## F I L E D United States Court of Appeals Tenth Circuit 

### MAR 6 1998 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

REX BAKER, JOSEPH N. BORDELON, GARY COON, MACK D. MANTLE, JAMES D. SPEARS, JR., GARY MILLER, SR., EDWARD McHENRY, Plaintiffs-Appellees, and ALAN BOYD, CHARLIE E. BRADSHAW, JR., ROBERT CORNETT, JR., LARRY CUNNINGHAM, DENNY HENSLEY, STEVEN D. HENSLEY, LEONARD L. MAHAN, TRACY R. McMANUS, EDDIE MILLER, GERALD MILLER, DAVID L. ROBINSON, DENNIS STILES, RAY E. FOWLER, WILLIAM R. CLARENCE, Plaintiffs,

v. FLINT ENGINEERING & CONSTRUCTION COMPANY, Defendant-Appellant, and BARNARD CONSTRUCTION CO., INC.; DAVY McKEE CORPORATION; FOUR-WAY COMPANY, INC.; FOUTZ & BURSUM No. 96-2133-2-

CONSTRUCTION COMPANY, INC.; MOUNTAIN WEST FABRICATION PLANTS & STATIONS, INC.; PIONEER CONTRACTING COMPANY, INC., Defendants.

Appeal from United States District Court

for the District of New Mexico (D.C. No. CIV-93-140-BB)
John T. Schmidt (Deirdre O. Dexter and Rebecca S. W oodward with him on the brief), of Conner & Winters, Tulsa, Oklahoma, for t he appellant. Michael L. Oja (J.E. Gallegos and Michael J. Condon with him on the brief), of Gallegos Law Firm, P.C., Santa Fe, New Mexico, for the appellees.
Before BRISCOE, McKAY, and LUCERO, Circuit Judges.
BRISCOE, Circuit Judge.
Plaintiffs are a group of rig welders in the natura l gas pipeline construction industry. They filed this action against Flint Eng ineering & Construction Company for overtime compensation under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. Flint appeals the district court’s entry of summa ry judgment in favor of plaintiffs, contending the cou rt erred in concluding plaintiffs were employees of Flint rather than independent con tractors. We exercise-3-

jurisdiction under 28 U.S.C. § 1291 and affirm.
I. Flint is a corporation engaged in the construction, installation, and servicing of oil and gas pipelines and related faci lities for the oil and gas industry in the “Four Corners” region of New Mexico. In particular, Flint is routinely hired as a general contractor by oil and gas compan ies to build natural gas pipelines and compressor stations which transport n atural gas from the wellheads to the owner’s main processing plants. When Flint is the successful bidder on a project (o r is otherwise hired to complete a project), it hires a variety of workers, including rig welders, to assist in completion of the project. Rig welders (a/k/a p ipe welders) perform skilled welding on pipes, sheet metal, and other portions o f gas industry facilities. They are routinely tested and certified by project owner s to insure they can perform their jobs. They provide their own welding equipme nt, which is typically mounted on flat-bed pickup trucks. The equipped tr ucks are referred to as “welding rigs,” and each welding rig costs between $35,000 and $40,000. Rig welders are also responsible for costs of stocking their welding rigs with supplies, as well as for necessary repairs to the rigs. Rig welders do not bid on jobs and do not have contractor’s licenses that would enable th em to do so. Flint simply hires rig welders at a set hourly rate to work on particu lar projects. Flint does not-4-

negotiate the hourly rate, and sometimes pays on a “straight contract” basis at approximately $27 to $30 per hour, and sometimes ona “split check” basis at a rate of $10 per hour for labor and $17 per hour forrig rental. Work on a project is typically conducted six days aweek, twelve to fourteen hours per day. Rig welders are supervisedby Flint foremen and are required to arrive, take breaks, and leave at times specified by the foremen. They are not allowed to complete their work when they wa nt and, in most cases, it would be impossible for them to do so because they must coordinate their work with the other crafts and because other equipment a nd workers are necessary to move pipe for welding. Rig welders are not provide d project blueprints. Instead, the foremen map out what pipes they want built and in what order. The foremen do not establish the welding specifications and standards, nor do they tell rig welders how to weld or how long a particular weld s hould take. Welding specifications and standards are established by the customer (i.e., the project owner) and the quality of welding is overseen by aninspector hired by the customer. Because of the nature of their work, rig welders (and other pipeline workers) would be unemployed after completion of a project if they did not seek work on new projects. Accordingly, it is common fo r rig welders to work for several different companies during the course of a year. Prior to July 1, 1991, Flint considered rig welders as independent-5-

contractors and asked each rig welder to sign a doc ument entitled “Agreement With Independent Contractor,” which stated:

