Acosta v. Off Duty Police Servs., Inc.

• Decision Date: 12 February 2019
• Docket Number: Nos. 17-5995/6071,s. 17-5995/6071
• Citation: 915 F.3d 1050
• Parties: R. Alexander ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant/Cross-Appellee, v. OFF DUTY POLICE SERVICES, INC. ; Darrell Spurgeon; Bonnie Spurgeon, Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

915 F.3d 1050

R. Alexander ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant/Cross-Appellee,

v.OFF DUTY POLICE SERVICES, INC. ; Darrell Spurgeon; Bonnie Spurgeon, Defendants-Appellees/Cross-Appellants.

Nos. 17-5995/6071

United States Court of Appeals, Sixth Circuit.

Argued: October 18, 2018

Decided and Filed: February 12, 2019

ARGUED: Dean A. Romhilt, UNITED STATES DEPARTMENT LABOR, Washington, D.C., for Appellant/Cross-Appellee. Raymond C. Haley III, FISHER & PHILLIPS LLP, Louisville, Kentucky, for Appellees/Cross-Appellants. ON BRIEF: Dean A. Romhilt, UNITED STATES DEPARTMENT LABOR, Washington, D.C., for Appellant/Cross-Appellee. Raymond C. Haley III, Emily N. Litzinger, FISHER & PHILLIPS LLP, Louisville, Kentucky, for Appellees/Cross-Appellants.

Before: GUY, WHITE, and STRANCH, Circuit Judges.

JANE B. STRANCH, Circuit Judge.

The way we work in America is changing. The relationships between companies and their workers are more fluid and varied than in decades past. Our task in this appeal is to apply traditional legal protections to one such relationship. In the proceedings below, the district court decided that some of the workers for Off Duty Police Services, Inc. (ODPS) were "employees" entitled to overtime wages under the Fair Labor Standards Act (FLSA) while others were "independent contractors" who fell outside the scope of the FLSA's protections. Because our analysis leads us to conclude that all the workers were employees under the FLSA, we AFFIRM the district court's judgment in part, REVERSE in part, and REMAND for further proceedings.

I. BACKGROUND

A. Factual History

ODPS offers private security and traffic control services in the Louisville, Kentucky area. These services are simple—a typical day for an ODPS worker includes, for example, sitting in a car with the lights flashing or directing traffic around a construction zone. Most of ODPS's workers are sworn officers, meaning they work for some law-enforcement entity in addition to working for ODPS. Other workers are nonsworn, meaning they generally have no background in law enforcement. Although ODPS pays sworn officers more per hour, the tasks performed by sworn and nonsworn workers are basically the same. Many ODPS workers, both sworn and nonsworn, have routinely worked for ODPS for years, some for a decade or more.

Darrell Spurgeon, the founder and vice president of ODPS, collects assignments for ODPS's workers by contracting with businesses in and around Louisville. Spurgeon uses "schedulers," whom ODPS also classifies as independent contractors,¹ to keep track of these customers' work requests. The customers specify the services needed and the qualifications of the requested workers. Spurgeon or one of his schedulers then offers the assignments to workers who meet those qualifications. Workers can choose to accept or reject a job, although multiple witnesses testified that Spurgeon would discipline them—for example, by withholding future assignments—if they declined work. Some workers referred to this as being placed in "time out."

If workers accept a job, ODPS tells them where to report, when to show up, and whom to speak with when they arrive. ODPS sometimes provides workers with supplies and equipment necessary for the assignment, including stop-and-go signs, reflective jackets, and badge-shaped patches. But workers must pay for other equipment. In certain cases, for example, the cost of an ODPS-branded shirt is deducted from workers' paychecks. And all workers must own police-style vehicles. While sworn police officers usually drive their police cruisers, nonsworn workers must buy a police-style vehicle—usually a Crown Victoria—with their own money. Nonsworn workers testified that they drive these vehicles both on the job and for personal use. In all, the cost of the nonsworn workers' investments ranges from roughly $3,000 to $5,000.

At the job site, workers follow the customer's instructions, comply with ODPS's standard policies, and occasionally submit to the supervision of other ODPS workers. Sworn police officers wear their official police uniforms, and nonsworn workers wear police-style uniforms that bear ODPS-branded patches. With few exceptions, all workers are to remain clean-shaven. Spurgeon and Frank Medieros, who helps manage the business, sometimes visit job sites to inspect the setup and monitor workers' compliance with these policies. In some instances, both sworn and nonsworn workers have been disciplined by Spurgeon or Medieros for failing to comply with ODPS's dress and grooming requirements. Some sworn officers, however, testified that they were rarely or never supervised at job sites.

