicheaux v. Radcliff Material, I nc., 6 9 7 F.2 d 6 6 2 (5th Cir.1 9 83 ), in which we held that a group of welders were em ploy ees under the FLSA, on the grounds that the welders in Robicheaux worked a substantial period of tim e exclusiv ely with the defendant in that case, ranging from ten m onths to three y ears; the welding in Robicheaux required only m oderate skill; the defendant in Robicheaux told the welders how long a welding assignm ent should take; the welders in Robicheaux spent only fifty percent of their tim e welding, and the rem aining tim e cleaning and perform ing sem i-skilled m echanical work; and the defendant in Robicheaux prov ided the welders with steady reliable work ov er a substantial period of tim e. Carrell, 9 9 8 F.2 d at 3 3 4 (citing Robicheaux, 6 9 7 F.2 d at 6 6 7 ). The welders in Robicheaux had signed a contract with the defendant in that case describing them selv es as independent contractors; furnished their own welding equipm ent, in which they had inv ested from fiv e to sev en thousand dollars each; prov ided
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their own insurance and workers com pensation cov erage; inv oiced the defendant on their own business letterheads, filed federal incom e tax returns on IRS form s as self-em ploy ed indiv iduals, and receiv ed a higher hourly wage than did other welders em ploy ed by the defendant who did not furnish their own equipm ent and who were considered by the com pany to be em ploy ees. Robicheaux, 6 9 7 F.2 d at 6 6 5. The facts of this case lie som ewhere between those of Carrell and Robicheaux. Sim ilar to the facts in Carrell, the plaintiffs in this suit are highly skilled and perform only serv ices requiring the use of those skills, the defendants here did not control the details of how the plaintiffs perform ed their assigned jobs, and the plaintiffs prov ided their own trucks, equipm ent, and tools, in which they had inv ested substantial sum s. Howev er, there are som e significant dissim ilarities between the facts in the instant case and the facts in Carrell, such that the facts of this case are not as readily distinguishable from those in Robicheaux. The plaintiffs in this case worked full-tim e exclusiv ely for the defendants for approxim ately elev en m onths, within the tim e range that the Robicheaux welders had worked for the defendant in that case. The plaintiffs in this case did not hav e the sam e tem porary , project-by -project, on-again-off-again relationship with their purported em ploy ers as the plaintiffs in Carrell did with their purported em ploy er. The defendants-appellees argue that Crom well and Bankstons work-restoring dam aged telecom m unications lines along the Mississippi Gulf Coast in the wake of Hurricane Katrina-was by nature tem porary , but courts m ust m ake allowances for those operational characteristics that are unique or intrinsic to the particular business or industry , and to the workers they em ploy . Brock v. Mr. W Fireworks, I nc., 81 4 F.2 d 1 04 2 , 1 054 (5th Cir.1 9 87 ) ([W]hen an industry is seasonal, the proper test for determ ining perm anency of the relationship is not whether the alleged em ploy ees returned from season to season, but whether the alleged em ploy ees worked for the entire operativ e period of a particular season.). Thus, the tem porary nature of the em ergency restoration work does not weigh against em ploy ee status. It is com m on in FLSA cases that there are facts pointing in both directions regarding the issue of em ploy ee status, see Herman v. Express Sixty-Minutes Delivery Serv., I nc., 1 6 1 F.3 d 2 9 9 , 3 05 (1 9 9 8) (quoting Carrell, 9 9 8 F.2 d at 3 3 4 ), but the facts in this case truly appear to be nearly in equipoise. Howev er, on balance, we believ e that, as a m atter of econom ic reality , Crom well and Bankston were econom ically dependant upon Driftwood and BellSouth, and were not in business for them selv es. The facts of this case sim ply appear closer to those in Robicheaux than in Carrell. The m ost significant difference between the facts in those cases, in term s of the econom ic reality of whether the plaintiffs were econom ically dependant upon the alleged em ploy er, was that the Robicheaux welders worked on a steady and reliable basis ov er a substantial period of tim e exclusiv ely with the defendant, ranging from ten m onths to three y ears, whereas the Carrell welders had a project-by project, on-again-off-again relationship with the defendant, with the av erage num ber of weeks that each welder worked for the defendant each y ear being relativ ely low, ranging from three to sixteen weeks. Sim ilar to the Robicheaux welders, Crom well and Bankston worked on a steady and reliable basis ov er a substantial period of tim e-approxim ately elev en m onths-exclusiv ely for their purported em ploy ers. The perm anency and extent of this relationship, coupled with Driftwood and BellSouths com plete control ov er Crom well and Bankstons schedule and pay , had the effect of sev erely lim iting any opportunity for profit or loss by Crom well and Bankston. Although it does not appear that Crom well and Bankston were actually prohibited from taking other jobs while working for Driftwood and BellSouth, as a practical m atter the work schedule establish by Driftwood and BellSouth precluded significant extra work. Also, the fact that Driftwood and BellSouth prov ided Crom well and Bankston with their work assignm ents lim ited the need for Crom well and Bankston to dem onstrate initiativ e in perform ing their jobs. See Carrell, 9 9 8 F.2 d at 3 3 3 (As for the initiativ e required, a Welders success depended on his ability to find consistent work by m ov ing from job to job and from com pany to com pany . But once on a job, a Welders initiativ e was lim ited to decisions regarding his welding equipm ent
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and the details of his welding work.). Although there are facts that clearly weigh in fav or of independent contractor status, notably that Crom well and Bankston controlled the details of how they perform ed their work, were not closely superv ised, inv ested a relativ ely substantial am ount in their trucks, equipm ent, and tools, and used a high lev el of skill in perform ing their work, these facts are not sufficient to establish, as a m atter of econom ic reality , that Crom well and Bankston were in business for them selv es during the relev ant tim e period. The judgm ent of the district court is VACATED, and this case is REMANDED to the district court for proceedings consistent with this opinion.

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