It is the intent of the parties involved to establi sh and maintain an “independent relationship” rather than an employ er-employee relationship. All Federal, State and Local laws, r egulations, and guidelines should be adhered to accordingly. The I ndependent Contractor is responsible for maintaining adequate amounts of insurance.” R. I at 49. The agreements did not indicate how lo ng the “independent relationship” was to last, did not refer to specifi c projects or project specifications, and did not indicate how much the w elder was to be paid. Although Flint began characterizing rig welders as employees on and after July 1, 1991, no other substantial changes took place in th e way they were hired or treated. Flint treats the majority of workers on each projec t as employees. For example, job foremen are treated and paid as employ ees, as are laborers, pipefitters, and welders’ helpers (all of whom, lik e rig welders, are hired on a per project basis). Flint treats a few other workers ( e.g., insulation workers, electrical workers) on each project as subcontractors or indep endent contractors. These subcontractors are paid on a lump-sum basis or a un it basis. Plaintiffs filed this action on February 5, 1993, c laiming violations of the FLSA. The parties filed cross-motions for summary judgment, all of which focused on whether plaintiffs were employees of Fli nt prior to July 1, 1991, for-6-

purposes of the FLSA. The district court conductedan evidentiary hearing and, on May 26, 1994, granted summary judgment in favor of plaintiffs on the independent contractor/employee issue, concluding p laintiffs were employees prior to July 1, 1991. Thereafter, the parties rea ched a settlement of other issues unrelated to the independent contractor/employee is sue. On June 3, 1996, the court entered final judgment in favor of plaintiffs on the independent contractor/employee issue, consistent with its May 24, 1994, order, and concluded the settlement between the parties resolved all rem aining issues asserted by plaintiffs against Flint. The court further found that, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, there was no just reason for delay of entry of final judgment on the order granting summary jud gment in favor of plaintiffs.
II. The FLSA defines an employee as “any individual emp loyed by an employer.” 29 U.S.C. § 203(e)(1). In turn, “emplo yer” is defined as including “any person acting directly or indirectly in the in terest of an employer in relation to an employee.” 29 U.S.C. § 203(d). The FLSA “de fines the verb ‘employ’ expansively to mean ‘suffer or permit to work.’” N ationwide Mut. Ins. Co. v. Darden , 503 U.S. 318, 326 (1992) (quoting 29 U.S.C. § 203 (g)). The Supreme Court has emphasized that the “striking breadth” of this latter definition “stretches the meaning of ‘employee’ to cover some parties who might not qualify-7-

as such under a strict application of traditional a gency law principles.” Id. Thus, in determining whether an individual is covered by the FLSA, “our inquiry is not limited by any contractual terminology or by tradit ional common law concepts of ‘employee’ or ‘independent contractor.’” Hendersonv. Inter-Chem Coal Co.,
Inc. , 41 F.3d 567, 570 (10th Cir. 1994) (citing Dole v. Snell , 875 F.2d 802, 804 (10th Cir. 1989)). Instead, the economic realities of the relationship govern, and “the focal point is ‘whether the individual is econ omically dependent on the business to which he renders service . . . or is, a s a matter of economic fact, in business for himself.’” Id. The economic reality test includes inquiries into whether the alleged employer has the power to hire and fire employees, supervises and controls employee work schedules or conditions of employment, determines the rate and method of payment, and maintains emplo yment records. Watson v.
Graves , 909 F.2d 1549, 1553 (5th Cir. 1990). In applying the economic reality test, courts gener ally look at (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 in vestment in the business; (4) the permanence of the working relationship; (5) the deg ree of skill required to perform the work; and (6) the extent to which the w ork is an integral part of the alleged employer’s business. Henderson , 41 F.3d at 570. In deciding whether an individual is an employee or an independent contrac tor under the FLSA, a district-8-

