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Misclassification of Employee v. Independent Contractor in FLSA lawsuits

In Gaye v. TJD Transportation, No. H-18-243 (S.D. Tex. June 25, 2019), the plaintiff sued the defendant alleging violations of the Fair Labor Standards Act (“FLSA”) for failing to pay the plaintiff overtime for all hours worked over 40 in a workweek. Under the FLSA, employers are required to pay their non-exempt workers time and a half the workers regular rate of pay for all hours worked over 40 in a given workweek. 

Here, in Gaye, the plaintiff moved for summary judgment on the misclassification of the plaintiff saying that he was really the defendant’s employee and not an independent contractor. The defendant is a luxury transportation company that operates fleets of vehicles. The plaintiff worked as a driver for the defendants and was paid a flat daily rate of $185 plus tips. The plaintiff was required to work the evening shifts up to five days a week and could not turn down an assignment during his shift. The defendant said the plaintiff was an independent contractor. Based on the facts below, the Court granted the plaintiffs motion for summary judgment as to his employment status.

“Summary judgment is appropriate only when `the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'” Shepherd on Behalf of Estate of Shepherd v. City of Shreveport, 920 F.3d 278, 282-83 (5th Cir. 2019). Here, the court had to decide whether the plaintiff was an employee or an independent contractor under the FLSA. “To determine if a worker qualifies as an employee,” a court “focus[es] on whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.” Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008). Five factors guide this inquiry:

  1. The degree of control exercised by the alleged employer

 

Here, control is measured by whether the employer or the worker dictates the “meaningful economic aspects of the business,” including “hiring, firing, [and] assignment.” Hopkins, 545 F.3d at 343. The defendants argued that this factor favors finding independent contractor status because they did not set “specific working hours for [their] drivers,” and they allowed the plaintiff to “drive for other transportation companies” when not working a shift. However, the plaintiff’s work resemble that of the employee-drivers. He received a flat daily rate and was told when to start working, who, when and where to pick up individuals, and he had to accept all driving assignments. Thus, the Court found that the plaintiff was an employee.

    2.  The extent of the relative investments of the worker and the alleged employer

 

Here, the Court did not get into specifics with regard to the plaintiff’s relative investment because the Court said there was undisputed facts that established that the plaintiff was an employee. The defendants conceded that the parties’ relative investments dictated an employee status so the Court left this factor alone. 


  1. The degree to which the worker’s opportunity for profit or loss is determined by the alleged employer

A worker’s opportunity for profit or loss is determined by whether that worker controls how much money he or she could make. Hopkins, 545 F.3d at 344. The defendants argued that the plaintiff was an independent contractor because he could work a second job and make as much money as he wanted when he was not working a shift. However, the Court said that the defendants set the shifts, paid the plaintiff a flat rate, and told him what fares to charge. Thus, the plaintiff have very little control over the profit he could make. This factor favored the finding that the plaintiff was an employee.


  1. The skill and initiative required in performing the job

The defendants argued that the plaintiff was an independent contractor because he and the company’s other drivers “exercised full discretion on how they ran their route.” The Court said that the plaintiff made deliveries only on an assignment and he had no control over what to charge clients or other business decisions. Thus, this factor favored finding the plaintiff as an employee. 


  1. The permanency of the relationship

“This factor weighs in favor of employee status when the work is done continuously and for a long period of time.” Wherley v. Schellsmidt, No. 3:12-CV-242-D, 2014 WL 5744335, at *6 (N.D. Tex. Oct. 23, 2013). Here, the plaintiff worked continuously for the defendants for three years so the permanency of the relationship was present. 

Based on the foregoing, the Court said that the plaintiff was an employee, thus entitled to receive overtime pay, and was misclassified as independent contractor.  If you have been designated as a 1099 worker and wonder whether your have been misclassified as an independent contractor and may be owed overtime pay, consider speaking with an experienced FLSA attorney today. Josh Borsellino is a FLSA attorney who understands the rules and regulations under the FLSA. He offers free consultations and can be reached at 817.908.9861 or 432.242.7118.