Company and Company Owner Liable for FLSA Violations – Workers Not Independent Contractors

by Merritt Green on Sep. 06, 2019

Employment Business 

Summary: In a recent case, the Court found workers were improperly classified as independent contractors and entitled to back pay for missing overtime compensation. The court determined that the workers were dependent on the business rather than in business for themselves and, thus, were employees. The Court also found that the owner of the employer business was also an “employer” and was personally liable for unpaid wages owed to the employees.

At Home Personal Care Services LLC (“AHPC”), owned by Robin Wright, provides in-home personal care services for individuals enrolled in Medicare and Medicaid. In Acosta v. At Home Personal Care Services LLC (Case No. 1:2018-cv-00549), the Secretary of Labor, R. Alexander Acosta, brought this action under the Fair Labor Standards Act (“FLSA”) against AHPC and Wright, claiming they violated the FLSA by failing to pay time-and-a-half overtime compensation to 44 personal care aides (“PCAs”). The Secretary sought back pay and liquidated damages. In response, the defendants argued that the workers in question were independent contractors and thus were not “employees” covered by the FLSA’s overtime provisions and that Wright was not liable as an “employer” under the FLSA. The Eastern District of Virginia found in favor of the Secretary, and the defendants were held jointly and severally liable for back pay and liquidated damages.

Under the FLSA, generally, any covered employee who works more than 40 hours in a workweek must receive overtime pay. AHPC argued that the aides were not covered by the FLSA’s overtime provision because they were properly classified as independent contractors. 

In deciding whether a worker is an employee, covered by the FLSA, or an independent contractor, the Court considers the “economic realities” of the relationship between the worker and the employer and asks “whether the worker is economically dependent on the business to which he renders service or is in business for himself.” The Court considers six factors: (1) the degree of control that the putative employer has over the manner in which the work is performed; (2) the worker’s opportunities for profit or loss dependent on his managerial skill; (3) the worker’s investment in equipment or material, or his employment of other workers; (4) the degree of skill required for the work; (5) the permanence of the working relationship; and (6) the degree to which the services rendered are an integral part of the putative employer’s business. 

Applying the factors here, the Court found that the PCAs were “employees.” First, AHPC exercised substantial control over the manner in which the PCAs worked. PCAs were given an orientation and training on how to perform in-home personal care and had to undergo monthly refresher training. Moreover, PCAs were subject to discipline if they failed to perform the services in accordance with AHPC’s rules. Second, the PCAs did not have substantial opportunities for profit or loss dependent on their managerial skills. Third, the PCAs did not “invest in equipment or material,” since the only “equipment” discussed at trial was the rubber gloves that AHPC provided to all PCAs. Fourth, the PCAs at issue were (in traditional terms) low-skilled workers. Fifth, although the PCAs often worked in time-limited capacities, because the plans of care had to be periodically reevaluated and the patients for whom they cared could change, they did not work in the temporary, project-related capacity typically associated with independent contracting.

Finally, the services rendered by the PCAs were clearly an integral part of AHPC’s business. AHPC is a provider of at-home healthcare and personal care services, and PCAs generate approximately 40% of the company’s total revenues. Thus, the Court found that each of the six factors weighed in favor of finding that the PCAs were “employees” covered by the FLSA’ s protections and were entitled to back wages and liquidated damages.

Next, the defendants argued that Wright was not liable as an “employer” under the Act. Under the FLSA, an “employer” is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The Court found that a corporate officer with operational control of a corporation’s covered enterprise is an employer along with the corporation, jointly and severally liable under the FLSA for unpaid wages. Whether an individual is an “employer” depends on whether the individual possesses “substantial control” over the terms and conditions of the work of employees. That inquiry depends on factors including whether the alleged employer (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.

Wright was the sole owner and president of AHPC and exercised substantial control over the policies, job responsibilities, and day-to-day functioning of the PCAs. She was personally involved in decisions to hire, fire, and discipline PCAs, approved requests for time off, completed appraisals of employee job performance, trained incoming PCAs, worked to ensure that the company’s billing and timekeeping requirements complied with Medicare and Medicaid regulations, and often designed the plans of care PCAs had to follow. Wright also set each PCA’s rates of pay and resolved any disputes relating to payroll or scheduling that her human resources staff couldn’t handle. Thus, the Court found Wright was an “employer” for purposes of the FLSA and was equally liable for the back wages and liquidated damages to be awarded.

What Does Acosta v. At Home Personal Care Services LLC Mean for Employers?

Here, the Court provided guidance on the determination of whether a worker is an employee or independent contractor. Where employers, such as AHPC here, exercise substantial control over the manner in which workers perform their duties and employees are required to undergo multiple trainings, the workers are more likely to be employees. Similarly, where workers don’t have opportunities for profit or loss dependent on their managerial skills, don’t invest in equipment, don’t work in temporary, project-related positions, and provide services that are an integral part of the employer’s business, the workers are likely employees rather than independent contractors. Additionally, this case shows that the owner of a business can be personally considered an “employer” and liable for unpaid wages, along with the business, if the owner exercises sufficient control over the terms and conditions of the work of employees.

If you need more guidance or information, contact the employment law experts at General Counsel, PC today at 703-556-0411 or mgreen@gcpc.com. Attorneys at General Counsel, PC are specialized in labor and employment law and have experience working with business owners and individuals throughout the DC Metro area..

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