In a recent Florida case, Scantland v. Jeffry Knight, Inc., the court handed employers a victory when it applied the economic realities test to find that service technicians for a cable company were properly classified as independent contractors. The court made this finding despite the technicians’ relationship with the employer having several features that could support an employer-employee relationship.
The economic realities test used to determine independent contractor status resolves the issue of whether an employment relationship exists based upon whether the individual is economically dependent upon the employer. Economic dependency is determined by evaluating factors such as determined by evaluating factors such as the following:
· The extent to which the services rendered are an integral part of the employer’s business;
· The permanency of the relationship;
· The amount of the employer’s investment in facilities and equipment;
· The nature and degree of control by the employer; and
· The individual’s opportunities for profit and loss.
No one factor is meant to be determinative, so the courts typically have freedom in assigning weights to the various factors.
The Scantland court found that the services rendered by the technicians were an integral part of the employer’s installation services business. In addition, while there was no clear indication that the relationship between the employer and the technicians was a permanent one, many of the technicians had worked for the employer for a period of years on a full-time basis. There was also a seemingly implicit understanding that the technicians would not, or could not, perform work for competitors. Despite these two findings, the court’s evaluations of the remaining economic dependency factors lead it to conclude that the individuals were independent contractors and not employees.
First, the service technicians heavily invested in their own equipment. This includes spending up to thousands of dollars to acquire vehicles, tools, insurance, and uniforms. Second, the service technicians also controlled the manner and means of the performance of their work. The employer’s close monitoring of the technicians’ scheduling and timing was not found to be controlling because it was a necessary aspect of guaranteeing effective service in the industry in addition to being outside the scope of the type of control the court was concerned with--assigning potential liability from the work. This was directly tied to the technicians’ choices such as whether safety standards were followed and work was performed free from defect. Finally, because the service technicians were paid by the assignment and controlled how many assignments they could do based upon the speed and skill with which they handled their assignments, technicians had the opportunity to control their profits. The technicians were also in control of their losses as they were accountable for taking care of their equipment and making sure not to perform work in a deficient manner that would require future repairs. These factors pointed towards independent contractor status.
While the Scantland court concluded that the workers in question were independent contractors and not employees, employers should be wary to make too much of the decision. As we have previously highlighted, the lack of a bright line rule distinguishing employees and independent contractors means employers should err on the side of caution. Just because the court in this case decided that 3 factors in favor of independent contractor status outweighed 2 factors in favor of employee status does not mean the same conclusion will always be reached. As a result, employers should remain vigilant of the DOL guidelines on proper classification and not take designations for granted.