Security guards frequently work long hours and are often classified as independent contractors and paid a flat hourly rate or day rate, regardless of the number of hours they actually work in a week. As a recent case decided by the Sixth Circuit Court of Appeals illustrates, this situation can result in violations of the federal overtime laws.
In Acosta v. Off Duty Police Services, Inc. (“ODPS”), the U.S. Department of Labor sued a security service company for alleged overtime law violations. According to the DOL, ODPS violated the overtime pay laws by misclassifying its workers as independent contractors. ODPS offers private security and traffic control services. Such services include, for example, sitting in a car with the lights flashing or directing traffic around a construction zone. Most of ODPS’s workers are sworn officers, meaning they work for some law-enforcement entity in addition to working for ODPS. Other workers are nonsworn, meaning they generally have no background in law enforcement.
If workers accept a job, ODPS tells them where to report, when to show up, and whom to speak with when they arrive. ODPS sometimes provides workers with supplies and equipment necessary for the assignment, including stop-and-go signs, reflective jackets, and badge-shaped patches. But workers must pay for other equipment. In certain cases, for example, the cost of an ODPS-branded shirt is deducted from workers’ paychecks. And all workers must own police- style vehicles. While sworn police officers usually drive their police cruisers, nonsworn workers must buy a police-style vehicle—usually a Crown Victoria—with their own money. Nonsworn workers testified that they drive these vehicles both on the job and for personal use. In all, the cost of the nonsworn workers’ investments ranges from roughly $3,000 to $5,000.
ODPS considers all these workers to be independent contractors, regardless of the compensation they receive, the work they perform, or their background in law enforcement. All workers must sign “independent contractor agreements” that contain non-compete clauses prohibiting them from working for ODPS’s customers for two years after their work with ODPS ends. Because ODPS classifies its workers as independent contractors, it has never paid them overtime wages. The DOL alleged that the workers were truly employees, and thus were owed overtime pay at a rate of one-and-a-half times their regular rate of pay for each hour worked above forty in a week.
At trial, the district court found that the sworn officers were independent contractors, and thus not owed overtime, while the unsworn workers were employees, and were owed overtime pay. Both parties appealed.
The Sixth Circuit recognized the importance of its opinion, stating that “[t]he way we work in America is changing. The relationships between companies and their workers are more fluid and varied than in decades past. Our task in this appeal is to apply traditional legal protections to one such relationship.” The Court began its discussion by stating that there are six factors that are used to determine whether a worker is an independent contractor or an employee:
1) the permanency of the relationship between the parties; 2) the degree of skill required for the rendering of the services; 3) the worker’s investment in equipment or materials for the task; 4) the worker’s opportunity for profit or loss, depending upon his skill; . . . 5) the degree of the alleged employer’s right to control the manner in which the work is performed . . .;” and 6) “whether the service rendered is an integral part of the alleged employer’s business.”
Applying these factors, the Sixth Circuit found that five of the six economic-reality factors support finding an employment relationship between ODPS and all its workers. The Court held that ODPS’s workers were an integral part of ODPS’s business, that they performed low-skilled jobs at a set rate of pay for fixed periods of time, that they overall made limited investments in specialized equipment, and that they worked for ODPS consistently over the course of many years. The remaining factor—ODPS’s right to control its workers’ performance—favors employee status for the nonsworn workers and, in the case of the sworn officers, is evenly balanced in support of both parties’ positions. The Court went on to say that these factors must be viewed in light of the FLSA’s “strikingly broad” definition of the word “employee.” As such, the Court concluded that both the sworn and non sworn workers were employees and were entitled to overtime pay.
As the above case shows, security guards and other workers can be misclassified as independent contractors and, if so, may be owed considerable amounts of money in overtime pay. If you have questions regarding your status as an independent contractor, speak with an experienced overtime attorney. Josh Borsellino represents workers to get them the overtime pay they deserve. For a free consultation, call Josh at 817.908.9861 or 432.242.7118, or fill out this online form.