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Court Gives DOL Black Eye Independent Contractor Case

Volume 2, Issue 11
June 15th, 2014
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A U.S. District Court ordered the Department of Labor to pay $566,000 in attorneys’ fees and costs to a Texas employer.

The court held that DOL’s position that the employer misclassified gate attendants as independent contractors was not “substantially justified”—nor was the DOL’s demand that the employer pay over $6 million in back wages and unpaid overtime.

DOL began investigating Gate Guard Services in 2010 after a DOL investigator received complaints from two friends the investigator said he had met through “parties” and “the bars and stuff like that” who worked at the company along with about 400 other gate attendants.

GGS locates gate attendants for operators to keep track of vehicles entering and leaving oilfield sites.

Without warning, the DOL investigator showed up at GGS’s office to speak to the manager. The investigator returned 10 days later for an “opening conference.” Based on these meetings, his friends’ reports, and an interview with a third GGS worker, the investigator initially concluded that GGS most likely owed more than $6 million in back wages.

The investigator then interviewed fewer than 17 of the gate attendants over the next few months. Based on having interviewed less than 5% of the gate attendants, the investigator informed GGS that these workers were actually employees, and told the company to pay $6.2 million in back wages and unpaid overtime.

The court ruled that the Labor Department had failed to act in a reasonable manner both before and during the course of this litigation.

The judge openly criticized the investigation, pointing out that if the DOL had “interviewed more than just a handful of GGS’s roughly 400 gate attendants before presenting GGS with a $6 million demand, it would have known the gate attendants were not employees.”

The federal judge also declared that, once discovery revealed the underlying facts of the case, “DOL should have abandoned this litigation.”

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