The Court of Appeals for the Sixth Circuit ruled last week in Keller v. Miri Microsystems that a technician who installed satellite dishes is entitled to a jury trial on the issue of whether he was improperly classified as an independent contractor and therefore entitled to overtime pay. Michael Keller argued that he was not an independent contractor of Miri Microsystems, LLC, a satellite-internet-dish installation company, but, rather, was an employee who should have been compensated in a manner consistent with the requirements of the Fair Labor Standards Act (FLSA). Keller, who claims to have worked 19 hours a day, six days a week, was paid a flat fee by Miri for each installation and repair instead of an hourly rate and an overtime premium for hours worked over 40 each week.
In determining whether a worker is an independent contractor or employee, the Court applied an economic-reality test in which six factors were evaluated: the permanency of the relationship, the degree of skill required by the worker, the worker’s investment in equipment or materials, the worker’s opportunity for profit and loss, the degree of control exercised by the alleged employer, and whether the service provided by the worker is integral to the alleged employer’s business. No one factor is determinative, but the analysis of the factors as a whole informs the answer to the ultimate question – whether the worker is economically dependent on the alleged employer. After evaluating each of the six factors, the Court concluded that there was an issue of fact to be decided by a jury with regard to all of them and remanded the case back to the lower court for trial.
The stakes in this case are high for Miri. If a jury finds that Keller was an employee of Miri and that he worked the hours he claims, Keller will be entitled to a substantial award of overtime pay under the FLSA as well as the value of the employee benefits that Miri failed to provide him. And this case could lead to claims from other of Miri’s “independent contractors,” who may also allege that they are owed the overtime or benefits to which they would have been entitled if they had properly been classified as employees.
Employers should learn from Miri’s experience and be aware that courts will treat the relationship between a company and an individual independent contractor with skepticism. If more than one or two factors of the six-part economic-reality test suggest that the worker is economically dependent on the alleged employer, it will almost certainly be left to a jury to determine whether the worker was an independent contractor or employee. When in doubt, classify a worker as an employee and pay him or her compensation and benefits as required by applicable employment laws.