Driftwood Electric – Fifth Circuit Court of Appeals Overturns Independent Contractor Finding.

Whether persons who do work are employees or independent contractors has traditionally been a very fact intense inquiry. This issue usually arises when a person or group of people who have been doing work as independent contractors sue to recover overtime wages.  A company can typically cite to facts which support it’s decision to treat the person as an independent contractor  while  claimants can also point to facts which support their position that they were employees.  The Fifth Circuit in Cromwell vs. Driftwood Electric Contractors, Inc., Case No. 09-60212, (5th Cir 2009)(unpublished opinion 10/12/09) held that plaintiffs Fred Cromwell and Jeff Bankston, two cable splicers who worked restoring Hurricane Katrina damaged telecommunication lines were employees under the economic reality test of the Fair Labor Standards Act (“FLSA”).  The District Court had granted Driftwood’s motion for summary judgment finding that plaintiffs were independent contractors and therefore not entitled to the claimed unpaid overtime wages. 

The undisputed facts of the case showed that both plaintiffs worked for Driftwood’s customer, Bellsouth, working twelve hour days in shifts consisting of thirteen work days followed by one day off.  They were paid an hourly wage by Driftwood and reported each morning to a Bellsouth work location where they were given work assignments and specifications by a Bellsouth supervisor.  Both plaintiffs provided their own trucks, testing equipment and tools and were responsible for their own vehicle liability insurance and employment taxes.  Driftwood supplied workers compensation insurance and work liability insurance for both plaintiffs.  Based upon these facts, the United States District Court for the Southern District of Mississippi, granted Driftwood’s summary motion request concluding that both plaintiffs were independent contractors, not employees under the FLSA because the men operated their own businesses and were not economically dependent on Driftwood.  On appeal, plaintiffs argued that Driftwood exercised an extreme amount of control over them and that the trial court had wrongly determined that they were independent contractors under the FLSA.  Driftwood, in turn argued that the two men were highly skilled workers who controlled the manner in which they completed work assignments using their own trucks, equipment and tools and thus were independent contractors for purposes of the FLSA.

The Fifth Circuit acknowledged there were facts supporting the company’s contention, most notably that the plaintiffs controlled the details of how they performed their work, they were not closely supervised, they invested a relatively substantial amount in their equipment and they used a high level of skill in performing their work.  None the less, the Court concluded that the plaintiffs were employees under the FLSA because they had worked on a steady and reliable basis over a substantial period of time (approximately 11 months) exclusively for Driftwood.  The Court found that the permanency and extent of this relationship coupled with Driftwood’s complete control over plaintiffs’ schedule and pay had the effect of severely limiting any opportunity for profit or loss by the plaintiffs.  In addition, the Court noted that the employer’s work schedule effectively precluded the plaintiffs from taking other jobs and  the way plaintiffs were provided their work assignments limited the men’s need to demonstrate initiative in performing their jobs, thus making them more like employees than independent contractors.  Interestingly, the Court noted that there were facts pointing in both directions regarding the issue of the employees’ status and that the facts in this case truly appear to be equal on both sides. The Court found, however, that on balance, the plaintiffs were economically dependent on the defendant and were not in business for themselves.

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