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Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

., TENTH CIRCUIT 

ELIZABETH DOLE, Secretary of 

Labor, UNITED STATES DEPARTMENT 

OF LABOR, 

) 

) 

) 

) 

FILED 

United States Court of Appeals 

Tenth Circuit 

MAY 2 31989 

ROBERT L. HOECKER 

Clerk 

v. 

Plaintiffs/Appellants, ) 

) 

) No. 87-1500 

KAREN SNELL and GERALD SNELL, 

individuals doing business as 

CAKES BY KAREN, 

Defendants/Appel lees. 

) 

) 

) 

) 

) 

) 

Appeal from the United States District Court 

for the District of Colorado 

(D.C. No. 86-F-443) 

Ellen R. Edmond (Tedrick A. House, Jr., Regional Solicitor, Henry 

C. Mahlman, Associate Regional Solicitor, George R. Salem, 

Solicitor of Labor, Monica Gallagher, Associate Solicitor, Linda 

Jan s. Pack, Counsel for Appellate Litigation, and Anne Payne 

Fugett, Attorney, on the briefs), U.S. Department of Labor, 

Washington, D.C., for Plaintiffs/Appellants. 

Timothy LaQuey (Raymond J. Miller with him on the brief), 

Attorneys at Law, Denver, Colorado, for Defendants/Appellees. 

Cynthia G. Schneider, Migrant Legal Action Program, Inc., 

Washington, D.C., and David F. Steinhoff, Colorado Rural Legal 

Services, Denver, Colorado, Amicus Curiae. 

Before HOLLOWAY, Chief Judge, ANDERSON, Circuit Judge, and 

O'CONNOR,*District Judge. 

l\NDERSON, Circuit Judge. 

* Hon. Earl E. O'Connor, Chief Judge, United States District 

Court, Kansas, sitting by designation. 

Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 1 
The sole issue in this case is whether cake decorators at a 

bakery known as "Cakes by Karen" are employees or 

·-..:.~,contractors -. for·· purposes , of .-,coverage· under - the 

Standards Act of 1938, as amended ("FLSA''), 29 U.S.C. 

~ The district court held that they were 

contractors. We conclude that they are employees. 

I. 

independent 

Fair Labor 

§ 201, et. 

independent 

Karen and Gerald Snell own and operate a bakery and decorated 

cake sales business called "Cakes by Karen." It is composed of 

one bakery and eight retail stores, one of which is connected to 

the bakery. The cake decorators in question, consisting of 

thirty-two individuals over the period of time at issue, decorated 

cakes at the bakery/retail store, which is located in Northglenn, 

Colorado. From that location they supplied all eight retail 

outlets. 

After an investigation, the Department of Labor ("DOL") 

determined that the decorators were employees of the Snells, and 

sued to enjoin the Snells from violating the overtime and record 

keeping provisions of the FLSA (sections 15(a)(2) and 15(a)(5)), 

and to enjoin the continued withholding of overtime pay alleged to 

be due. R. Vol. I at Tab 1 (Complaint). 

At trial, the DOL's case consisted of the testimony of Lisa 

Novak, one of the cake decorators, and Donald Klein, a compliance 

officer of the Wage and Hour Division of the DOL. The Snells did 

not call any witnesses, and rested their case after the 

presentation of the DOL's case. The parties stipulated that the 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 2 
testimony of Novak was representative of the method of payment and 

the type of work and circumstances of the other decorators. R. 

~vol. II at 47. 

Novak began working at the bakery in August of 1982. When 

she started she had no prior experience or skills in cake decorating. She testified that new decorators without experience learned 

how to decorate cakes while on the job. She noted that "some" of 

the decorators took a decorating class. Id. at 7. 

Novak testified that the Snells' cake decorators are paid on 

a piecework basis, by the cake. In 1983 the Snells established a 

pay sheet to determine the amount paid per cake. At the time it 

was established, the decorators were paid approximately 20% of the 

price of the cake. Novak testified that at the present time their 

rate of pay is less than 20% of the price of the cakes because of 

rising prices. Id. at 14, 45. 

