2015 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-21-2015

Mikael Safarian v. American DG Energy

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"Mikael Safarian v. American DG Energy" (2015). 2015 Decisions. Paper 780.

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 NOT PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

_____________ 

No. 14-2734 

_____________ 

 

MIKAEL M. SAFARIAN 

v. 

AMERICAN DG ENERGY INC. 

v. 

MULTISERVICE POWER, INC. 

Mikael Safarian, 

 Appellant 

 

On Appeal from the United States District Court 

for the District of New Jersey 

(District Court No.: 3-10-cv-06082) 

District Judge: Honorable Anne E. Thompson 

 

Argued on June 2, 2015 

Before: RENDELL, HARDIMAN, and VANASKIE, Circuit Judges 

(Opinion filed: July 21, 2015) 
2 

Maurice W. McLaughlin, Esq. (Argued) 

Pauline M.K. Young, Esq. 

McLaughlin & Nardi 

37 Vreeland Avenue 

Totowa, NJ 07512 

 Counsel for Appellants 

Rodman E. Honecker, Esq. (Argued) 

Windels, Marx, Lane & Mittendorf 

120 Albany Street Plaza, 6th Floor 

New Brunswick, NJ 08901 

 Counsel for Appellee 

Stephen G. Yoder, Esq. 

United States Securities & Exchange Commission 

100 F. Street, N.E. Mail Stop 1090 

Washington, DC 20549 

Dean Romhilt, Esq. (Argued) 

United States Department of Labor 

Office of Solicitor, Room N-2716 

200 Constitution Avenue, N.W. 

Washington, DC 20210 

 Counsel for Amicus Appellants 

 

O P I N I O N*

 

RENDELL, Circuit Judge: 

The District Court granted summary judgment for Appellee American DG Energy 

Inc. (“ADG”) on all of Appellant Michael Safarian’s claims.1

 The central issue on appeal 

 

*

 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not 

constitute binding precedent. 

1

 Safarian brought claims for violation of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (“Dodd-Frank”), violation of the Fair Labor Standards Act 

(“FLSA”), violation of New Jersey’s Wage and Hour Law, breach of contract, 
3 

is whether the District Court correctly held that Safarian was an independent contractor, 

and not an employee of ADG. While we affirm in part, we will also vacate and remand 

in part because the District Court did not reason through the factors that are important for 

determining employment status under the Fair Labor Standards Act (“FLSA”) and New 

Jersey state law. 

I. Background 

ADG operates in the utility business, and Safarian is an engineer who serviced and 

installed ADG’s machines from approximately December 2006 to April 2010. Safarian 

worked for ADG Mondays through Fridays, as well as some weekends, working at least 

40 hours and sometimes over 50 hours per week. ADG told him which job site to visit 

and which services to perform. ADG provided Safarian with materials to install and fix 

its devices, business cards, cellphone, beeper, business email address, and clothes with 

the company logo. His supervisor described him as ADG’s “boots on the ground” and “a 

face of the company.” (App. 914, 715.) 

Safarian originally understood that he was “being hired as a full-time employee,” 

but then ADG told him “that it was to the best of the company’s interest to temporarily 

put you on as a subcontractor.” (App. 814a.) As a result, Multiservice, a company that 

Safarian owned, invoiced ADG and Multiservice paid Safarian. Multiservice invoiced 

ADG for Safarian’s time on a per-hour basis. Safarian occasionally brought an assistant 

 

promissory estoppel, violation of the Conscientious Employee Protection Act (“CEPA”), 

and violation of public policy under Pierce v. Ortho Pharm. Corp., 84 N.J. 58, 61 (1980). 
4 

to the ADG job sites, and Multiservice billed ADG for the assistant’s labor as well. 

Safarian also took a non-ADG job in Russia for two months. 

While working at ADG sites, Safarian discovered that ADG was performing 

certain work without appropriate permits and that ADG was overbilling customers. 

Safarian objected to ADG’s permit violations and overbilling practices. Safarian claims 

that ADG terminated him in retaliation for these disclosures. 

The District Court noted that in order to bring claims under the federal statute, the 

FLSA, or New Jersey state laws, namely the CEPA, Pierce, and the New Jersey Wage 

and Hour Law, Safarian must be an employee of ADG. The District Court stated that 

determining whether Safarian was an employee required an examination of all the 

circumstances, and it cited factors that we have listed as determinative in FLSA cases, 

citing Martin v. Selker Bros., 949 F.2d 1286 (3d Cir. 1991). The District Court then 

noted that some of the facts of Safarian’s relationship with ADG were “often associated 

with employee relationships,” such as the continuity of the relationship, the importance of 

Safarian’s work to the business, payment on a per-hour basis, and the provision of 

uniforms, tools, and a phone. (App. 9.) The District Court concluded, however, that 

Safarian was an independent contractor because he “structured his relationship with 

[ADG] as an independent contractor and gained certain benefits that come with this 

status.” (Id.) “After experiencing the benefits available through this arrangement, 

[Safarian] ‘stumbles’ in an effort to characterize himself as an employee of [ADG].” 

