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Wage & Hour Law Update

Different Circuit, Different Result: Fifth Circuit Upholds Independent Contractor Classification Under FLSA

As discussed here, here and here, the issue of independent contractor classification under wage, unemployment, tax and other laws is omnipresent, continuing to arise in litigation and legislative reform. In a rare victory for employers in this regard, this week the Fifth Circuit Court of Appeals (encompassing Texas, Louisiana and Mississippi) affirmed a district court’s decision that an individual performing work as a “splicer” (one who installs, cuts, repairs, and tests various high voltage cables) was properly classified as an independent contractor under the FLSA. Thibault v. BellSouth Telcoms., Inc., 2010 U.S. App. LEXIS 15267 (5th Cir. 2010).

The Thibault case arose from BellSouth’s efforts to rebuild its telecommunications grid in the aftermath of Hurricane Katrina. Unable to directly employ sufficient splicers to complete the huge volume of needed repairs, BellSouth contracted out some of the work. In fact, demand was so great that the contractor (Directional) subcontracted to a second entity (Parker), which in turn entered into a contractor agreement with Plaintiff Thibault. While Thibault was not an experienced splicer, he had extensive technical knowledge from a previous career, and operated his own business in his home state of Delaware. 

The Court described Thiabult’s work on the BellSouth repairs as follows:

In October, Thibault filled his trailer home with water and food, and the two men drove to Louisiana. From October 4, 2005 to January 6, 2006, Thibault worked as a splicer. In that time, Thibault made $ 51,628. Everyday, Thibault was required to report to Kenner Yard, a property rented by BellSouth.  At the first meeting, Thibault claims that a Parker supervisor informed them that they would be paid sixty-eight dollars an hour, would work at least eighty-four hours a week and would get a per diem and a place to park his motor home. Every day, Thibault showed up to Kenner Yard, and was assigned a specific splicing job in New Orleans. BellSouth  engineers created the overall rewiring plan for New Orleans. BellSouth supervisors designated the specific jobs to be done daily, and assigned Directional supervisors to distribute the assignments. When Thibault received his assignment, he was then required to take his truck to the job and work on the problem he was assigned. When completed, Thibault would return to Kenner Yard and would be assigned another splicing job. He worked in thirteen-day intervals with a one-day break in between. While Parker paid Thibault, BellSouth  had to approve all vacation and break time. On January 6, Parker laid off Thibault. Directional offered Thibault a job as a splicer, working directly for Directional, but Thibault declined. Instead, he returned to Delaware, and has not worked as a splicer since. Thibault brought this suit against Parker, Directional, and BellSouth for overtime pay under the FLSA, breach of contract, and Louisiana wage law statutes.

Id. at * 4-6.

In analyzing the “economic realities” of the arrangement between Thibault and the contracting entities, the Court noted that: 1) the relationship did not have a high degree of permanence as Thibault intended to return home to Delaware; 2) Thibault was subject only to limited supervision in his performance of the splicing work; 3) Thibault possessed a high degree of technical skill and initiative; and 4) Thibault had a high degree of investment in the tools necessary to be a splicer (bucket truck, cable splicer, pump, ventilator, ladder, climbing belt, harness, hard hat, safety vest and other miscellaneous tools), and controlled his profit or loss by managing his expenses while stationed in Louisiana. Furthermore, Thibault was a sophisticated business man with an independent business who was not economically dependent on splicing work.

While Thibault is a favorable decision and positive news for employers within the Circuit, it is important to note that the Plaintiff in the case possessed a high degree of skill, sophistication and autonomy: important components for creating a defensible independent contractor relationship.