The Department of Labor often challenges an employer’s independent contractor classification, even when such classification is a matter of long-standing, industry practice. Such disagreements can result in DOL audits or even DOL litigation seeking alleged unpaid minimum wage and overtime, as well as private enforcement actions. In a recent victory for employers involving litigation brought by DOL, the Federal District Court for the Southern District of Texas court held that gate attendants who worked with a prominent provider of oilfield gate attendant services properly were classified as independent contractors under the FLSA. Gate Guard Servs., L.P. v. Solis, 2013 U.S. Dist. LEXIS 20156 (S.D. Tex. Feb. 13, 2013).
Following on the heels of his own decision rejecting a similar claim brought by a private litigant (Mack v. Talasek, 2012 U.S. Dist. LEXIS 42485 (S.D. Tex. Mar. 28, 2012)), Judge John D. Rainey applied the five primary “economic realities” factors associated with assessing the independent contractor classification in the Fifth Circuit, namely: “(1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship," to the work of gate attendants, who were paid a fixed day rate for their time guarding any given oilfield gate, worked sporadically, and were offered gate assignment by Gate Guard on a “take-it or leave-it basis.” The court found that Gate Guard’s lack of control and supervision of gate attendants, the attendant’s opportunity for profit or loss, and the sporadic, impermanent nature of the work all militated in favor of contractor status. The court also determined that the secondary factors of: 1) a written agreement setting forth the relationship as a contractor relationship; 2) industry custom; and 3) the federal government’s use of independent contractors to perform substantially similar services also weighted towards upholding the contractor classification. The court thus found no issues sufficiently material to warrant a trial, and granted summary judgment for Gate Guard.
Gate Guard is a positive result for industry employers, and also demonstrates the steps employers must take to ensure that their use of the independent contractor classification is supportable under the “economic realities” of the relationship. Periodic review of that relationship remains an essential aspect of risk management for businesses utilizing the independent contractor designation for service providers.