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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 plaintiff’s 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 defendant’s 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 England’s 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 facility’s site manager, John Smith, for extra work. Smith, who had initially hired Barlow, was not satisfied with England’s janitorial contractor at that time, so he asked England’s 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 & W’s services.

Without much reasoning regarding this portion of the plaintiff’s claim, the court held:

We also agree with the district court’s 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, 722–23 (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 worker’s opportunity for profit or loss; (3) the worker’s 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 employer’s 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, 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 court’s decision to grant summary judgment.

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

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Companies Slash Payrolls By Calling Workers Independent Contractors; Costly To IRS And States, L.A. Times Reports

The LA Times reports that the “Internal Revenue Service and 37 states are cracking down on companies that try to trim payroll costs by illegally classifying workers as independent contractors, rather than as full employees, The Associated Press has learned. The practice costs governments billions in lost revenue and can leave workers high and dry when they are hurt at work or are left jobless.

Many who have studied the problem believe it’s worsened during the economic downturn, fueling even more aggressive recovery efforts by states.”

The article points out that “[t]ypically, unless workers fight for and win a ruling that they should have been treated as full employees, they aren’t able to collect workers’ compensation for the injury or unemployment benefits when left jobless.”

To read the full article click here.

To read more about the legal factors that determine whether someone is misclassified as an independent contractor vs employee, and industries where misclassification is rampant click here.

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