court acting as the trier of fact must first make f indings of historical facts surrounding the individual’s work. Second, drawing inferences from the findings of historical facts, the court must make factual fi ndings with respect to the six factors set out above. Finally, employing the find ings with respect to the six factors, the court must decide, as a matter of law, whether the individual is an “employee” under the FLSA. Id. at 571. None of the factors alone is dispositive; instead, the court must employ a totality-of-the-ci rcumstances approach. Id. at 570 In reviewing the district court’s decision on appea l, we review the two types of factual findings (findings of historical f act, and findings with respect to the six factors) for clear error. The ultimate det ermination of whether an individual is an employee or an independent contrac tor for purposes of the FLSA is a question of law, which we review de novo. Id. at 571.

Control The district court found Flint’s “degree of control over the rig welders, and the Plaintiffs’ lack of independence over setting t heir work hours, work crews and other details of their welding work, is more consis tent with employee rather than independent contractor status.” R. I. 272. After carefully reviewing the record on appeal, we conclude this finding is not clearly err oneous.-9-

As in Dole , “the record does not support any inference that t hese [rig welders] act[] autonomously, or with any degree of independence which would set them apart from what one would consider normal empl oyee status.” 875 F.2d at 806. Instead, Flint’s foremen tell the rig welders when to report to work, when to take breaks, on what portion of the project they wi ll be working, and when their workday ends. The record indicates rig welders can not perform their work on their own schedule; rather, pipeline work has assem bly line qualities in that it requires orderly and sequential coordination of var ious crafts and workers to construct a pipeline. The record further indicates plaintiffs work on only one project at a time and do not offer services to thir d parties while a project is ongoing. Indeed, the hours plaintiffs are required to work on a project (ten to fourteen hours a day, six days a week), coupled wit h driving time between home and often remote work sites each day, make it pract ically impossible for them to offer services to other employers. In short, very little about plaintiffs’ work situation makes it possible to view plaintiffs as p ersons conducting their own businesses. See id. at 808.

Opportunity for profit or loss In analyzing the second factor, the district court found plaintiffs are paid at a fixed hourly rate, plaintiffs have no opportunity to experience a loss on the job-10-

site, plaintiffs’ ability to control costs of weldi ng supplies does not necessarily enable them to make a profit, and plaintiffs’ abili ty to maximize their wages by “hustling” new work is not synonymous with making aprofit. Based on these findings, the court found “Plaintiffs had no opportunity to experience a profit or loss consistent with the characteristics of being i ndependent businessmen.” R. I. at 273. These findings are not clearly erroneous. If plaintiffs could bid on jobs at a set amount and correspondingly set their own hours or schedule, they would have the opportun ity for profit or loss. However, plaintiffs are hired on a per-hour basis r ather than on a flat-rate-per-job basis. There is no incentive for plaintiffs to wor k faster or more efficiently in order to increase their opportunity for profit. Mo reover, there is absolutely no risk of loss on plaintiffs’ part. Plaintiffs exerc ise independent initiative only in locating new work assignments. While working on a particular assignment, there is little or no room for initiative (certainly none related to profit or loss). There is no indication plaintiffs share in the profits (or l osses) of Flint’s business. See Dole , 875 F.2d at 809. “In short, the [rig welders] ha [ve] no control over the essential determinants of profits in a business, an d no direct share in the success of the business.” Id. at 810.

Investment in business-11-

The district court found plaintiffs have substantia l investments in their welding rigs and that twenty-five to fifty percent of their compensation is based on their furnishing rigs. Although the court furth er found Flint’s investment in the overall business far exceeds plaintiffs’ investments, it nevertheless found “Plaintiffs’ investment in this industry, and theircompensation which is based on this investment, is more consistent with finding th e rig welders independent
contractors.” R. I. at 277. The investment “which must be considered as a facto r is the amount of large capital expenditures, such as risk capital an d capital investments, not negligible items, or labor itself.” Dole , 875 F.2d at 810. This factor “is interrelated to the profit and loss consideration.” Lauritzen , 835 F.2d at 1537. “Courts have generally held that the fact that a wo rker supplies his or her own tools or equipment does not preclude a finding of e mployee status.” Dole , 875 F.2d at 810. In making a finding on this factor, i t is appropriate to compare the worker’s individual investment to the employer’s in vestment in the overall operation. See id. (comparing defendants’ relative investment as cake decorators with employer’s overall investment in bakery busine ss); Lauritzen , 835 F.2d at 1537 (comparing migrant workers’ capital investmentwith employer’s overall investment in pickle-farming operation). The district court is clearly correct in finding pl aintiffs’ investments in-12-

