CWS 3.0: January 30, 2013

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Company Prevails in Independent Contractor Overtime Lawsuit

The Tenth Circuit ruled late last month that a security guard/janitor was in fact an independent contractor and not an employee, and therefore could not proceed with his Fair Labor Standards Act unpaid overtime claims, according to the January issue of Legs & Regs Advisor, now available to Corporate and CWS Counsel members of Staffing Industry Analysts

In February 2005, C.R. England Inc. hired Willie Barlow, Jr.,  as a part-time security guard; he also did some maintenance and ground work. After about 18 months, Barlow sought extra work, but England’s personnel department said Barlow could not work any more hours because England would then be required to pay him overtime. The facility site manager suggested that Barlow create a company that England could contract with for janitorial services.

Barlow subsequently formed E&W Janitorial & Maintenance Services LLC, with England as its sole client. Under an oral agreement with the facility site manager, Barlow began providing janitorial services for England three days per week. While England provided cleaning supplies, it did not direct Barlow about how he should clean. England paid $400 a month for E&W's janitorial services.

In late 2007, England suspended the janitorial contract in part because Barlow was cleaning during his security guard shifts (his employment as a security guard was also terminated on other grounds). Barlow brought a number of claims against the company, including a claim that he performed his janitorial work as an FLSA employee and was entitled to overtime pay for the more than 40 hours combined he worked as a security guard and janitor for England.

The Tenth circuit  applied a  six-factor test, and determined that Barlow’s creation of a company to provide janitorial services, his maintenance of separate financial records and filing of a corporate tax return and his “freedom to decide how to accomplish” his janitorial duties supported a finding that he was in fact an independent contractor.

 “[L]ittle in the case indicates the relationship between Barlow and 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,” the court said in its ruling. Accordingly, the court found that the evidence suggested “Barlow was in business for himself as a janitor” and was not an employee when performing janitorial work.

While the company prevailed in this case, companies should continue to review the bases for their independent contractor classification. Consider the entire business relationship — especially if you have the unique situation of a worker in a dual role as an independent contractor in one position and an employee in another position. As in the Barlow case, courts will pay particular attention to how much control you exercise over the independent contractor and whether the independent contractor position is truly a separate entity, as evidenced by the maintenance of separate financial records and the filing of separate tax documents.

Likewise, audit the independent contractor relationships for workers being provided to you by staffing firms to make sure they have taken operational steps to help mitigate any exposures.  

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