Virtual Workers and Economic Reality: Independent business owners file FLSA collective action for unpaid wages

Posted on November 10, 2017 by Barkan Meizlish

Call center service provider Great Virtual Works is facing a collective action complaint for violations of the FLSA (Fair Labor Standards Act) and minimum wage/overtime laws of Kentucky and Pennsylvania. The case alleges that Great Virtual Works misclassified its “independent business owners” as independent contractors, rather than employees.

Great Virtual Works is a corporation headquartered in Fort Lauderdale, Florida that provides telephone-based customer service, sales service and technical support to customers of client companies such as Great Healthworks, makers of the dietary supplement Omega XL. The collective claims brought under the FLSA here allegedly apply to similarly situated individuals in other states in a00ddition to Kentucky and Pennsylvania.

The two plaintiffs claim that Great Virtual Works misclassified them in an attempt to avoid paying employees all the hours they spent actually working for the company. According to the plaintiffs, Great VirtualWorks’ so-called “business owners” are actually individual employees working from their homes, performing hourly-paid work duties such as telephone-based customer service, sales service, and technical support for Great VirtualWorks’ client companies.

The plaintiffs argue that they and other similarly situated individuals were not business owners or independent contractors as labeled by Great VirtualWorks because they did not make significant investments in equipment or materials, exercise any specific skills, or make a significant profit or loss from their work. The plaintiffs state that Great VirtualWorks has at all times of plaintiffs’ employment been in control of their work schedules and activities, relying on them and similarly situated employees to perform an integral part of its business of providing telephone-based customer service, sales service and technical support to other companies.

Specifically, the plaintiffs allege Great VirtualWorks failed to pay them for work performed before, during, and after their shifts, including:

connecting to the company from their own homes or places of work, opening computer applications for the company’s telephone-based customer service, sales service and technical support (5-20 minutes);
having brief rest breaks (the FLSA says 5-minute to 20-minute breaks must be counted as hours worked);
troubleshooting activities when disconnected from the company’s network;
shutting down computers and applications at the end of a shift;
reviewing emails and completing notes when not engaged in calls but clocked in;
completing required online training; and
attending mandatory meetings or coaching sessions.

As a result of this unpaid work, the compensation plaintiffs actually received averaged less than the federal minimum wage, as well as the Kentucky and Pennsylvania minimum wage. Additionally, plaintiffs allege that they did not receive proper overtime compensation at a rate of time-and-a-half of their regular rates of pay. The plaintiffs are now seeking unpaid minimum, overtime, and contractually-owed wages, liquidated damages, attorneys fees and costs, and other remedies they may be entitled to under federal or state law.

The lawsuit is currently stayed pending an an upcoming ruling by the United States Supreme Court on a legal issue relevant to the employees’ claims, which is whether Great Virtual Works can require employees to submit their claims to individual arbitration. The amended collective class action complaint is recorded in Kentucky as Case No. 0:17-cv-00063-HRW. The plaintiffs are represented by the law firms of Barkan Meizlish Handelman Goodin DeRose Wentz, LLP and JTB Law Group, LLC.

If you have questions or information to provide, you may contact the following attorneys:

Trent Taylor; ttaylor@barkanmeizlish.com; (800) 274-5297

Robi Baishnab; rbaishnab@barkanmeizlish.com; (800) 274-5297

Nicholas Conlon; nicholasconlon@jtblawgroup.com; (877) 561-0000

Wage and Hour Violations in the Oil and Gas Industry

Posted on November 1, 2017 by Barkan Meizlish

The Fair Labor Standards Act (“FLSA”) was designed to protect workers from employers who may otherwise take advantage of their employees. Generally, the FLSA requires employers to pay an overtime premium to non-exempt employees of one and a half times the employee’s regular rate of pay for all hours worked in excess of 40 within a workweek and to also pay at least the minimum wage for all hours worked. In the rapidly growing oil and gas industry, however, wage and hour violations have become more common as companies seek ways to lower their labor costs. For example:

1. Day Rate Pay Without Overtime

One common type of violation occurs when an employee receives a “day rate” payment without overtime. A “day rate” method of payment is a flat sum for a day’s work without regard to the number of hours worked in the day. Simply paying employees a day rate does not, however, negate the FLSA’s requirement that non-exempt employees receive overtime at a rate of 1.5 times the regular rate for all hours worked over 40. To comply with the FLSA, employers who use this method of compensation must therefore pay non-exempt employees a premium overtime rate. There is often plenty of room for error in calculating an employee’s overtime on a day rate of pay, as this rate can fluctuate depending on the amount of hours worked.

2. Independent Contractor Misclassification

Additionally, some employers try to avoid their obligations under the FLSA by classifying workers as independent contractors, rather than employees. Independent contractors are not subject to the many of the FLSA’s protections, including overtime, so employers often “misclassify” workers to eliminate certain tax obligations or other costs otherwise owed to employees.

This technique is fairly common in the oil and gas industry, where much of the day-to-day work on oil rigs and gas wells is sub-contracted out to other companies. But it is the actual employment relationship—not the label—that controls whether an individual is an employee or an independent contractor for the purposes of the FLSA. For example, one of the various tests applied by courts in making this determination (“economic reality test”) takes into consideration 6 different factors: (1) the permanency of the relationship; (2) the degree of skill required; (3) whether the worker contributes services that are an integral part of the business; (4) the employer’s control over the worker; (5) the worker’s opportunity for profit or loss; and (6) the worker’s investment in materials and equipment.

