A subcontractor that hired field technicians to install cable, phone and internet for Cox Communications customers misclassified the workers as independent contractors, a U.S. District Court judge in Rhode Island has found.
Defendant M+M Communications required the workers to attend weekly training meetings, work during assigned time blocks, perform their work according to specific guidelines, and display Cox and M+M business names on their uniforms and vehicles.
The workers also could not negotiate their pay rate or structure and allegedly were required to report to the M+M facility each work day and collect all equipment and supplies from M+M’s warehouse.
In asserting claims for unpaid wages and overtime under the federal Fair Labor Standards Act and the Rhode Island Payment of Wages Act, the plaintiffs argued that the defendant exercised a level of control over their work that they should have been classified as employees.
Judge Mary S. McElroy agreed, applying FLSA’s “economic reality test” in making her determination.
“In short, the issue is whether the totality of the circumstances demonstrate that … the worker is ‘economically dependent on the business to which he renders service or is, as a matter of economic [reality], in business for himself,”’ McElroy wrote, quoting the 4th U.S. Circuit Court of Appeals’ 2016 McFeeley v. Jackson St. Entm’t. decision. “Having considered the undisputed facts in light of the factors of the economic reality test, the Court finds as a matter of law that the plaintiffs were employees of M+M.”
Plaintiffs’ counsel Richard A. Sinapi of Warwick called the decision “clear and on point.”
“It’s an important decision because the exploitation of installers in the internet telecommunications industry is rampant,” he said. “The exploitation in this industry in particular has been going on for some time, and hopefully this is a step toward putting an end to it.”
James G. Atchison of Providence, who represented the defendant, said his client was disappointed by the ruling but emphasized that the judge had not yet determined whether the plaintiffs were due any pay for time worked.
He also said the plaintiffs were not forced but rather wanted to work as independent contractors.
“In fact, some of the plaintiffs continued to work as independent contractors for a competing cable installation [company] even after leaving M+M,” he said. “In addition, the plaintiffs kept and submitted their own time cards, in which they reported working less than 40 hours per week.”
The 23-page decision is Sigui v. M+M Communications, Inc., et al.
The plaintiffs were hired and paid by M+M to perform on-site installation, maintenance and construction work on cable, internet and phone lines for Cox customers in Rhode Island.
Most of the plaintiffs were paid as IRS Form W-2 employees for part of their tenure with M+M, and IRS Form 1099 independent contractors for other periods of time, though the terms and conditions of their employment and the work itself was the same regardless.
M+M, in turn, had a field service agreement with Cox under which Cox dictated all terms, conditions and manner in which M+M provided services.
Under the terms, technicians M+M hired had to go through background checks and meet requirements prescribed by Cox’s internal “Contractor Requirements Program.”
They also had to attend mandatory weekly meetings to receive ongoing training, including reviewing Cox materials on how they had to perform their work.
Work was assigned to M+M and then, in turn, to the technicians through a Cox proprietary management system the technicians had to use.
They also apparently had to electronically notify both companies when they started work for a customer, completed the work, and about the specific work performed. And at the end of the day, they had to check in with M+M to see if there were additional work orders.
The plaintiffs also allege that they were required to report to the defendant’s Warwick facility at 7:30 a.m. Monday through Saturday, and that they were required to collect all equipment and supplies from its warehouse.
Meanwhile, M+M maintained a system of “back charging” in which it could deduct money from technicians’ paychecks for improper or incomplete work, though it claims it never actually did that to any of the plaintiffs.
M+M also mandated the type, style and color of the plaintiffs’ uniforms and required them to display both M+M and Cox’s business names on their uniforms and vehicles.
Additionally, the plaintiffs could not negotiate their own rates and pay structure. Nor could they bid on, refuse or select work assignments. Instead they were paid fixed per-task rates for assigned work completed, based on a task-based compensation system.
The plaintiffs ultimately brought suit in U.S. District Court alleging that they should have been paid as employees at all times, and that M+M’s misclassification resulted in them not receiving wages for all hours worked or overtime pay for all hours worked beyond 40 hours in a workweek.
They then moved for summary judgment on all three claims.
Applying FLSA’s “economic reality test,” McElroy first looked at whether the defendant controlled the plaintiffs such that they did not stand as separate economic entities in business for themselves.
The judge found that it did.
Regarding the performance of work, McElroy said “M + M exercised near complete control over the plaintiffs’ performance of their work, from the work orders assigned to each plaintiff, the amount and types of equipment allowed out of the warehouse, the matter that each task was to be performed, to the requirements for interacting with Cox customers.”
Additionally, she observed, any work found not conforming to Cox and M+M requirements was critiqued in mandatory weekly meetings with each technician’s performance compared to one another’s and ranked accordingly.
“Further, M+M exercised discretion to back-charge Technicians for incomplete or nonconforming work,” the judge said. “These undisputed facts are compelling evidence of an employer/employee relationship.”
The judge similarly found the requirement that the plaintiffs wear specific uniforms and ID badges while displaying M+M and Cox logos to indicate an employer-employee relationship, along with M+M’s ability to hire and fire the plaintiffs and monitor their work.
McElroy further found that M+M’s level of economic power in its relationship and its control over the plaintiffs’ work schedules to be like that of an employer-employee relationship.
In addition to control, the judge looked to whether the workers had an opportunity to increase their profit based on their managerial and technical skills and found they did not.
“Even if the plaintiffs could work efficiently to finish a job more quickly, as M+M suggests, the plaintiffs had no control over the jobs that they were assigned. Indeed, the plaintiffs could not refuse jobs that would have been unprofitable,” McElroy said. “While there may be some side work that the plaintiffs could perform, like hanging televisions for customers, this was minimal and took place outside of the normal hours the plaintiffs were expected to work. As such, this factor favors a finding of employment status.”
Finally, the judge noted, each plaintiff worked exclusively for M+M during their employment — not offering services to other cable companies or the public — and did so under a schedule that made it effectively impossible to perform work for any other employers.
“[A]lthough the defendant maintains that the plaintiffs were not precluded from working for others, the nature of scheduling and other control facts … indicate that this was not a realistic possibility,” McElroy said. “This factor therefore indicates employment status.”
Accordingly, the judge granted summary judgment to the plaintiffs on the misclassification question. However, she denied summary judgment on their claims of unpaid wages and overtime, finding questions of fact that could not be resolved at the present stage.