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To determine whether a person is an employee or independent contractor for purposes of the Fair Labor Standards Act (“FLSA”), courts examine several factors to determine the “economic reality” of the relationship between the alleged employee and employer. Merely putting an independent contractor label on the alleged employee or entering a contract that controls the relationship does not exempt a person from the requirements of the FLSA. The court’s determination instead is governed by whether that relationship demonstrates economic dependence. Peter Mavrick is a South Florida employment attorney who represents the interests of business and their owners in labor and employment litigation, including lawsuits seeking overtime wages and minimum wages.
The Eleventh Circuit Court of Appeals (“Eleventh Circuit”), i.e., the appellate court governing federal labor and employment lawsuits in the State of Florida, recently ruled in favor of an employer who properly classified a worker as an independent contractor instead of as an employee. The Eleventh Circuit held that the employer owed the worker no overtime wages because he was an independent contractor. In J. L. Nieman v. National Claims Adjusters, Inc., et al., Case No.: 3:17-cv-01430-HES-JRK (11th Cir. 2019), insurance adjustor J. L. Nieman (“Nieman”) sued National Claims Adjusters, Inc.’s (“National”) and David Ierulli’s (collectively “NCAI”) for failure to pay wages and for retaliatory discharge under the FLSA.
Neiman did not state many facts in his complaint that would support his claim for employee status. The allegations in his complaint suggested that nothing prevented Neiman from working for other insurance companies, and he did in fact do so during his relationship with NCAI. Neiman’s allegations did not allege that NCAI controlled the number of hours he worked, supervised him, or paid for his professional licensing. Also, Neiman alleged that his belief that his temporary role with NCAI might have “potentially” become a permanent one did not suggest economic dependence. The district court granted NCAI’s motion to dismiss and found such factors to be indicative of the lack of an employment relationship. Nieman’s appeal followed.
On appeal, Nieman argued that the district court erred in dismissing his FLSA claims because he was NCAI’s employee, rather than an independent contractor. The Eleventh Circuit disagreed. Courts consider several factors to determine the economic reality of the relationship between the alleged employee and employer, namely “(1) the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed; (2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee’s investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; [and] (6) the extent to which the service rendered is an integral part of the alleged employer’s business.” Scantland v. Jeffry Knight, Inc., 721 F.3d 1308 (11th Cir. 2013).
The Eleventh Circuit reasoned that each of these factors are important, however the overarching focus of the inquiry is economic dependence. In other words, the question is ultimately, “whether the individual is ‘in business for himself’ or is ‘dependent upon finding employment in the business of others.’” J. L. Nieman v. National Claims Adjusters, Inc. supra. Applying the six factors of the economic reality inquiry, the Eleventh Circuit found that the first, third, fourth and fifth factors favored independent contract status and the remaining factors did not weigh in favor of either status. The first factor indicated independent contractor status because Neiman controlled his schedule, set up his own appointments and inspection, controlled the geographic location within which he took assignments. While National controlled the software Neiman used for his reports, Neiman ultimately controlled the methods by which he completed his reports and how he performed each job. Neiman controlled how and when he completed his assignments and whether he would take on more or less of them, showing that he was essentially “in business for himself.” The third factor also indicated independent contractor status because Neiman invested in his own equipment and materials for work. Neiman worked from his home and used his own laptop and iPad for field work and was equipped with a vehicle, ladder, measuring tools, digital voice and photographic equipment, and “other similar tools of the trade.” The fourth factor also indicated independent contractor status because Neiman’s job required a professional license. The fifth factor also indicated independent contractor status because Nieman alleged that National hired him for “special projects” including claims arising from Hurricane Irma, but there was no indication of any permanency of his position.
The Eleventh Circuit found significant the fact that Nieman completed work for another company after he responded to National’s initial advertisement and looked for and interviewed for other jobs to perform while he was still engaged with National. This demonstrated that Neiman was not economically dependent on National. The Eleventh Circuit concluded that upon review of all the factors viewed in the light most favorable to Nieman, four of the six factors weighed strongly in favor of independent contractor status. The district court’s dismissal of Neiman’s claims was affirmed.
Peter Mavrick defends businesses and their owners in employment lawsuits in Broward, Miami-Dade, and Palm Beach Counties, Florida. This article does not serve as a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.