The decorators have no say in determining the prices on the 

pay sheet or the prices of the finished products. R. Vol. II at 

14. However, when they decorate cakes which are especially large 

or unusual they negotiate the rate at which they are paid. Novak 

testified that there were not "too many" of these unusual 

requests. Id. at 15. In most cases, the counter workers, who are 

employees of the Snells and who take in the orders, decide if the 

cake requires an extra decorating charge according to a few basic 

shop rules. If for some reason, the counter worker fails to place 

an additional charge on the cake, Karen Snell intervenes and pays 

the cake decorators an additional $2.00 per cake. Id. at 40. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 3 
Novak testified that the cake decorators are generally free 

to choose the cakes they wish to decorate. Id. at 12. However, 

.. · .. the Snells .. dete.rmine ·who. is~.to decorate ·the·,wedding cakes. Id. at 

19. 

The decorators are required to purchase some of their own 

equipment, including pastry bags, couplers, an air brush, books, 

spatulas, aprons, and towels. Id. at 18, 37. Such equipment 

costs approximately $400.00 per year. R. Vol. II at 18. The 

Snells supply everything else and pay all the operating expenses 

of the business. Id. at 19. 

Novak worked an average of 50-60 hours a week at the bakery. 

Id. at 9. The number of working hours is determined in large part 

by the volume of orders for cakes that come in. The hours are 

much longer during holiday periods. Id. at 10-11. Although the 

decorators have some flexibility in determining their working 

hours, if they come in during the mornings they have to be in by 

9:00 a.m. Generally, the Snells require that unless permission is 

obtained from Karen Snell to leave early, the decorators must stay 

until 6:00 p.m. or until all the cakes have been decorated. 

The decorators are free to work for other employers. Novak 

testified that she works for a dairy approximately four times a 

year. Id. at 20, 45. The decorators are also free to decorate 

cakes at home for sale to third parties. Novak testified further 

that, although some decorators do decorate cakes at home, she 

chooses not to. Id. at 35-36. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 4 
,. 

_II. 

Courts have adopted an expansive interpretation of the 

· de-finitions-'---relating. -to-". employment--,status ;-'-under- the FLSA, 1 in 

order to effectuate its broad remedial purposes. See Patel v. 

Quality Inn South, 846 F.2d 700, 702 (11th Cir. 1988), cert. 

denied, 109 s.ct. 1120 (1989); Brock v. Superior Care, Inc., 840 

F.2d 1054, 1058 (2nd Cir.), modified, 1988 U.S. App. Lexis 4338 

(1988); Donovan v. Williams Oil, Co., 717 F.2d 503, 504-05 (10th 

Cir. 1983); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 

748, 754 (9th Cir. 1979); Shultz v. Mistletoe Express Service, 

Inc., 434 F.2d 1267, 1270 (10th Cir. 1970). Courts are not 

limited by any contractual terminology used by the parties or by 

the traditional common law concepts of "employee" or "independent 

contractor." McLaughlin v. Seafood, Inc., 861 F.2d 450, 452 (5th 

Cir. 1988), modified, 867 F.2d 875 (1989); Donovan v. Williams Oil 

Co., 717 F.2d at 505. Rather, as we noted in Doty v. Elias, 733 

F.2d 720, 722-23 (10th Cir. 1984), the Supreme Court has directed 

that the economic realities of the relationship govern, and the 

focal point is "whether the individual is economically dependent 

1 Section 3 

definitions: 

of the FLSA provides the following pertinent 

( d) "Employer" includes any person acting directly or 

indirectly in the interest of an employer in relation to an 

employee. • • • 

(e) (1) . • • the term "employee" means any individual 

employed by an employer. 

. . . . (g) "Employ" includes to suffer or permit to work. 

29 u.s.c. § 203. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 5 
on the business to which he renders service or is, as a 

matter of economic fact, in business for himself." See Bartels v . 

. ~ - BiI'-mingham,- 332,U.s. :·T26, 130·,· 67.".s .• ct. ·.,l.547, l.549, 91 L.Ed. 1947 

(1947). 

In Doty we listed five factors derived from United States v. 

Silk, 331 U.S. 704, 716, 67 s.ct. 1463, 1469, 91 L.Ed. 1757 

(1947), which courti generally consider in applying this test: 

11 (1) the degree of control exerted by the alleged 

employer over the worker; (2) the worker's opportunity 

for profit or loss; (3) the worker's investment in the 

business; (4) the permanence of the working 

relationship; and (5) the degree of skill required to 

perform the work." 

Id. at 723. See,~' Rutherford Food Corp. v. McComb, 331 U.S. 

722, 730 (1947); Brock v. Superior Care, Inc., 840 F.2d at 1058-

59; Sec'y of Labor v. Lauritzen, 835 F.2d 1529, 1535 (7~h Cir. 

