Client Alert – Employee Classification

Employment Law Update

February 2019

On February 12, 2019, the federal Sixth Circuit Court of Appeals (which covers Ohio) reinforced the importance of properly classifying workers as employees, as opposed to independent contractors, and of keeping accurate and adequate records of hours worked. In Acosta v. Off Duty Police Servs., et. al., the Sixth Circuit held that off-duty police officers, who moonlighted for a private security company and were classified by the security firm as independent contractors, should have been classified as employees for purposes of the Fair Labor Standards Act (“FLSA”). As a result, the off-duty police officers are now entitled to substantial amounts of unpaid overtime compensation.

In analyzing whether the officers should have been classified as employees vs. independent contractors, the court utilized a six factor “economic realities” test. The economic realities test consists of the following factors:

  • The permanency of the relationship between the parties;
  • The degree of skill required;
  • The worker’s investment in equipment or materials;
  • The worker’s opportunity for profit or loss, depending on skill;
  • The degree of the alleged employer’s right to control the manner in which the work is performed; and
  • Whether the service rendered is an integral part of the alleged employer’s business.

An analysis of these factors resulted in the Sixth Circuit concluding that the off-duty police officers, many of whom moonlighted for the private security firm for several years at their discretion, should have been classified as employees rather than independent contractors, and, therefore, were entitled to unpaid overtime. The court also held that the private security firm failed to properly maintain accurate records of wages, hours and other conditions of employment for the off-duty officers, which precluded the security firm from making any substantive arguments regarding actual hours worked by the off-duty officers.

The decision by the Sixth Circuit reinforces the importance of properly classifying your workers. Improperly labeling an employee as an independent contractor can have significant financial consequences if the Department of Labor, or some other governmental agency, conducts an audit or a disgruntled employee seeks the advice of a competent attorney, particularly because such claims allow for an award of attorney’s fees for the employee’s attorney if a violation is found. Plaintiff’s employment attorneys often seek out these types of wage and hour cases, because of the prospects for an attorney’s fees award, so be sure to seek counsel before classifying workers as independent contractors.

If you have any questions regarding the proper classification of your existing employees or independent contractors, please do not hesitate to contact Bryan Niemeyer, Certified Labor and Employment Law Specialist, Faulkner, Garmhausen, Keister & Shenk, A Legal Professional Association, at 937-492-1271 or bniemeyer@fgks-law.com.

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