Carrell v. Sunland Const., Inc.

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 23, 1993
• Docket: 92-4948
• Status: Published

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 92-4948.

Bennis CARRELL, et al., Plaintiffs-Appellants,

v.

SUNLAND CONSTRUCTION, INC., Defendant-Appellee.

Aug. 25, 1993.

Appeal from the United States District Court for the Western District of Louisiana.

Before REAVLEY, DUHÉ and BARKSDALE, Circuit Judges.

REAVLEY, Circuit Judge:

Twenty welders sued Sunland Construction Inc. (Sunland), claiming that Sunland violated the

Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., by failing to pay them overtime

compensation. The district court dismissed the welders' lawsuit on the ground that they were not

"employees" within the meaning of the FLSA. We affirm.

I. BACKGROUND

Sunland constructs transmission pipelines for natural gas companies. For each pipeline

construction project, Sunland hires pipe welders and classifies them as independent contractors. The

welders typically work 60 hours per week and are fully aware that Sunland considers them

independent contractors. Twenty former welders (the Welders), who worked for Sunland at various

times from 1987 to 1990, brought this action pursuant to section 16(b) of the FLSA. See 29 U.S.C.

§ 216(b). They claim that Sunland violated section 7(a)(1) of the FLSA by failing to pay them

overtime compensation. See 29 U.S.C. § 207(a)(1) (requiring employers to pay employees at least

1.5 times the regular rate for hours worked in excess of 40 hours per week). The parties stipulated

to many facts and filed cross-motions for summary judgment on the issue of employee status. The

district court ruled that the Welders were independent contractors and not "employees" covered by

the FLSA. Based on this ruling, the court dismissed the Welders' FLSA claims. The Welders appeal.

II. ANALYSIS To determine employee status under the FLSA, we focus on whether the alleged employee,

as a matter of economic reality, is economically dependent upon the business to which he renders his

services. Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1043, 1054 (5th Cir.), cert. denied, 484

U.S. 924, 108 S.Ct. 286, 98 L.Ed.2d 246 (1987). Essentially, our task is to determine whether the

individual is, as a matter of economic reality, in business for himself. Donovan v. Tehco, Inc., 642

F.2d 141, 143 (5th Cir.1981). To gauge t he degree of the worker's dependency on the alleged

employer, we consider five factors: the degree of control exercised by the alleged employer, the

extent of the relative invest ments of the worker and alleged employer, the degree to which the

worker's opportunity for profit and loss is determined by the alleged employer, the skill and initiative

required to perform the job, and the permanency of the relationship. Mr. W Fireworks, 814 F.2d at

1043. These factors are merely aids in determining the question of dependency, and no single factor

is determinative. Id. at 1054. We review de novo the district court's conclusion that the Welders

were independent contractors. Id. at 1045. The parties have stipulated to the relevant facts

underlying our determination.

a. Permanency of the relationship

During each of the years relevant to this lawsuit, none of the Welders worked exclusively for

Sunland. To work consistently throughout the construction season, which lasts six to nine months,

the Welders moved from job to job, company to company, and state to state. Sunland hired the

Welders on a project-by-project basis, but made an effort to move the Welders to subsequent

projects. The duration of Sunland's construct ion projects averaged six weeks, but some projects

lasted only a few days. The average number of weeks that each Welder worked per year for Sunland

varied from approximately 3 weeks to 16 weeks.1

b. Degree of control exercised by the alleged employer

The parties agree that pipe welding requires specialized skills and that Sunland had no control

over the manner or method of the pipe welding. Instead, Sunland's customers dictated the specific

1 We approximated these averages from the record. The lead plaintiff in this lawsuit worked for Sunland approximately 20 weeks in 1987 and 8 weeks in 1988, an average of 14 weeks per year. Carrell worked approximately 188 hours of overtime in 1987 and 165 hours in 1988. welding procedures and the type of welding rods required for each construction project. Before each

project, the gas company customer, not Sunland, tested and certified each Welder. Sunland was

prohibited from participating in the test's administration. Each Welder placed his identification

number on each weld so that the gas companies could determine who was responsible for any

improper welds. Either the gas company or Sunland could unilaterally remove a Welder.

While working for Sunland, the Welders performed only pipe-welding work. Sunland

assigned the Welders to specific welding work and maintained daily time records for each Welder.

Sunland, however, did not specify the amount of time that a Welder could spend on an assignment.

Sunland required the Welders to work the same days and hours as the remainder of Sunland's crew,

including taking the same daily break periods.

c. Skill and initiative required

Pipe welding, unlike other types of welding, requires specialized skills. That the gas

companies tested and certified each Welder before a job demonstrates the specialized nature of the

work. As for the initiative required, a Welder's success depended on his ability to find consistent

work by moving from job to job and from company to company. But once on a job, a Welder's

initiative was limited to decisions regarding his welding equipment and the details of his welding

work.

d. Relative investments of worker and alleged employer

The Welders supplied their own trucks, welding machines that were mounted on the trucks,

and various other specialized welding tools (e.g., grinders, cutting torches, welding leads, welding

hoods, gloves). The Welders' investment in their welding machines, trucks, and tools averaged

$15,000 per Welder. The Welders also assumed all costs associated with operating, repairing, and

maintaining their welding equipment. The Welders pro vided their own lodging and meals on all

Sunland projects, including the out-of-town projects. Sunland maintained a policy requiring the

Welders to provide their own general liability and workers' compensation insurance, but Sunland

rarely enforced that policy.