1987), cert. denied, 109 s.ct. 243 (1988); Brock v. Mr. w. 

Fireworks, Inc., 814 F.2d 1042, 1043 (5th Cir.), cert. denied, 108 

s.ct. 286 (1987); Doty v. Elias, 733 F.2d at 723; Real v. Driscoll 

Strawberry Associates, Inc., 603 F.2d at 754; Donovan v. 

DialAmerica Marketing, Inc., 757 F.2d 1376, 1382 (3rd Cir.), cert. 

denied, 474 U.S. 919 (1985); Donovan v. Sureway Cleaners, 656 F.2d 

1368, 1370 (9th Cir. 1981). An additional commonly considered 

factor is the extent to which the work is an integral part of the 

alleged employer's business. See,~, Brock v. Superior Care, 

Inc., 840 F.2d at 1059; Sec'y of Labor v. Lauritzen, 835 F.2d at 

1535; Real v. Driscoll Strawberry Associates, Inc., 603 F.2d at 

754; Donovan v. DialAmerica Marketing, Inc., 757 F.2d at 1382; 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 6 
Donovan v. Sureway Cleaners, 656 F.2d at 1370. 2 It is well 

established that no one of these factors in isolation is 

-"0··;-'d-ispos·i-tive; -· rather;:.·- t·he- test· -is ·-based 0 upon ,a totality of the 

circumstances. Rutherford Food Corp. v. McComb, 331 U.S. at 730. 

The parties disagree with respect to the standard of review 

which governs our analysis of this case. This circuit has not as 

yet explicitly articulated a standard of review governing FLSA 

cases. However, we believe the proper standard, followed by most 

courts, is that expressed by the Second Circuit in Brock v. 

Superior Care, Inc., 840 F.2d at 1059, as follows: 

"The existence and degree of each factor is a question 

of fact while the legal conclusion to be drawn from 

those facts--whether workers are employees or independent contractors--is a question of law. Thus, a district 

court's findings as to the underlying factors must be 

accepted unless clearly erroneous, while revi~w of the 

ultimate question of employment status is de novo." 

See McLaughlin v. Seafood~ Inc., 861 F.2d at 452; Sec'y of Labor 

v. Lauritzen, 835 F.2d at 1535; Brock v. Mr. w. Fireworks, Inc., 

814 F.2d at 1044-45; Beliz v. W.H. McLeod & Sons Packing Co., 765 

F.2d 1317, 1327 (5th Cir. 1985); Castillo v. Givens, 704 F.2d 181, 

185-86 (5th Cir.), cert. denied, 464 U.S. 850 (1983); Donovan v. 

New Floridian Hotel, Inc., 676 F.2d 468, 471 n. 4 (11th Cir. 

1982). 

2 Although we did not list this factor in Doty, we implicitly 

considered it a determinative factor in Shultz v. Mistletoe 

Express Service, Inc., 434 F.2d at 1271 ("The terminal operators 

are an integral part of the Mistletoe transportation business."). 

In any event, since factors such as the ones listed are simply 

analytical tools, their weight, number and composition are 

variable. All relevant evidence may be considered. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 7 
III. 

The district court carefully addressed and made findings with 

·• 0.- • ·,:·re.spect-,:.to :all· but. --two :of.,,,the .0facto.rs.-slist-ed -above. . .. Nevertheless, 

in each instance we are left with a definite and firm conviction 

that a mistake has been made, and that the findings are clearly 

erroneous. Specifically, we conclude that the circumstances of 

this case show that the cake decorators more closely resemble 

employees of this business than independent contractors engaged in 

their own business. 

A. Control. 

The district court found that --

"Defendants lack significant control over the 

decorators' work. In particular,. defendants do not 

establish rigid working schedules; thus, decorators are 

free, within limits, to determine their work hours. 

Neither do defendants oversee or supervise the actual 

decorating of cakes. Decorators select, design, and 

prepare cakes solely upon their skill and desire. 

Defendants merely inspect the finished product and see 

that it meets the established quality standards. 

Decorators are free to and do offer their services to 

outside and third parties while working for defendants. 

In fact, Ms. Novak occasionally works for a dairy." 

