DIRECTV satellite techs take independent contractor misclassification claims to trial

By Joy Waltemath

By Lisa Milam-Perez, J.D.

An overtime suit against DIRECTV brought by installation technicians who worked as subcontractors of the satellite TV giant will proceed to trial after a federal court in Iowa rejected cross motions for summary judgment on questions whether the technicians were improperly classified as independent contractors and whether, even if they were DIRECTV employees, they fell under the FLSA’s retail and service establishment exemption, and so were not entitled to overtime anyhow (Roeder v. DIRECTV, Inc., January 13, 2017, Strand, L.).

Two technicians filed separate collective actions against DIRECTV contending they were misclassified as independent contractors and that, as a result, were denied overtime due. (They previously abandoned their minimum wage claims.) The case had been stayed pending a motion for consolidation before the Judicial Panel on Multidistrict Litigation, but was back before the court after consolidation was denied; the panel determined that an individualized inquiry was necessary to assess whether the nearly 500 plaintiffs were properly deemed independent contractors. DIRECTV’s motion to bifurcate the cases is pending before a magistrate judge. Meanwhile, the court grappled here with cross motions for summary judgment as to whether the technicians were independent contractors and whether they were exempt from overtime, at any rate, under the FLSA’s Section 7(i) exemption for retail or service establishments.

Fissured industry. DIRECTV is no stranger to independent contractor misclassification suits; the company has fielded an onslaught of these claims. The satellite TV giant employs contracting companies to install and service the company’s satellite systems. The work was completely outsourced to subcontractors up until 2008; now, about half of DIRECTV’s installations are performed by the company’s own W-2 employees. The plaintiffs here performed installation work through a few different contractors, as subcontractors of the contractors.

Contract. The contracting companies all had virtually identical service contracts. The technician subcontractors had to sign onto the agreements too, which established that they were independent contractors, they were not entitled to the benefits typically provided to DIRECTV employees, and that for the duration of the agreement, they could only perform installation services for DIRECTV. The agreements also provided that the contractor had full control over the manner in which the work was performed.

Control. Nonetheless, the contractor companies had to meet DIRECTV’s quality installation standards, the installers had to complete the same technical training as DIRECTV’s employee technicians, and their work was scrutinized in customer follow-up surveys using the same metrics as the DIRECTV-employed technicians. Also, the contractor technicians had to wear DIRECTV-approved shirts and caps, and they had to pass a criminal background check, drug test, and inspection of their driving record (all conducted by DIRECTV’s chosen vendor) before DIRECTV would assign them jobs.

The technicians got their assignments directly through DIRECTV’s computerized work order system, just like DIRECTV-employed installers—the system did not differentiate between employees and subcontractors. They communicated directly with DIRECTV for specific work order tasks, such as noting when they arrived at a customer location. DIRECTV site managers oversaw all installations in their respective regions, by both DIRECTV employees and subcontractors. The managers got word when subcontractors arrived on site at jobs throughout the day. On the other hand, both plaintiffs said they performed “hundreds” of work orders for the company, and cited only a handful of occasions in which a DIRECTV supervisor was on-site to oversee or inspect their work.

Pay. DIRECTV paid its contractor companies based on its own established rate and the contractors in turn decided what to pay the subcontractor technicians, and whether to pay on an hourly or piece-rate basis. The plaintiffs were paid per work order, regardless of how long it took to complete a given job. DIRECTV would charge back to the contractor if the work was not performed to its standards, and the contractor would decide whether to pass on the cost of that chargeback to the technician whose work was subpar. One of the plaintiffs incurred $50 chargebacks on several occasions.

The plaintiffs alleged they worked 55-60 hours per week performing installations and were paid an average of $20 and $18.18 per hour, respectively. They never reported their hours to DIRECTV—or to their direct employer, for that matter. DIRECTV didn’t keep time or pay records for the subcontractor technicians.

Independent contractors? In a lengthy opinion, the court presented an exhaustive analysis of the technicians’ employment status under the economic realities test. Scrutinizing the degree of control that DIRECTV exercised over the technicians, it found a reasonable jury could go either way on this point. As for the money spent on tools and other investment to carry out their work, the court rejected the notion that a pick-up truck and cell phone purchased by the technicians before they even took on DIRECTV work orders supported independent contractor status. This factor favored neither party.

The technicians did not have sufficient opportunity to control profit or loss based on their own managerial skills. DIRECTV cited the technicians’ ability to minimize mileage and fuel costs, or shop around to get the best price for their tools and equipment; it also pointed out that they could maximize their profits by avoiding chargebacks. But this was not enough. DIRECTV also contended that because the technicians were paid on a piece-rate basis, they could have worked more efficiently so they could take on more work orders and earn more money. In practice, though, this opportunity apparently never materialized. Therefore, this factor weighed in favor of employee status.

One of the technicians occasionally performed custom work for DIRECTV customers, and was paid directly by customers for this work. For him, the “skill and initiative” factor weighed in favor of independent contractor status. But there was no evidence the other technician showed such initiative to use his skills for further profit. Moreover, the regular installation work did not require particular skill, judgment, or foresight, so this factor suggested employee status for the second technician.

The court likewise rendered a split decision as to the “degree of permanence” factor. One technician performed work for other companies—including a direct competitor—and took numerous breaks in employment to do other kinds of work, akin to an independent contractor-type relationship. As for the other, while his work for DIRECTV was not long in duration, there was nothing to indicate that he didn’t view his brief stint with the contractor as anything other than permanent employment while he was there. Also, their installation work was an integral part of DIRECTV’s business, so this factor weighed squarely in favor of an employment relationship.

The court evaluated a litany of other factors too, and found noteworthy the similarities between the work performed by the company’s own employees and the work performed by the subcontractor technicians—as well as the similar way their work schedules were maintained, work orders assigned, and performance standards applied. These factors all suggested that the technicians were employees, not independent contractors. In the end, though, the court denied summary judgment to either party, concluding the jury would have to evaluate the facts as they applied to each factor.

Joint employer? DIRECTV argued as to one of the technicians that even if he was a statutory employee, he was an employee of the contractor, and not of DIRECTV. It reasoned that the court would have to first decide whether the contractor company was his employee and, if he was, the court only then would have to assess whether DIRECTV was a joint employer. But DIRECTV had it wrong. The technician alleged only that he was a DIRECTV employee; he didn’t contend he was an employee of the contractor. In cases that DIRECTV leaned on in support of this contention, the plaintiffs had named both the direct contractor and the satellite TV company as defendants—unlike here. Also, neither technician had admitted that their contracting companies were their “employers.” Consequently, the court wouldn’t entertain whether DIRECTV was a joint employer.

Retail or service establishment? DIRECTV also asserted that, independent contractors or not, the technicians were exempt from overtime anyhow under the FLSA 7(i) exemption for retail or service establishments. The definition of “retail or service establishment” applied here because the goods and services provided by DIRECTV were not for resale—they were provided directly to end user customers in their homes. Also, cable installation companies have a “retail concept” and are recognized as retail establishments in the industry. However, for the exemption to apply, DIRECTV also had to show that the technicians earned more than half their compensation in the form of commissions, and that their regular rate was at least one and one-half times the minimum wage. DIRECTV met its burden as to the latter, but not the former. The technicians had no role in the sales aspect that led to their installation jobs. There was no evidence they were incentivized to work more efficiently so they could take on added work orders and earn more pay. And there was no correlation between the prices paid by customers and the technicians’ rate of pay.

Source:: Employment Law Daily Newsfeed