Although Sunland generally did not supply any essential equipment or welding tools to its welders, it did supply blades for the grinders2 and some equipment to assist in cutting, supporting,

and clamping pipes. Sunland also owned a "tack rig" which the Welders utilized in areas where they

could not physically utilize their own rigs (approximately 17 of the time). Sunland employed "welder

helpers" to assist the Welders,3 and occasionally provided the necessary pipe jacks and welding rods.

We further recognize that Sunland's overall investment in each pipeline construction project was

obviously significant.

e. The degree to which the worker's opportunity for profit and loss is determined by the alleged employer

Sunland did not solicit bids or proposals from the Welders. It paid the Welders a fixed hourly

rate of $23, plus $10 per day for rental of their grinders. Sunland intended approximately 407 of the

$23 hourly rate to compensate the Welders for supplying their own welding equipment. Sunland

required the Welders to submit invoices for work performed on Sunland projects. On appeal, the

Welders stress that Sunland exclusively controlled the Welders' compensation while they worked on

a Sunland project: Sunland rarely deviated from its hourly rate and it controlled the number of hours

that the Welders worked.

Sunland, however, explains that a Welder's year-end profits or losses as a welder depended

on his ability to consistently find welding work with other companies and to minimize welding costs.

Sunland refers us to the income tax returns filed by the lead plaintiff, Bennis Carrell. From 1987 to

1989, Carrell derived his welding income from companies that classified him as an employee as well

as from companies, such as Sunland, that classified him as an independent contractor. For 1987,

Carrell reported $31,923 in income for his contract welding work and deducted $26,273 for costs

attributable to his contract work, leaving him with taxable profit of $5,650. For 1988, he reported

contract income of $12,072 and deducted $11,659, leaving him with a net taxable profit of $413. For

1989, he reported $5,713 in contract income and deducted $12,094, leaving him with a net loss of

$6,381. Like Carrell, many of the other Welders classified themselves as self-employed on their

2 Welders use grinders to smooth the surface of the pipe before it is welded. 3 The Welders often brought their own helpers, who appear to have been unskilled or semi-skilled laborers. Sunland classified and compensated these helpers as its employees. income tax returns.

Sunland exerted some control over the Welders' opportunity for profits by fixing the hourly

rate and the hours of work. Yet, the t ax ret urns of Carrell indicate that the Welders' profits also

depended on their ability to control their own costs. Moreover, the Welders worked for numerous

companies in each of the years relevant to this dispute.

Our determination of employee status is very fact dependent. And, as with most

employee-status cases, there are facts pointing in both directions. Several facts weigh in favor of

employee status; for example, Sunland dictated the Welders' schedule, including the timing of their

breaks; Sunland assigned the Welders to specific work crews; Sunland paid the Welders an hourly

rate that was rarely negotiable; the Welders' compensation while working for Sunland depended on

the hourly rate and number of hours worked, both of which Sunland controlled. Despite the facts

indicative of an employment relationship, we are convinced that the Welders were independent

contractors, not employees. In making our determination, we rely on the following: the Welders'

relationship with Sunland was on a project-by-project basis; the Welders worked from job to job and

from company to company; many of the Welders spent little time working for Sunland; the Welders

worked while aware that Sunland classified them as independent contractors, and many of them

classified themselves as self-employed;4 the Welders were highly skilled; Sunland's customers, the

gas companies, tested and certified each welder before each project; Sunland had no control over

the methods or details of the welding work; when on a Sunland job, the Welders performed only

welding services; the Welders supplied their own welding equipment; and their investments in

welding equipment averaged $15,000 per Welder. The economic realities are consistent with

Sunland's traditional practice of classifying its welders as independent contractors. The Welders are,

as a matter of economic reality, in business for themselves.

This court has previously faced the issue of whether welders are employees under the FLSA.

In Robicheaux v. Radcliff Material, Inc., 697 F.2d 662 (5th Cir.1983), this court concluded that five

4 The Welders' arrangement with Sunland is relevant, but not dispositive. See Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 667 (5th Cir.1983) ("[T]he fact that the [workers] signed contracts stating that they were independent contractors, while relevant, is not dispositive."). welders who worked for Radcliff Material, Inc. were employees, and thus entitled to overtime

compensation. Id. at 667. But the Robicheaux court's determination of employee status was based

on several significant facts that are absent from this case: the welders worked a substantial period

of time exclusively with Radcliff Material, ranging from ten months to three years; the welding

required only "moderate" skills; Radcliff Material told the welders how long a welding assignment

should take; the welders spent only 507 of their time welding, and the remaining time cleaning and

performing semi-skilled mechanical work; and Radcliff Material provided the welders with "steady

reliable work over a substantial period of time." Id. A careful examination of Robicheaux reinforces

our conclusion that the Welders in our case were independent contractors.

AFFIRMED.