R. Vol. I, Tab 2 at 8. 

At trial, counsel for the Snells emphasized continually that 

these decorators enjoyed some flexibility in work schedules and 

choice of hours, and that they could choose their cakes and manner 

of decoration. R. Vol. II at 26, 29, 31, 32, 37, 39, 41, 42. Of 

course, flexibility in work schedules is common to many businesses 

and is not significant in and of itself. See Doty v. Elias, 733 

F.2d at 723 ("A relatively flexible work schedule alone . does 

not make an individual an independent contractor rather than an 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 8 
employee."). More to the point, however, the record does not 

support any inference that these decorators acted autonomously, or 

- -- , ~.wi th--·--any. degree -·of 00-independence ·-which.,,would,, set them apart from 

what one would consider normal employee status. Certainly the 

business operations were not subject to the whims or choices of 

the decorators. Quite the opposite was true. The demands of the 

business controlled the decorators. 

The record establishes the following facts beyond reasonable 

dispute. The decorator work force consisted of never less than 

ten and up to fourteen individuals. R. Vol. II at 43. They work 

at separate tables in a single room at one location. Id. at 23. 

Novak testified that she worked ten to twelve hours a day, and 

fifty to sixty hours per week, five days a week. Id. at 8-9, 28. 

By preference, in the recent past she worked nights, alone, from 

8:00 p.m. to approximately 6:00 a.m. Id. at 8. She was free to 

leave early only if there was "not a ton of work to do." Id. at 

29. Apparently the rest of the decorators worked days. They were 

required by Karen Snell to be at work by a time certain in the 

morning, at or before 9:00 a.m. Id. at 31. They pun~hed a time 

clock before they began decorating in the morning, when they left 

for breaks, and when they finished decorating at the end of the 

day. Id. at 8. Undecorated cakes were placed on racks from 

which, at random, the decorators selected cakes which they wanted 

to decorate during the day. Id. at 12. But toward the end of the 

day when there were a limited number of cakes remaining, the 

decorators were required to work on those remaining cakes. Id. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 9 
The volume of cake orders determined the length of the work 

day, including long overtime hours whenever necessary. Id. at 8-

. 12, 31-32 •. ,>It: .. was::. an· .abso,lute .. -r,equirement~ that sufficient 

decorators stay to complete the cakes. Id. And, while the 

decorators might trade among themselves, or arrange with Karen 

Snell for early or normal time departure, it was out of the 

question for the entire work force, or any necessary part of it, 

to choose to leave before the cakes were done. Id. The workers 

were totally controlled in this regard. Id. Thus, on one holiday 

occasion the entire staff was required to work thirty-two hours 

straight because of an unexpected volume of orders. Id. at 10-11. 

On another occasion an individual was fired for refusing to work 

overtime on a Friday night. Id. at 12. 

Vacations and any special work schedules or hours, or time 

off, were required to be approved by Karen Snell. Id. at 11, 41-

42. The decorators worked without direct supervision, but Karen 

Snell was almost always there, and cakes deemed unsatisfactory by 

the Snells were rejected. Id. at 9, 12-13. 

As the foregoing indicates, this, in fact, was a highly 

regulated work force absolutely controlled by the Snells with 

regard to the production and quality demands of the business. It 

is utterly inconceivable, for instance, that the Snells would have 

tolerated a decorator work force composed of individuals who came 

and went as they alone pleased, leaving this volume-driven 

business with uncertainty in its production capacity. The 

following portions of Novak's testimony illustrate these points: 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 10 
"THE COURT: You said 6:00 or 7:00 in the morning 

until everything was finished. What time would that be, 

please, ordinarily? 

··. ,·"THE'i,wrTNESS: Well,;.:·they ··don't stop-·taking orders. 

They have a series of other stores, and as long as they 

keep calling in the orders, the cakes have to be 

decorated, so say the other stores close at 6:00 

o'clock, you wouldn't be able to leave until everything 

was done. 

"If they call in an order at 6:00 o'clock, you have 

to stay and do those orders. 

"THE COURT: What would your ordinary day be? 

"THE WITNESS: Until about 6:00 in the evening. 

BY MS. BISSEGER: 

"Q Okay. When you arrived in the morning, when did 

you punch the time clock? 

"A When they put in the time clock we were instructed 

to come in, (sic) get all our equipment ready and punch 

the time clock when we started decorating. Then you 

would decorate, punch out for breaks, and then punch out 

and clean up your equipment and go home. 

"Q How many days a week did you work? 

"A Five. 

"Q And your average number of hours were per day? 