After completing an assignment, workers send Spurgeon an invoice with the number of hours they spent on the job. That practice started only after the Department of Labor (DOL) began investigating ODPS's recordkeeping practices. ODPS ordinarily uses these invoices to pay workers an hourly wage, although infrequently workers are paid per project. At trial, Spurgeon admitted that the information in these invoices is sometimes inaccurate or incomplete, but he blamed any errors on his workers' failure to submit accurate records.

ODPS considers all these workers to be independent contractors, regardless of the compensation they receive, the work they perform, or their background in law enforcement. All workers must sign "independent contractor agreements" that contain non-compete clauses prohibiting them from working for ODPS's customers for two years after their work with ODPS ends. Because ODPS classifies its workers as independent contractors, it has never paid them overtime wages.

B. Proceedings Below

The DOL brought this suit against ODPS under the FLSA, alleging that (i) all of ODPS's workers are employees entitled to overtime wages and (ii) ODPS violated the FLSA's recordkeeping requirements by failing to maintain accurate employment records. The district court held a four-day bench trial at which 19 current and former ODPS workers testified. In its post-trial decision, the district court held that ODPS's nonsworn workers were employees entitled to overtime wages under the FLSA. The court also determined that ODPS's sworn officers were independent contractors because they "simply were not economically dependent on ODPS and instead used ODPS to supplement their incomes." In response to the DOL's claim that ODPS violated the FLSA's recordkeeping requirements, the court acknowledged that some of ODPS's records were "faulty" but found that these errors did not violate the FLSA because ODPS did not "knowingly fail[ ] to maintain accurate records."

After the parties briefed the issue of damages, the court entered a final judgment detailing the back wages owed by ODPS to its nonsworn workers. Both parties filed notices of appeal. In this consolidated appeal, the DOL challenges the district court's decision that (i) ODPS's sworn officers were independent contractors and (ii) ODPS did not violate the FLSA's recordkeeping requirements. ODPS appeals the district court's (i) conclusion that the nonsworn workers were employees entitled to overtime wages under the FLSA and (ii) calculation of back wages.

II. ANALYSIS

We review a district court's post-trial factual findings for clear error. Sharpe v. Cureton , 319 F.3d 259, 269 (6th Cir. 2003). We review de novo the district court's application of those factual findings to the relevant legal standards. Solis v. Laurelbrook Sanitarium & Sch., Inc. , 642 F.3d 518, 522 (6th Cir. 2011).

A. Employment Relationship

The FLSA is "a broadly remedial and humanitarian statute ... designed to correct ‘labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.’ "

Donovan v. Brandel , 736 F.2d 1114, 1116 (6th Cir. 1984) (quoting Dunlop v. Carriage Carpet Co. , 548 F.2d 139, 143 (6th Cir. 1977) ). With that goal in mind, the FLSA requires employers to pay overtime wages to employees who work more than 40 hours in a week. 29 U.S.C. § 207(a)(1). The definition of "employee" in this context "is strikingly broad" and includes "some parties who might not qualify as such under a strict application of traditional agency law principles." Keller v. Miri Microsystems LLC , 781 F.3d 799, 804 (6th Cir. 2015) (internal quotation marks omitted) (quoting Nationwide Mut. Ins. Co. v. Darden , 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) ). To determine whether a worker fits within this expansive definition, "we must look to see whether [the] worker, even when labeled as an ‘independent contractor,’ is, as a matter of ‘economic reality,’ an employee." Id. (quoting Rutherford Food Corp. v. McComb , 331 U.S. 722, 729, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947) ).

This "economic reality" test considers six factors:

"1) the permanency of the relationship between the parties; 2) the degree of skill required for the rendering of the services; 3) the worker's investment in equipment or materials for the task; 4) the worker's opportunity for profit or loss, depending upon his skill; ... 5) the degree of the alleged employer's right to control the manner in which the work is performed ...;" and 6) "whether the service rendered is an integral part of the alleged employer's business."

Id. at 807 (quoting Brandel , 736 F.2d at 1117 & n.5 ). None of these factors is determinative on its own, and each must be considered "with an eye toward the ultimate question—[the worker's] economic dependence on or independence from" the alleged employer. Id. We address each of these factors below, beginning with the least difficult and then turning to those that require the most attention.

1. Integral Part of the Business

The first factor asks whether the services provided by the worker are integral to the company's business. "The more integral the worker's services are to the business, then the more likely it is that the parties have an...