Defining employee status can be complex and it all depends on the circumstances surrounding the employment relationship as a whole. Additionally, misclassification can expose employers to serious liability—including payment of back wages, liquidated damages, and attorney’ fees—when violations are found.

Independent Contractors

Posted on May 14, 2015 by Barkan Meizlish

Last month, a New York federal court in Saleem v. Corporate Transp. Grp., Ltd., 2014 WL 4626075 held that drivers for a “black car” business were independent contractors, rather than employees, under both the FLSA and New York Labor Law. The drivers claimed that their employer misclassified them as independent contractors, entitling them unpaid overtime and other wage claims.

We’ve explained the test for determining independent contractor versus employee status in a few of our earlier posts. The “economic realty test,” which is one of the various tests courts apply, considers (1) the degree of control exercised by the employer over the worker; (2) the worker’s opportunity for profit or loss and investment in the business; (3) the degree of skill required to perform the work; (4) the permanency of the working relationship; and (5) whether the worker contributes services that are an integral part of the business. The analysis in Saleem provides a good illustration of how courts will apply these factors to determine employee or independent contractor status. Here is what the Saleem court considered:

(1) Control—this factor weighed in favor of classifying the drivers as independent contractors. The employer only exercised limited control over the drivers. The drivers could set their own schedules, hire other drivers to work on their behalf, and take vacations whenever they wanted—even without notifying the employer. They had no obligation to accept any job, and they could also freely work for other transportation companies. Even though the employer did require the drivers to periodically inform them of the status of their assignments, the court still found that this factor weighs slightly in favor of independent contractor status.

(2) Opportunities for loss or profit—the court found that the drivers had an opportunity for profit or loss. Because they were not guaranteed a set amount of work under their franchise agreements, the drivers could ultimately control their income with the amount of jobs they accepted. The drivers also invested money into the business by buying, renting, or maintaining cars and paying fees associated with their for-hire drivers licenses.

(3) Skill—this factor did not weigh in favor of employee or independent contractor status. While the drivers were not required to have a high degree of skill, they did need to exercise a high degree of independent initiative. Because the drivers were not required to accept any particular job, they had to independently take affirmative steps to secure jobs in order to be successful.

(4) Permanence of the relationship—this factor weighed in favor of independent contractor status. Even though the drivers had franchise agreements with the employer for many years, they could quit working at any time. The fact that the drivers could work for other companies also weighed in favor of independent contractor status.

(5) Integral part of the business—this last factor favored employee status, as the employer could not operate the business without the drivers’ work.

After weighing the factors and looking to the totality of the circumstances, the court determined that the drivers were properly designated as independent contractors and accordingly dismissed the drivers’ FLSA claims.

Source: Larry S. Perlman & Tamar N. Dolcourt, FLSA Case Is A Guide To Using Undependent Contractors, LAW360 (Oct. 17, 2014) https://www.law360.com/classaction/articles/586551/flsa-case-is-a-guide-to-using-independent-contractors

Employee v. Independent Contractor

Posted on May 13, 2015February 21, 2022 by Barkan Meizlish

Employee v. Independent Contractor – What You Need To Know

What is the difference between an employee and an independent contractor? This is an important question and one that business owners and workers must reckon with. Oftentimes, employers will attempt to classify a new hire as an “independent contractor.” This is done to limit exposure under a given state’s worker’s compensation act. Also, if a hire is considered an employee, employees are mandated to withhold income taxes and pay Social Security, Medicare taxes, and unemployment tax on wages. Employers are under no such obligation to independent contractors.

This is an issue that raises a number of questions and attempting to answer them is not exactly straightforward. In fact, there are many factors that go into determining how to most effectively address this situation. When courts have weighed in on the “employee versus independent contractor” dynamic, some common factors have become apparent.

Control and Relationships – What They Mean And How They Affect You

It’s important to note that each jurisdiction has its own statutes and regulations and if you have specific, detailed questions you should refer to a state’s statutes and rules that focus on employment. Regardless, the most common element that all courts look for in these relationships is the right of “control” as to the means and manner of the job.

The IRS offers two key points to clarify how to understand the dynamics that define an employee compared to an independent contractor.

As we said, the first is control. If the business controls what a person does and then directs how it is done, that is considered a type of behavioral control. Financial control is also a consideration if the business dictates particular aspects of the tasks. That includes

Level of instruction
Amount of training
Degree of business integration
Method of payment
The furnishing of work tools and other materials
Ultimate control over the work environment and where work is completed
The right of discharge

While this list is by no means exhaustive, it should provide all parties with a firm understanding of the factors which go into an independent contractor/employee relationship determination.

A second factor is the relationship between the two parties and any contractual obligation or benefits associated with the employment. The factors, for the type of relationship between two parties, generally fall into the categories of:

Written contracts
Employee benefits
Permanence
Services provided

Again, this is not a definitive list, but it should offer some clarity in terms of an established relationship between an employee or independent contractor and their employer.

If you have any questions about your status as an employee or independent contractor, please contact our team today.

The law firm of Barkan Meizlish DeRose Cox, LLP is over sixty years old, with a national practice, focused on wage and hour/overtime litigation, Ohio workers’ compensation, Social Security Disability, and personal injury/medical malpractice. Our law firm and individual law firm members appear on lists of the best law firms and attorneys in the nation.

Tag: Independent Contractors