"A Well, I would say an averag~ number would be ten to 

twelve hours. 

"Q Okay. Was Karen Snell present during the hours 

that you worked? 

"A Most of the time. 

"Q Who informed decorators of their hours? 

"A Well, if a decorator had a reason to leave then 

that was all right, but basically the rules are, you 

know, the caks (sic) have to be finished before you can 

go home. 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 11 
. . . . "Q .Who requested decorators to stay until all cakes 

were decorated? 

"A Karen Snell. 

"Q And when you needed to take some time off from whom 

did you seek permission? 

"A From Karen Snell. 

"Q Okay. If there were cakes to be done, and 

decorators wanted to leave before the cakes were done, 

how did Karen Snell react to that? 

"A Well, as long as somebody was going to stay and 

finish them, the situation now they deliver right after-

-right in the evening. They used to wait until morning 

to deliver the cakes. So that people had to stay and 

decorate the cakes until they were finished. 

"Now they deliver the cakes in the evening, and so 

you have to have a certain amount done before you can 

go, and the basic rule is somebody has to stay and 

finish the work. 

"A Well, you have to be in by a certain time in the 

morning if you work during the day. You have to be in 

by a certain time to get that day's cakes started so 

people don't come in to pick up their cakes and nobody 

has done them, so you have to be there by--some people 

prefer to come early, some people prefer to come in by 

9:00 o'clock, but somebody has to be there. 

"Q Well, is it fair that volume dictates? 

"A Pretty much. 

"Q Of necessity? 

"A The amounts of hours you have to stay, sure. 

"Q Okay. Now, you testified regarding St. Patrick's 

Day and an all night. 

"A Um-hm. 

"Q Is this common? 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 12 
"A Well, when I worked during the day, it was common 

you would have to stay until pretty small hours in the 

morning, but that's the only time I had stayed all night 

and into the next day.~ 

. . "Q So really one can't make any broad generalizations? 

"A As to the hours that one works, no, it can 

fluctuate a great deal. 

"Q Is that pretty much up to the decorators? 

"A Well, the decorators, of course, want to work, you 

know, at least a normal number of hours a week, and so 

they are there and they are available to work, and the 

only time that you have to work, you know, overtime or 

extra hours or whatever you want to call it is when you 

have got a lot of orders. 

"Q Okay. But sometimes it can work just the opposite? 

"A It can work the opposite, and there can be nothing 

to do and you can stand around. 

"Q Are you free to leave? 

"A Well, no, somebody has to be up there until 6:00 

o'clock in case an order comes in for a cake to be 

decorated, but say on Monday it won't be as busy because 

people order cakes for Saturday, so Fridays people put 

in a lot of hours so on Monday everybody can clean up 

and leave by 7:00 and you can go home." 

R. Vol. II at 8, 9, 10, 11-12, 31-32, 38-39 (emphasis added). 

Under circumstances involving considerably more latitude and 

less supervision than that demonstrated in the case before us, the 

Supreme Court determined that homeworkers can be employees within 

the FLSA, stating: "[The workers] are regimented under one 

organization, manufacturing what the organization desires and 

receiving the compensation the organization dictates.". Goldberg 

v. Whitaker House Cooperative, 366 U.S. 28, 32 (1961). See 

Donovan v. DialAmerica Marketing, Inc., 757 F.2d at 1384. See 

also McLaughlin v. Seafood, Inc., 861 F.2d at 452; Real v. 

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Driscoll Strawberry Associates, Inc., 748 F.2d at 756; Silent 

Woman, Ltd. v. Donovan, 585 F.Supp. 447, 450-51 (E.D. Wis. 1984). 

, . ·· · - The 0• record does ,support- the di-st.rict.~_court '.,s. finding that the 

decorator's were free to offer their services to third parties 

while working for the Snells, and did so. However, they did so to 

a virtually insignificant degree insofar as there is anything 

shown in the record, with no indication of any income from such 

activity, and, in any event, nothing to indicate that incidental 

decorating for others involved an effort greater than might be 

done by any employee on his or her own time after hours, on 

weekends, or days off. R. Vol. II at 35-36. Thus, Novak 

testified that although she is free to work for other employers 

she has only worked for one other employer, Wheatridge Dairy, and 

only does so four times per year. R. Vol. II at 19-20, 45. She 

also testified that although she is free to decorate cakes at home 

for sale to third parties, she chooses not to. R. Vol. II at 35-

36. 3 Under these circumstances we apply the rule that: "[I]t is 

not what the [workers] could have done that counts, but as a 

matter of economic reality what they actually do that is 

dispositive." Brock v. Mr. w. Fireworks, Inc., 814 F.2d at 1047. 

