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February 14, 2011
Beware the Independent Contractor Designation

A Florida restaurant needed a bookkeeper, so they hired one and called her an independent contractor. Along the way, they assigned her many other tasks, to the point where she testified she was working 60 hours a week. So she sued for unpaid overtime under the Fair Labor Standards Act (FLSA).

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What happened. “Gomez” worked for the Jaguar Restaurant Group from December 2004 to March 2008. In her lawsuit filed in August 2008, she first argued that she was not a contractor but an employee. And she had a good point: The employer was clearly in total control of her time, from asking her to open the restaurant in the morning, manage the cash register, distribute tips, open bank accounts, maintain menus, process new employees into the system, and manage liquor orders—on top of her bookkeeping duties.

Until a pretrial procedure in October 2009, the Jaguar Restaurant Group argued only its independent contractor defense. But during the procedure, it suggested that Gomez might not have been covered by FLSA because of the administrative exemption. The employer didn’t raise that point during a pretrial conference but waited until the trial itself, in federal district court. Gomez and her attorney objected, but the judge allowed the employer not only to argue the administrative exemption to the jury but also to amend its defense after the fact, so that its defense would match the evidence. The jury accepted that Gomez was exempt from FLSA and ruled for the employer. Gomez appealed to the 11th Circuit, which covers Alabama, Florida, and Georgia.

What the court said. Appellate judges strongly objected to the district judge’s decision to allow Jaguar to change its defense in mid-trial. Leaving the argument to so late in the case meant that it had effectively waived the right to use that defense. Judges wrote, “If ever there were a classic case of waiver, this is it!” A major reason to create a reasonable deadline for either plaintiff or defendant to make a particular argument in a case is fairness to the other side: Gomez had based her case almost entirely on the argument that she was an employee, not a contractor, and was therefore owed overtime.

Neither party disputed the number of hours she had worked; it’s likely Jaguar had never kept records, so the courts had to accept Gomez’s own testimony and records. So the district judge’s decision was reversed and her case will return to that court. Diaz v. Jaguar, U.S. Court of Appeals for the 11th Circuit, No. 09-16046 (2010).

Point to remember: If someone works full time on your premises and you tell him or her what to do, when, and how, the person is probably an employee.

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