The 6th Circuit first set forth the “economic realities” test, listing the factors to consider when determining whether an individual is an employee or an independent contractor:
- Permanency of the relationship between the parties;
- Degree of skill required for rendering the services;
- Worker’s investment in equipment and materials for the task;
- Worker’s opportunity for profit or loss, depending on his skill;
- 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.
The court noted that no single factor is determinative on its own, but each factor must be considered “with an eye toward the ultimate question—[the worker’s] economic dependence on or independence from” the alleged employer.
First, the 6th Circuit stated there was no question that the services provided by the workers are an integral part of ODPS’s business. In fact, it noted, the company was formed specifically for the purpose of providing the services to customers.
The court next looked at the skill required to perform the job, concluding the sworn off-duty police officers have specialized training and skills in the area of law enforcement. However, those skills aren’t really required to perform the job. In fact, the unsworn workers with no special training can perform the security and traffic-directing duties just as competently as the sworn workers. Bottom line, the court found it wasn’t the skills possessed by the workers but the skills required by the job that matter when assessing this factor.
Looking at the workers’ investment in equipment, the court stated it was appropriate to compare the employees’ investment with the company’s investment. Most of the sworn law enforcement officers spend little to nothing on equipment because they use equipment provided by either ODPS or their other employers. The unsworn officers do spend on average between $3,000 and $5,000 on equipment, but most of that is for acquiring and maintaining a police-type vehicle, which they also can use for personal transportation. The court found that outlay is minimal compared to the $200,000 per year ODPS spends to provide equipment and supplies for its workers.
With respect to the permanency of the relationship, the court noted that although the workers move from assignment to assignment with different customers, many have worked regularly for ODPS for years, even while they’re also employed elsewhere. On the latter point, the 6th Circuit said the trial court put too much emphasis on the fact that the sworn employees, who typically work full-time jobs in law enforcement, aren’t economically dependent on ODPS. The court pointed out that if having multiple jobs disqualifies individuals from employee status, employers could easily circumvent their FLSA obligations by offering only part-time positions so that employees are forced to take multiple jobs to make ends meet.
Moreover, the court noted that an employee having multiple sources of income is a more relevant factor if he transfers from place to place as certain work is offered to him. That isn’t the situation for the law enforcement officers who work for ODPS part-time. Rather, the length and consistency of the workers’ relationship with the company are the more compelling factors.
The court next examined whether the workers have an opportunity for loss or profit based on their business-management skills. The court observed that the jobs at ODPS require little skill, and all workers are typically paid the same rate. The only way the workers can control their income is by accepting or rejecting work, which doesn’t require any managerial skill. The court held that because the workers earn set wages to perform low-skill jobs for fixed periods, this factor mitigates against independent contractor status.
Finally, the court looked at the degree of control ODPS has over the work. The court noted the company maintains written policies dictating the dress code and workplace conduct, equipment requirements, and rules for exchanging assignments. OPDS argued that although it does maintain those kinds of policies and workers are subject to discipline for violations, it has never instituted or exercised such control. And in fact, there was evidence its supervisors visit the worksites only sporadically. However, other testimony indicated the company does supervise some projects closely and has implemented discipline on at least some occasions, including freezing out workers for a while after they decline a job.
The court further noted that although the workers can stop accepting assignments at any time, their noncompete agreements prohibit them for working for competitors of ODPS. When workers do accept jobs, The company tells them where to go, when to arrive, and how much they will be paid. There was no dispute that the company expects the workers to comply with its grooming and dress code policies.
In the end, the 6th Circuit concluded ODPS has the right to control both the sworn and the unsworn workers, even if it doesn’t always choose to exercise that right. After balancing all the factors and looking at the evidence presented at trial, the court ruled that all of the ODPS workers are employees covered by the FLSA. As a result, the 6th Circuit reversed the trial court’s holding with respect to the sworn workers and affirmed the holding with respect to the unsworn workers and found that all of the workers were entitled to overtime pay and that ODPS violated the record-keeping requirements of the FLSA for all of its personnel. Acosta v. Off Duty Police Services et al., Nos. 17-5995/6071.