3 The record does not indicate whether Novak used her cake 

decorating skills at the Wheatridge Dairy. If she did not, then 

this additional employment would be more like a second job than an 

example of an independent contractor performing her work for 

different employers. This other work may have minimally 

supplemented Novak's income but ''minor additional income made from 

work which is not connected with the actual business under 

examination is not relevant to a court's determination of employee 

status." Brock v. Mr. w. Fireworks, Inc., 814 F.2d at 1049 

(citing Usery v. Pilgrim Equipment Co., Inc., 527 F.2d 1308, 1313 

(5th Cir.), cert. denied, 429 U.S. 826 (1976)). 

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In short, the individuals in question were basically hiring 

out their labor. In doing so, they were regimented with respect 

· .:to.the-·time 0 -and place,.and, in ·,·essential respects, as to the 

quality and the manner in which they performed that labor. It is 

virtually impossible to look upon these individuals as having the 

independence which characterizes a person conducting their own 

business. 

B. Opportunity for Profit or Loss. 

The district court found that: "Essentially, decorators 

determine their wages and thus control their profit potential. 

Decorators decide their hours, choose which cakes to decorate and 

are compensated at approximately 20% of the cake's cost, and 

negotiate prices on large or unique cakes." R. Vol. I, Tab 2 at 

8. 

As previously indicated, these individuals are paid on a 

piecework basis, by the cake. Thus, it is true that the more 

cakes a decorator can do, the more the decorator will make. But 

toiling for money on a piecework basis is more like wages than an 

opportunity for "profit." See Brock v. Mr. W. Fireworks, Inc., 

814 F.2d at 1050-51; Usery v. Pilgrim Equipment, 527 F.2d at 1313. 

See also Rutherford Food Corp. v. McComb, 331 U.S. at 730. 

Clearly, these individuals did not share in the profits of this 

business. Although, as the district court noted, the decorators 

were paid approximately 20% of the price of each cake, that was 

only in 1982 and for a short time thereafter. As time went on, 

the prices of the cakes changed, but the amount received by the 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 15 
decorators did not, and the decorators had no input whatsoever 

into the amount which they were to receive for each cake except on 

the -~ ra·I:'ec"0-cca:sj·on-where, an-.,unusuaT. cake .was ,.involved.· . R. Vol •. II 

at 14-15. Novak's testimony in this regard is significant: 

"Q How are you paid at Cakes by Karen? 

"A I am paid by the cake. 

"Q Were you always paid during your term of 

employment--did the pay structure ever change? 

"A When I first started, we were paid twenty percent 

of each cake, and then the cakes over the last five 

years, the retail price of cakes has risen, but our wage 

has stayed the same as when I first started. 

"Q Ms. Novak, could you please refer to Exhibit Number 

1, please. Could you identify that for me? 

"A This is the sheet that determines the amount we get 

paid for each cake. 

"Q And were you always paid on the basis of that 

sheet? 

"A No. This is within the last two years we were 

given this. 

"Q To whom did the pay sheet apply? 

"A The decorators. 

"Q To all decorators? 

"A To all the decorators. 

"Q What, if any, say did you have in setting the price 

on this decorator's pay sheet? 

"A This was news to me. I had no say in this at all. 

"Q What, if any, say did you have in setting the 

retail price of the cakes? 

"A None. 

"Q Did you have the opportunity to bargain or discuss 

any of the prices with the Snells? 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 16 
"A Well, at present, if I do a cake that's an 

especially large cake or an especially strange cake, we 

do a lot of real strange cakes, and if you do something 

like that, there is really no set price for that, and I 

can . say ·well,-- I.;-:,think :•my bime .. is ·worth such and such an 

amount, and you can pretty much set what you are going 

to get paid, but that's rare; usually get paid by what's 

on this sheet. 

"THE COURT: What do you mean by strange cakes, 

unique cakes? 

"THE WITNESS: Well, really large cakes or a cake 

shaped like a building or something dumb. 

"THE COURT: Like a courthouse or a football field, 

something irregular like that? 

"THE WITNESS: Yes, something very much out of the 

ordinary. 

