Compensation for Unpaid Hours in Wage Disputes: Employee vs. Independent Contractor

In July 2023, the Court of Appeals for the Fifth Circuit held that three window blind installers deserved the opportunity to go to trial on the issue of whether their employer owed them unpaid overtime. Earlier, a lower court, the Southern District of Texas, determined that the installers could not provide adequate proof that they had worked the hours claimed. It therefore granted summary judgment to the employer without ever reaching the issue of whether the workers were employees. The installers appealed.

The Fifth Circuit dusted off a 1946 U.S. Supreme Court precedent to hold that the installers had presented enough evidence of hours worked to merit a trial, known as Anderson v. Mt. Clemens Pottery Co. That case is still law, but it is curious that the Fifth Circuit dove back into old employment law jurisprudence. Generally, a worker who brings a claim for unpaid overtime bears the burden of proving that he or she was not properly paid for hours worked. This is easy when an employer keeps accurate records of the employee’s hours. But Mt. Clemens Pottery recognizes that employers may have an incentive not to keep full and accurate records of hours worked, especially since those records can be used to prove overtime liability.

Employee Rights and Unpaid Overtime Wage Claim

The case involves two intertwined questions of employment rights:

  • first, whether the installers could show that they had worked hours that should have been paid as overtime; and
  • second, whether they were employees who were entitled to the wage and hour protections of the Fair Labor Standards Act (FLSA) or whether they were independent contractors with only contract rights.

If they could not provide proof of hours worked, then there was no reason to tackle the question of whether they were employees. Similarly, if they were self-employed contractors, there was no reason to get to the question of overtime compensation. In other words, if the answer to either one of these questions is no, their claims would fail.

Work Hours Documentation – Long Hours, Flexible Schedules

Jose Flores, Jean Romero-Rodriguez, and Brandon Villarreal installed blinds for FS Blinds. They measured windows, delivered and installed the window treatments, and repaired damaged blinds — mostly in new construction. Each managed his own schedule throughout the day. So long as the day’s job list did not specify otherwise, each worker could complete the jobs in any order. If they failed to complete all the jobs on the day’s list, they could roll jobs over to the next day.

Each installer worked a different schedule. Job scheduling differed from day to day, but all agreed that they worked around 70 hours a week. FS Blinds paid them by the job and kept no records of their hours. The installers’ evidence of underpayment included work orders and their own testimony as to starting and quitting times. Some of this was also corroborated by FS Blinds. The District Court was not persuaded. It found that the installers’ evidence was not enough to establish a prima facie case and granted FS Blinds’ motion for summary judgment.

Kilgore & Kilgore Protects the Legal Rights of Workers Including Wage Hour Compliance Issues

If you have questions about work hours documentation, hourly wage laws, worker classification, legal rights of workers, independent contractor status, or other employee rights issues, reach out to us. Contact us using this link Contact Kilgore Law or call us at 214.969.9099. Click on this link to find out about our Wage and Hour Dispute Resolution services.

FLSA Employee Overtime Rights, Wage Law Compliance, and Wage Claims

The federal Fair Labor Standards Act (FLSA) requires that covered employees must receive overtime compensation for hours worked over 40 per workweek, at a rate not less than one and one-half times the regular rate of pay. A lot is buried in this sentence, though. Among the thorny questions are how to prove hours worked and who is a contractor and who is an employee (known as worker classification).

Employment Law and Worker Protection

The absence of records creates a difficult dilemma for workers. In Mt. Clemens, the Court created a two-step solution to the problem:

Step One: When the employer’s records are inadequate or nonexistent, the employee’s burden of proof must necessarily be lighter. If the worker:

  • proves that he has in fact performed work for which he was improperly paid; and
  • produces sufficient evidence to show the amount and extent of that work;

then, as a matter of reasonable inference, a court may preliminarily conclude that the work was done.

Step Two: The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negate the reasonableness of the inference to be drawn from the employee’s evidence.

A Subtle Shift in Labor Law Policy and Labor Rights Enforcement

It is interesting to note that the Fifth Circuit reached back almost 80 years to find controlling wage and hour law precedent. The case cited herein, Mt. Clemens Pottery, focuses on the fundamental policy of the FLSA, which is to remedy “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” These detriments, according to Congress, burdened commerce and were at the root of labor disputes.

Evolution of Worker Protection and Employee Rights

Old as it is, the two-step solution of Mt. Clemens Pottery still stands. But it strikes a different tone than more recent employer friendly Fifth Circuit decisions. Whether this suggests a subtle shift in Fifth Circuit focus remains to be seen. The Fifth Circuit explicitly did not rule on the second question of whether the installers were employees. It left that question for the District Court on remand. Nonetheless, it is important to explore because the two questions are so intricately linked in many overtime compensation lawsuits.

Worker Classification – Employee vs. Contractor

Only covered employees are entitled to the wage and hour law protections of the FLSA. Self-employed workers are protected only by the terms of their contracts. Nonetheless, the issue of whether a worker falls within one category or the other often extends far beyond the existence or non-existence of a valid contract. The decisions also tend to be highly fact specific. If the installers mentioned earlier can meet their burden of proof about hours worked, they will have the chance to present evidence on this employee vs. contractor issue.

New Definition of Independent Contractor

On January 9, 2024, the U.S. Department of Labor published a final rule that refines the definition of independent contractor under the FLSA. Following are the six issues that the DOL considers:

  • whether the worker has an opportunity for profit or loss;
  • the investments by the worker and potential employer;
  • the degree of permanence of the relationship;
  • the nature and degree of the potential employer’s control over the work;
  • the extent to which the work is integral to the potential employer’s business; and
  • the worker’s skill or initiative.

Reach out to Kilgore & Kilgore for Legal Assistance on Employee Rights

Our Texas employment lawyers have decades of experience with wage and hour law, overtime compensation, employee rights, wage disputes, and other employment rights claims. Use this link to get started Visit Kilgore & Kilgore.

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