In the Courts (4 cases)

  • SUPPLIER OF INSTALLATION SERVICES FOR LARGE SATELLITE TV COMPANY CANNOT DISMISS IC MISCLASSIFICATION CLAIM BY INSTALLER. A federal district court in Mississippi last month denied cross-motions for summary judgment in an FLSA class action IC misclassification suit brought against Media Net, a supplier of technical and installation services to DirecTV. The lawsuit was commenced by an installer on behalf of himself and others similarly situated, who alleged that, among other things, Media Net improperly classified installers as ICs instead of employees and thereby failed to pay overtime compensation for all hours worked beyond 40 in a workweek. The court, applying the “economic realities” test, considered: (1) the degree of control exercised by the employer; (2) the relative investments of the worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship. It held that there were genuine issues of fact regarding the nature and degree of control that Media Net maintained over the installer’s work, including whether the installer could operate as a separate business entity and whether he could perform extra services for his own benefit or needed prior approval from Media Net, as well as the permanency of the relationship. Eberline v. Media Net LLC, No. 1:13-cv-00100 (S.D. Miss. Dec.18, 2014).
  • CLIENT OF STAFFING AGENCY SUCCEEDS IN DEFENSE THAT IT WAS NOT AN EMPLOYER OF CONSULTANT HIRED THROUGH A STAFFING COMPANY AS AN IC. The U.S. Court of Appeals for the Third Circuit affirmed a district court’s grant of summary judgment that an Asian market research consultant was an IC and not an employee of Bristol-Myers Squibb (“BMS”), the company for whom services were being performed. BMS had contacted GfK Healthcare, LP (“GfK”) for help in locating a consultant. GfK in turn contacted a staffing agency, Scientific Search, who identified Yu as a suitable candidate. BMS contracted with GfK for Yu’s consulting services. GfK entered into contracts with Scientific Search and with Yu, stating that Yu would provide consulting services to BMS and report to McGrath. The court found that although some factors supported an employment relationship between Yu and BMS to some extent, “no reasonable jury could conclude that [she] was an employee of BMS.” The court noted that while BMS had some discretion in determining the assignments that the consultant would work on and provided her with office space and equipment during the contract period, it did not set the consultant’s compensation, benefits, or rate and method of payment, and did not have the authority to hire or fire her. The appeals court further found that BMS had no control over payroll, insurance, or tax records for the consultant. Yu v. McGrath, No. 14-1842 (unpublished opinion) (3d Cir. Dec. 30, 2014)
  • 300 DRYWALL INSTALLERS FOUND TO BE MISCLASSIFIED BY U.S. DEPARTMENT OF LABOR, WHO SECURES CONSENT JUDGMENT AGAINST INTERIOR CONSTRUCTION COMPANY. The U.S. Department of Labor announced that, following an investigation against a construction contracting company, General Interior Systems, for misclassifying over 300 drywall installers as independent contractors for failure to pay overtime in violation of the FLSA, the company agreed to settle the matter and enter into a consent judgment filed in federal court. The consent judgment includes a requirement that the company pay $380,000 to drywall installers who regularly worked as many as 60 to 70 hours per week but did not receive overtime compensation. Perez v. General Interior Systems Inc., No. 5:08-cv-00823 (N.D.N.Y. Dec. 2014).
  • STRIP CLUB IN TEXAS AGREES TO SETTLE IC MISCLASSIFICATION SUIT BROUGHT BY EXOTIC DANCERS FOR $2.3 MILLION. A Texas federal district court approved a $2.3 million settlement of FLSA claims by class of exotic dancers that sued Jaguar Gold Clubs in a collective action for failing to pay them minimum wages and overtime compensation. The dancers claimed that the clubs required them to share tips with DJs, house moms, and managers; that the dancers had to pay fees for the shifts that they danced; and that the dancers did not receive any compensation from the Clubs. Although the Clubs argued that the dancers were not employees, but rather “licensees, lessees or independent contractors who worked for their advantage on the premises of another,” the Clubs agreed to settle the case to avoid litigation. Jones v. JGC Dallas, LLC, No.3:11-cv-2743-O (N.D. Tex. Dec. 24, 2014).

Regulatory and Enforcement Initiatives (3 matters)

  • COLORADO RENEWS ITS MEMORANDUM OF UNDERSTANDING WITH THE U.S. LABOR DEPARTMENT TO COMBAT IC MISCLASSIFICATION. The Colorado Department of Labor and Employment renews its partnership with the Wage and Hour Division of the U.S. Department of Labor on December 5 in an effort to more effectively share information and conduct joint compliance activities to combat worker misclassification. Dr. David Weil, the Wage and Hour Administrator, stated in a DOL News Brief that, “This memorandum of understanding sends a clear message that we are standing together with the state of Colorado to protect workers and responsible employers and ensure everyone has the opportunity to succeed.”
  • U.S. LABOR DEPARTMENT SECRETARY FOCUSES ON IC MISCLASSIFICATION IN RECENT PRESENTATION ON WORKPLACE LAW. Independent contractor misclassification was among the topics addressed in a presentation entitled “Enforcement Matters: How Workplace Law Enforcement Can Boost Americans’ Wages and Strengthen the Economy,” presented on December 4 by Secretary of Labor Thomas E. Perez. In his remarks, Secretary Perez singled out cable installers, truck drivers, and information technology workers as “the kinds of folks to face the abusive and growing practice of worker misclassification [as independent contractors].” Although Secretary Perez noted that there are individuals who are legitimately classified as independent contractors and that they play an important role in the economy, he expressed his concern that many companies that “call . . . employees independent contractors [are] stripping them of rights and benefits in the process [and] dodging [their] own tax obligations as an employer.” Secretary Perez described misclassification as a “triple whammy.” He stated, “It rips off the workers, of course; it cheats all the employers who are playing by the rules; and it also undermines the treasury.”
  • RHODE ISLAND ESTABLISHES TELEPHONE TIPLINE TO REPORT IC MISCLASSIFICATION. The Rhode Island multi-agency task force charged with eliminating IC misclassification has created an anonymous telephone tipline to allow workers and others to report employers who may be misclassifying employees as ICs. Established in June 2014, the Task Force is comprised of members of the Rhode Island Department of Labor and Training, the Division of Taxation, the Department of Business Regulation, the Attorney General’s Office, the Public Safety Commission, and the Workers’ Compensation Division. Informational seminars and flyers have been provided by some of the Task Force members, including materials mailed in September 2014 by the Department of Labor and Training to 32,000 employers in Rhode Island.

On the Legislative Front (1 matter) 

  • TEXAS BILL SEEKS TO CRACK DOWN ON IC MISCLASSIFICATION IN THE CONSTRUCTION INDUSTRY BY PENALIZING NON-REPORTING OF EMPLOYEES MISCLASSIFIED AS IC’S. Texas state Representative Senfronia Thompson (D-Houston) introduced a bill (HB 434) on December 3 seeking to curtail misclassification of workers in the construction industry by requiring construction businesses to report the classification status of all construction employees. The bill creates graduated penalties to construction employers for failing to report workers who have been misclassified as ICs. The proposed legislation would impose penalties for a first offense of $100, and for a second offense $1,000, for each employee not reported to the Texas Workforce Commission.


Written by Richard Reibstein.