"THE COURT: Many orders were like that? 

"THE WITNESS: No, there aren't too many, but that 

at that time is the only time I really set the rate that 

I make on a cake, because it's something you haven't 

done before. If you put five full sheets together to 

decorate it and look like a boat, there is no set price 

for something like that." 

R. Vol. II at 13-15 (emphasis added). 

With respect to the things upon which the volume of cakes 

depended, such as the number of retail outlets, and the quality 

and attractiveness of their decor, the selection and efficiency of 

the counter help, advertising for the business, the quality of the 

ingredients in the cakes, and so forth, the decorators had 

absolutely no input. Nor did they have any say with respect to 

the quality of their fellow workers or their finished products. 

In short, the decorators had no control over the essential 

determinants of profits in a business, and no direct share in the 

success of the business. Their earnings did not depend upon their 

judgment or initiative, but on the Snell's need for their work. 

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See Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 666-67 

( 5th Cir. 1983). 

Furt.hermore·, · -,there was .. ·no, way- ,'-.that,. t-he decorators could 

experience a business loss. A reduction in money earned by the 

decorators is not a "loss" sufficient to satisfy the criteria for 

independent contractor status. Sec'y of Labor v. Lauritzen, 835 

F.2d at 1536. Certainly, the decorators did not undertake the 

risks usually associated with an independent business. 

C. Investment in the Business. 

The district court found that the "decorators initially 

invest $400 in equipment and approximately the same sum every year 

thereafter. Defendants simply provide icing, tables, turntables, 

mats, and a copy cake machine. Except for the icing, decorators 

are, therefore, capable of decorating defendants' cakes without 

these items." R. Vol. I, Tab 2 at 8-9. 

Courts have generally held that the fact 

supplies his or her own tools or equipment does not 

that a worker 

preclude a 

finding of employee status. See Rutherford Food Corp. v. McComb, 

331 U.S. at 725 (meat boners own their own hooks, knives, and 

leather belts (aprons) and were still found to be employees); 

McLaughlin v. Seafood, Inc., 861 F.2d at 451 (seafood processors 

supply their own hairnets, aprons, gloves and seafood knives); 

Sec'y of Labor v. Lauritzen, 835 F.2d at 1537 {pickle pickers 

provide their own gloves); Robicheaux v. Radcliff Material, Inc., 

697 F.2d at 666 ("Although each of the welders had invested his 

own money in purchasing a welding machine, the district court 

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concluded that a relatively minor portion of the compensation was 

paid to the employees based upon their furnishing the equipment 

and, that the major pa:rt of - the -compensation was paid for the 

services of these .•. employees."); Real v. Driscoll Strawberry 

Associates, Inc., 603 F.2d at 752 (migrant farmworkers furnish 

their own hoes, shovels, pruning clippers and hand carts); Donovan 

v. Tehco, Inc., 642 F.2d 141, 143 (5th Cir. 1981) (worker supplies 

hand tools); Schultz v. Mistletoe Express Service, Inc., 434 F.2d 

at 1270-71 (terminal operators furnish local trucks}; Silent 

Woman, Ltd. v. Donovan, 585 F.Supp. at 451 (Seamstresses who work 

at home and supply their own sewing machines are considered 

employees. "The only 'expenditure' for which the 

seamstresses obtain a return is their own labor."). 

The fact is that these decorators had no investment at all in 

the Snell's business, as such. As Novak testified: 

"Q Did you invest or how did you invest in the 

business of the Snells? 

"A No, I haven't invested in the business." 

R. Vol. II at 17. The Snells maintained the eight retail outlets 

and the bakery, including the making of lease payments for the 

physical facilities. They supply the cakes, the icing, novelty 

items to be put on the cakes, doilies, boxes and boards, and 

provide a copy cake machine (to shine pictures on the cakes), food 

coloring, a set of pictures, turntables, and mats to stand on. R. 

Vol. II at 18-19, 46. They pay all the advertising and other 

operating expenses of the business including phone service, 

utilities, water, counter help, and all other necessary help. As 

courts have noted, the "investment," which must be considered as a 

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Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 19 
factor is the amount of large capital expenditures, such as risk 

capital and capital investments, not negligible items, or labor 

itself.· ,·.,The ·rela·tive---i,nves-tment ·of the decorators · in their own 

tools compared with the investment of the Snells simply does not 

qualify as an investment in this business. See Brock v. Mr. w. 