(Id.) 
5 

II. Analysis 

Safarian’s “employment status . . . is a legal conclusion,” and “[t]hus, our standard 

of review of the legal determination of employee status is plenary.” Martin, 949 F.2d at 

1292.2

Under the FLSA, “the term ‘employee’ means any individual employed by an 

employer.” 29 U.S.C. § 203(e)(1). This statutory definition is “necessarily broad to 

effectuate the remedial purposes of the Act.” Martin, 949 F.2d at 1293. In accordance 

with this “expansive definition[],” courts must “look to the economic realities of the 

relationship in determining employee status under the FLSA.” Id.; see also Tony & 

Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 301 (1985) (“The test of 

employment under the Act is one of ‘economic reality’ . . . .”) (quoting Goldberg v. 

Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961)). There are six factors to determine 

whether a worker is an “employee” under the FLSA: 

1) the degree of the alleged employer’s right to control the manner in which 

the work is to be performed; 2) the alleged employee’s opportunity for 

profit or loss depending upon his managerial skill; 3) the alleged 

employee’s investment in equipment or materials required for his task, or 

his employment of helpers; 4) whether the service rendered requires a 

special skill; 5) the degree of permanence of the working relationship; 6) 

whether the service rendered is an integral part of the alleged employer’s 

business. 

Martin, 949 F.2d at 1293 (quoting Donovan v. DialAmerica Mktg., Inc., 757 F.2d 

1376, 1382 (3d Cir. 1985)). 

 

2

 In general, “we employ a plenary standard in reviewing orders entered on motions for 

summary judgment.” Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 

2014). 
6 

 Even though the District Court listed these factors, it did not reason through 

them. Instead, it focused on the structure of the Safarian-ADG relationship, 

noting, for example, that Safarian billed his work for ADG through Multiservice 

and that Safarian used Multiservice to claim tax advantages. However, it is the 

economic realities of the relationship as analyzed using the Martin factors, not the 

structure of the relationship, that is determinative. Indeed, the issue arises because

the parties structured the relationship as an independent contractor, but the caselaw 

counsels that, for purposes of the worker’s rights under the FLSA, we must look 

beyond the structure to the economic realities. Thus, the dissent’s concern with 

the structure is beside the point.3

 

 In Rutherford Food Corp. v. McComb, 331 U.S. 722, 726 (1947), the 

Supreme Court held that meat boners in a factory were employees, even though 

the boners owned their own tools, hired employees to assist with the boning 

operation, and were not paid hourly. The Rutherford court noted that “[w]hile 

profits to the boners depended upon the efficiency of their work, it was more like 

piecework than an enterprise that actually depended for success upon the initiative, 

judgment or foresight of the typical independent contractor.” Id. at 730. In Tony 

and Susan Alamo Foundation, the Supreme Court held that workers—who 

testified that they were not employees, did not work for material rewards, and 

volunteered for ministry purposes—were employees within the meaning of the 

 

3

 Moreover, I view the analysis of the Martin factors as pointing more toward employee 

status for Safarian than our dissenting colleague; but it will be for the District Court to 

address these factors in the first instance. 
7 

FLSA because they were “entirely dependent upon the Foundation for long 

periods, in some cases several years.” Tony & Susan Alamo Found., 471 U.S. at 

301 (quoting Donovan v. Tony & Susan Alamo Found., 567 F. Supp. 556, 562 

(W.D. Ark. 1982)). See also Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 

1385-86 (3d Cir. 1985) (holding that workers were employees under the FLSA 

because they “were not in a position to offer their services to many different 

businesses and organizations,” “worked on a continuous basis with DialAmerica 

and were able to work only when and if DialAmerica was in need of their 

services,” and, consequently, “were economically dependent on DialAmerica”); 

Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 667 (5th Cir. 1983) (holding 

that workers were employees because “the fact that [workers] provided their own 

insurance coverage, listed themselves as self-employed on their tax returns, and 

had their own business cards and letterheads, does not tip the balance in favor of 

independent contractor status where, as here, the economic realities of the 

situation indicate that the employee depended upon the employer for his 

livelihood”); Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir. 

