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Jury to decide if Internet satellite installer was independent contractor

By Brandi O. Brown, J.D.

Vacating summary judgment in favor of an alleged employer in an FLSA suit by a technician who installed Internet satellites, a Sixth Circuit majority concluded that there were genuine issues of fact on whether the installer was an independent contractor rather than an employee. Judge Norris dissented (Keller v. Miri Microsystems LLC, March 26, 2015, Moore, K.).

Miri Microsystems LLC was a middle man in the satellite Internet installation chain, connecting certified installment technicians with orders that customers placed with a nationwide Internet service provider, HughesNet. Miri assigned jobs based on each technician’s geographic location and availability. Miri was paid by the job type by Hughes and, in turn, paid technicians by the job, rather than by the hour. The plaintiff, a technician who had previously worked for Miri, was paid $110 per installation and could complete two to four installations per day. He typically worked six days per week, from 5 a.m. to midnight. He filed suit against Miri, alleging that its payment system violated the FLSA and that he had not received overtime pay.

Miri filed a motion for summary judgment against the technician, arguing that he was an independent contractor and thus not entitled to overtime compensation. The district court granted that motion, holding that the plaintiff was an independent contractor and not an employee. The technician appealed. Noting that the question of whether or not the plaintiff was an employee under the FLSA was a mixed question of law and fact, the appeals court found fact disputes that should have foreclosed summary judgment.

Factors to consider. Although the FLSA was passed with “broad remedial intent,” the court noted that independent contractors do not enjoy its protections. The employer’s label was not dispositive—the court still examines whether or not a plaintiff was in fact an independent contractor by applying an economic-reality test. Six factors that are usually considered include: (1) the permanency of the relationship between the worker and purported employer; (2) the degree of skill necessary for the job; (3) the worker’s capital investment; (4) the worker’s opportunity to profit or lose money; (5) the degree of control the purported employer rendered over the manner in which the work was performed; and (6) whether the work in question was an “integral part” of the purported employer’s business. Although no factor alone was dispositive, one central consideration was how economically dependent the worker was on the purported employer’s business.

Exclusivity and permanency. With regard to the first factor, the appeals court found fact disputes on whether the parties had an “exclusive, permanent relationship in practice.” The fact that they did not have a contract was inconsequential, because the FLSA was “designed to defeat rather than implement contractual arrangements.” The fact that the relationship was not an exclusive one and that the technician could work for other companies was a factor for consideration, but it was one among many in determining his economic dependence. The technician worked for Miri for almost 20 months and treated the company “as his permanent employer,” never refusing an assignment and operating under the belief that he could be fired. On the other hand, he was never prohibited from working for other companies and, had he so chosen, could have worked fewer days for Miri. However, on the days he did work, there were many factors outside of his control, such as how long the installation would take and the travel time needed. “Even the most efficient technician could not finish four jobs in a day under eight hours,” the court explained, “suggesting that technicians have slim control over their working hours and little ability to work for other companies.” Thus, this factor was inconclusive.

Skill needed and acquired. Also uncertain was the amount of skill needed. While there was “ample evidence” to support a conclusion that technicians were skilled workers, based on required certification by the nationwide service provider and the need for computer and equipment-related skills, as well as knowledge of electrical code provisions, it was unclear if the acquisition of that skill was through a sufficiently rigorous process to differentiate it from that provided to an employee. Miri provided training for the certification required by HughesNet, which consisted of an online class and a one-day, in-person class. Otherwise, the work was not such that it “rises or falls on the worker’s special skill,” such as that of a carpenter. And the record did not suggest that the technicians were selected on any basis besides location and availability.

Capital investments. As for capital investments, the waters were equally muddy. The court agreed with the plaintiff that the parties’ investments should be compared, but noted that such comparison had to occur while considering a broader question: whether the investment was “evidence of economic independence.” Therefore, while having a vehicle for the job might be an investment, the impact of that investment could be diluted by personal use of that vehicle. The same was true for computer equipment and basic tools. Here, the plaintiff drove his wife’s van for work, held auto insurance on it, and generally paid for gas. He used his own tools and his own smart phone, printer, and digital camera. He also provided some materials, but Miri provided dishes, transmitters, and similar items. Miri also “made significant capital investments in its business,” including renting office space. Again, the trier of fact should be the one to decide how these investments compared and whether they demonstrated the technician’s economic independence.

Profit, loss, and control. Although the district court concluded that the profit or loss factor weighed in favor of finding that the technician was an independent contractor, the appeals court concluded that a reasonable jury could find that it pointed in the opposite direction. Although the technician may have controlled the size of his geographic territory and how many jobs he accepted, the appeals court could not see how he could have earned greater profits by expanding that territory or working somewhere else. As for hiring assistants or becoming a subcontractor, the impact of having a helper would be slight, as demonstrated by evidence regarding occasional help he received from his wife and a paid worker. And nothing compelled the conclusion that he could be more efficient on a daily basis with such help. Moreover, that help came at a cost of its own, while the payment he received from Miri did not change.

Schedule control. The court considered the amount of control the parties exercised over the technician’s schedule. Based on the way Miri made assignments and scheduled installations, a reasonable jury could find that it made it impossible for the technician to provide services for other companies. Moreover, it exerted some control over how he performed the job—requiring certification, providing instruction for certification, monitoring the quality of installations through photographs and customer feedback, and controlling the amount customers paid to the technician. On the other hand, the plaintiff could change up the route he took or rearrange his schedule without objection. Miri stated, however, that it could sever ties with the technician if he was routinely late or missed appointments. And there was a genuine dispute about discipline generally.

Finally, the court noted that a reasonable jury could conclude that technicians are integral to Miri’s business. A jury could also find that the technician did not hold himself out as an independent contractor, but instead as an employee. He did not carry a business card or register for a Federal Employer Identification number. Because there were many issues of fact and reasonable inferences to be drawn, summary judgment was not appropriate.

As to the employer’s alternative argument that the plaintiff did not introduce evidence showing he actually worked more than 40 hours per week, even without the technician’s testimony, the court concluded that the employer’s testimony was sufficient evidence from which a jury could conclude that he worked more than 40 hours per week. It confirmed that the plaintiff worked six days per week and completed four jobs per day, a number that could easily take him outside of the 8-hour-day confines.

Dissent. Judge Norris dissented, finding that the district court’s decision was rightly decided based on the individual circumstances in the record. In particular, Judge Norris argued that the control exerted by the technician over his working relationship, based on his ability to reject jobs, rendered him an independent contractor, as did the skill level he was required to possess. Judge Norris was also unpersuaded that the technician’s use of the van and other items for personal use was of any importance to the capital investment analysis. After pointing out problems with the majority’s analysis of the other factors, Judge Norris encouraged a “common sense approach” and a more comprehensive view, concluding that it was “abundantly clear that both” the technician and Miri, an LLC with a single member, “intended” for the technician “to be an independent contractor and conducted themselves accordingly.”