Fireworks, Inc., 814 F.2d at 1052; Sec'y of Labor v. Lauritzen, 

835 F.2d at 1537. And, comparing the decorator's $400.00 annual 

investment to their annual income suggests no different 

conclusion. Novak earned approximately $25,000 per year, which 

was above average, R. Vol. II at 27, but one would hardly refer to 

such income as the return on an annual investment of $400 in tools 

or equipment. 

D. Skill. 

With regard to the factor concerning the skill of the 

decorators the district court held that "[a]lthough not every 

decorator is highly skilled when starting, through native ability, 

time, and experience, decorators acquire and develop the necessary 

skills to design and decorate cakes according to the customer's 

wishes." R. Vol. I, Tab 2 at 8. Although this finding is 

certainly not clearly erroneous it is nonetheless irrelevant in 

determining whether the cake decorators are employees or 

independent contractors. As the court noted in Sec'y of Labor v. 

Lauritzen, 835 F.2d at 1537: "[T]his development of occupational 

skills is no different from what any good employee in any line of 

work must do." 

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The lack of the requirement of specialized skills is 

indicative of employee status. Doty v. Elias, 733 F.2d at 723 . 

. _,,_ --·,Novak.' s t-est-imony: makes ;;-it clear-,~that the, . .Snells ,.,,do .not require 

the decorators to have any specialized skills or prior experience 

when they start to work for the Snells. R. Vol. II at 6. They 

merely develop their skills on the job. Id. at 30. 

The district court found that the "majority of the decorators 

have at the very least taken a course in cake decorating." R. 

Vol. I, Tab 2 at 2. Because Novak, whose testimony was stipulated 

by the parties to be representative of the group of decorators, 

testified that she had no experience in cake decorating when she 

started and that only ''some" of the decorators had taken a class, 

this finding is clearly erroneous. 

E. Permanence of the Working Relationship. 

Although the district court listed the permanence of the 

working relationship as a factor in determining employee status, 

it made no findings regarding this factor. "Independent contractors" often have fixed employment periods and transfer from place 

to place as particular work is offered to them, whereas 

"employees" usually work for only one employer and such relationship is continuous and of indefinite duration. Donovan v. Sureway 

Cleaners, 656 F.2d at 1372. 

A careful examination of the record indicates that with 

regard to this factor the cake decorators are much more like 

employees than independent contractors. Novak testified that she 

had been working for the Snells for approximately four and a half 

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years. R. Vol. II at 5. At the time she started working for the 

Snells she expected to work there "indefinitely." R. Vol. II at 

20 •. : ., She ;works ,an average .. of. 50-60 hours a week at the bakery. 4 

R. Vol. II at 9. Cf. Brock v. Superior Care, Inc., 840 F.2d at 

1060 (transient nurses who work for several employers found to be 

employees); Sec'y of Labor v. Lauritzen, 835 F.2d at 1537 

(seasonal migrant farmworkers found to be employees). 

F. Integral Part of the Business. 

As mentioned earlier, in determining employee status many 

courts have examined whether or not the type of work performed by 

the alleged employees is an integral part of the business. 

Rutherford Food Corp. v. McComb, 331 U.S. at 726; Brock v. 

Superior Care, Inc., 840 F.2d at 1059; Shultz v. Mistletoe Express 

Service, Inc., 434 F.2d at 1271. 

Although the district court did not address this factor, the 

work performed by the decorators is obviously integral to the 

business of the Snells. The Snells, as indicated by the name of 

their company, "Cakes by Karen," are in the business of selling 

cakes which are custom decorated. 

4 As discussed above, Novak also sometimes works at 

Wheatridge Dairy. This is relevant here because it relates to 

issue of economic independence. However, because Novak works 

60 hours a week for the Snells and only four times a year for 

dairy it is clear that her relationship with the Snells 

"permanent'' · and that she is economically dependent on 

employment there. 

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the 

the 

50-

the 

is 

her 

Appellate Case: 87-1500 Document: 01019957910 Date Filed: 05/23/1989 Page: 22 
IV. 

Our consideration of the relevant factors in the discussion 

---,--. 

0

above '-indicates that -the, cake decorators, as a matter of "economic 

reality," are "economically dependent" on the business to which 

they supply their services and are therefore "employees," not 

"independent contractors," within the protection of the FLSA. We 

therefore REVERSE the judgment of the district court and REMAND 

for further proceedings. 

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