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Worker deemed possible employee under FLSA in retaliation case

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A lower court should have considered “economic realities” in determining whether an engineer who worked for an energy company was an independent contractor rather than an employee, says an appeals court in overturning a lower court ruling.

Mikael M. Safarian is an engineer who serviced and installed machines for Waltham, Massachusetts-based American DG Energy Inc. from December 2006 to April 2010, according to Tuesday's ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Mikael M. Safarian v. American DG Energy Inc. et al.

Mr. Safarian originally understood he was being hired as a full-time employee but, ADG told him it was in the company's interest to temporarily hire him as subcontractor, according to the ruling.

Mr. Safarian worked at least 40 hours — and sometimes more than 50 hours — per week for the company, and ADG provided him with materials to install and fix its devices, business cards, a cellphone and beeper, a business email address and clothes with the company label, according to the ruling.

While working at sites, Mr. Safarian discovered the company was performing certain work without appropriate permits and overbilling customers, according to the ruling. He claims he was terminated in retaliation when he complained about these practices.

Mr. Safarian filed suit against the company, but the U.S. District Court in Trenton, New Jersey, dismissed his litigation on the basis he was a subcontractor and that he must be an employee to pursue his case, according to the ruling.

However, a divided 3rd Circuit panel held in a 2-1 ruling that Mr. Safarian may have been an employee under the Fair Labor Standards Act. The District Court based its finding that Mr. Safarian was a subcontractor on the structure of his relationship with the company, said the appeals court. “However, it is the economics of the relationship … not the structure of the relationship, that is determinative,” said the majority ruling.

The ruling said it was remanding the case to the District Court so it “can apply the proper test” in weighing Mr. Safarian's employee status.

The minority opinion held “the record supports the District Court's conclusion that Safarian is not an employee of American DG Energy Inc. for purposes of federal law.”

The U.S. Department of Labor has just issued guidance regarding how employers should classify workers as either employees or independent contractors.