their welding rigs are significant (at least when c ompared to other workers), and in finding a significant portion of plaintiffs’ pay is based on their furnishing rigs. However, plaintiffs’ investments are disproportionately small when compared to Flint’s investment in the overall business. Severa l witnesses testified that Flint routinely had hundreds of thousands of dollars of e quipment at each work site. Compared to Flint’s investment in the overall busin ess, plaintiffs’ investments are not so significant as to indicate they are independ ent contractors.

Permanency of working relationship The district court found plaintiffs rarely work forFlint more than two months at any one time, and rarely for more than th ree months during any twelvemonth period. However, the court found plaintiffs remain on the job site until the necessary welding is done. Thus, the court found “ Plaintiffs’ lack of permanence is due to natural characteristics in the industry, and not the independent choice usually exhibited by one who intentionally chooses to be in business for oneself. Therefore, while rig welders are temporary workers, this finding is of little relevance in determining whether these Plaintiffs a re employees or independent
contractors.” R. I. at 279. Generally speaking, “‘independent contractors’ ofte n have fixed employment periods and transfer from place to place as particular work is offered-13-

to them, whereas ‘employees’ usually work for only one employer and such relationship is continuous and of indefinite durati on.” Dole , 875 F.2d at 811. However, “[m]any seasonal businesses necessarily hi re only seasonal employees, [and] that fact alone does not convert seasonal emp loyees into seasonal independent contractors.” Lauritzen , 835 F.2d at 1537. We agree with the district court’s findings on this factor. Although plaintiffs exhibit characteristics generally typica l of independent contractors as regards the short duration of their employment relationships and their frequent relocation to find employment, these characteristic s of plaintiffs’ employment are clearly due to the intrinsic nature of oil and gas pipeline construction work rather than any choice or decision on the part of plaintif fs. Notably, the record indicates the majority of workers employed by Flint (e.g., pi pefitters, laborers, etc.) work on the same basis as plaintiffs and are nevertheles s treated as employees. We conclude it is appropriate to characterize plaintif fs’ relationship with Flint as “permanent and exclusive for the duration of” the p articular job for which they are hired. Id. at 1537 (migrant workers’ relationship with single farming operation was permanent and exclusive for duration of single harvest season).

Degree of skill required to perform work The district court found plaintiffs “are highly ski lled individuals” and are,-14-

in fact, “the most skilled employees on a transmiss ion systems project.” R. I. at 280. However, the court further found plaintiffs d o not “make any independent judgments on the job site,” and thus do not exercis e their skills “in any independent manner.” Id. The court further found Flint does not attempt to hire the most skilled available rig welders nor does it negotiate pay depending on the level of skill possessed.

Most independent contractors develop a business rel ationship with many contractors based on their expertise. If they do superior work they are often sought out in the future. Partof the reason is that the contractor comes to trust their skills and depends upon their judgment in completing their tasks. Here there is no such judgment decisions expected of the rig welders and, conseque ntly, Defendant[] do[es] not discriminate between rig welders [it] hi re[s]. In light of the fact that the Plaintiffs do not exercise any in itiative or make any judgment decisions on the job site, the Court finds that Plaintiffs’ skills are not indicative of independent contractorstatus. Id. at 281-82. The district court’s findings on this factor are no t clearly erroneous. Although “[t]he lack of the requirement of speciali zed skills is indicative of employee status,” Dole , 875 F.2d at 811, “the use of special skills is no t itself indicative of independent contractor status, especi ally if the workers do not use those skills in any independent way.” Martin v. Se lker Bros., Inc. , 949 F.2d 1286, 1295 (3d Cir. 1991). As noted by the district court, plaintiffs are highly skilled but they did not exercise those skills in any indep endent fashion in their employment with Flint. Although plaintiffs are nottold by Flint how to complete-15-

a particular weld, they are told by Flint foremen w hen and where to weld. Accordingly, the fact that plaintiffs use special s kills does not necessarily indicate they are independent contractors.

Integral part of business After noting this factor focuses on whether workers ’ services are a necessary component of the business, the district c ourt found “[r]ig welders are necessary in the construction of all transmission s ystems projects,” and, although “they do not remain on the job site from start to f inish, their work is a critical step on every transmission system project.” R. I. at 28 2. These findings are not clearly erroneous. The evidence in the record on appeal clearly indicates rig welders’ work is an important, and indeed integral, component of oil and gas pipeline construction work.

Economic dependence of plaintiff s Our final step is to review the findings on each of the above factors and determine whether plaintiffs, as a matter of econom ic fact, depend upon Flint’s business for the opportunity to render service, or are in business for themselves. Dole , 875 F.2d at 804; Brock v. Superior Care, Inc. , 840 F.2d 1054, 1059 (2d Cir. 1988). Although Flint urges us to focus on whetherplaintiffs rely on Flint for1 Flint’s suggested focus would lead to outcomes clearly at odds with the FLSA.

For example, a low-skilled worker who regularly shifts jobs (e.g., fast food jobs) would never be dependent upon a single employer, or even a single industry, for annual subsistence. The worker would necessarily be classified as an independent contractor for purposes of the FLSA and would not be entitled to overtime pay. -16- their subsistence, we believe the question is wheth er plaintiffs are economically dependent upon Flint during the time period they wo rk for Flint, however long or short that period may be. 1 In other words, “the dependence at issue is depen dence on that job for that income to be continued and notnecessarily for complete sustenance.” Halferty v. Pulse Drug Co., Inc. , 821 F.2d 261, 267 (5th Cir. 1987). In arguing plaintiffs are independent contractors, Flint relies heavily on Carrell v. Sunland Const., Inc. , 998 F.2d 330, 334 (5th Cir. 1993), where the court held rig welders working for natural gas pipe line construction companies in Louisiana and other states were independent contrac tors for purposes of the FLSA. Although we agree the facts here are strikin gly similar to those in Carrell , there are factual differences. For example, the co urt in Carrell emphasized the rig welders before it were highly skilled, but made no mention of whether those welders were free to exercise their judgment in completing their work. Here, the district court specifically found that although pla intiffs are highly skilled, they are not free to exercise those skills in any independen t manner when they work for Flint. Plaintiffs are specifically told when and w here to weld and have no authority to override those decisions. They are to ld when to report to work, when-17-

to take breaks, and when to end their workday. Aside from differences in historical fact, we also disagree with the finding in Carrell that rig welders have an opportunity to maximize t heir profits by controlling the costs of their welding supplies andby consistently finding work with other companies. Instead, we agree with the d istrict court that this is not the type of “profit” typically associated with an indep endent contractor. Generally speaking, an independent contractor has the abilityto make a profit or sustain a loss due to the ability to bid on projects at a flat rate and to complete projects as it sees fit. Here, plaintiffs have neither the abi lity to bid on projects nor to complete their work in an independent fashion. Ultimately, we agree with the district court and co nclude plaintiffs are employees of Flint, rather than independent contrac tors, for purposes of the FLSA. In most respects, plaintiffs are no different from any other workers hired by Flint and treated as employees. Plaintiffs are hired to complete a job, are told their working hours, are told their hourly pay rate , and are told on what portion of the project they will be working during a given workday. Although plaintiffs are the most skilled workers on the job site, they are not asked to exercise their discretion in applying their skills; they are told what to do and when to do it. The only substantial difference between plaintiffs and the other workers on the job site is that plaintiffs are required to supply equi pment to perform their jobs. This-18-

fact alone, however, does not alter the realities o f their working situation. Nor does it allow them to make any type of substantial profit above wages they are paid. Ultimately, plaintiffs, like other workers h ired by Flint, are dependent upon Flint for the opportunity to render services for ho wever long a particular project lasts.
IV. The judgment of the district court is AFFIRMED.