2013) (“This [FLSA] inquiry is not governed by the ‘label’ put on the relationship 

by the parties or the contract controlling that relationship, but rather focuses on 

whether ‘the work done, in its essence, follows the usual path of an employee.’”) 

(quoting Rutherford, 331 U.S. at 729). 

 The fundamental point here is that courts must look to the economic 

realities, not the structure, of the relationship between the workers and the 
8 

businesses. Accordingly, we will vacate and remand so that the District Court can 

apply the proper test by examining the facts in light of the Martin factors and 

weighing them in coming to a conclusion regarding Safarian’s employee status. 

We will also vacate the District Court’s grant of summary judgment under CEPA 

and Pierce because the District Court did not consider the factors under New 

Jersey law for determining whether Safarian was an employee under those laws. 

See Pukowsky v. Caruso, 711 A.2d 398, 404 (N.J. Super. Ct. App. Div. 1998) 

(listing 12 factors that courts should consider to determine a worker’s status). 

 However, we will affirm the District Court’s grant of summary judgment in 

favor of ADG on Safarian’s Dodd-Frank,4

 breach of contract, New Jersey Wage 

and Hour Law, and promissory estoppel claims. We will also affirm the 

Magistrate Judge’s decisions regarding discovery. “[W]e review a district court’s 

denial of a discovery motion for an abuse of discretion,” and there was no abuse of 

discretion here. Lloyd v. HOVENSA, LLC., 369 F.3d 263, 274 (3d Cir. 2004). 

III. Conclusion 

Accordingly, we will affirm in part and vacate in part. We will affirm the District 

Court’s rulings on the Dodd-Frank, New Jersey Wage and Hour Law, promissory 

 

4

 In order to receive Dodd-Frank whistleblower protection, an employee must report 

“conduct which the employee reasonably believes constitutes a violation of section 1341, 

1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, 

or any provision of Federal law relating to fraud against shareholders.” 18 U.S.C. 

§ 1514A(a)(1). The District Court correctly determined that the misconduct that Safarian 

reported did not fall into any of these categories. Amicus Department of Labor expressed 

concern that the District Court’s opinion could be read narrowly to imply that DoddFrank whistleblower protection only applies to lawyers, accountants, or auditors who 

report shareholder fraud. We do not read the District Court opinion so narrowly. 
9 

estoppel, and breach of contract claims and its discovery orders. We will vacate the entry 

of summary judgment on Safarian’s FLSA, CEPA, and Pierce claims, and remand for 

further proceedings. 
Mikael M. Safarian v. American DG Energy Inc. v. Multiservice Power, Inc.

No. 14-2734

HARDIMAN, Circuit Judge, dissenting in part.

I join the panel’s opinion except that I disagree with my colleagues’ decision to 

vacate and remand for a redetermination of Safarian’s employment status under the Fair 

Labor Standards Act. In my view, the record supports the District Court’s conclusion that 

Safarian is not an employee of American DG Energy Inc. (ADG) for purposes of federal 

law.

In the seminal case of Rutherford Food Corp. v. McComb, the Supreme Court

explained that “the determination of the [employment] relationship does not depend on 

. . . isolated factors but rather upon the circumstances of the whole activity.” 331 U.S. 

722, 730 (1947). To help courts in making the employment-status determination, we 

enunciated six factors:

1) the degree of the alleged employer’s right to control the manner in which 

the work is to be performed; 2) the alleged employee’s opportunity for 

profit or loss depending upon his managerial skill; 3) the alleged 

employee’s investment in equipment or materials required for his task, or 

his employment of helpers; 4) whether the service rendered requires a 

special skill; 5) the degree of permanence of the working relationship; 6) 

whether the service rendered is an integral part of the alleged employer’s 

business.

Martin v. Selker Bros., 949 F.2d 1286, 1293 (3d Cir. 1991). After articulating these six 

factors, we explained that “[t]here is no single test to determine whether a person is an 

employee or an independent contractor for purposes of the FLSA.” Id. We further

cautioned that “neither the presence nor the absence of any particular factor is 
2

dispositive.” Id.

Here, the District Court noted many of the facts germane to the Martin factors in 

the background section of its opinion. For example, the District Court noted that Safarian 

is an engineer who worked for ADG five days a week for over three years and was told by

ADG where to go and what services to perform. The Court also indicated that Safarian 

was supplied materials by ADG and was paid by ADG through Multiservice Power, 

Inc.—a company Safarian owned. See Safarian v. Am. DG Energy Inc., 2014 WL 

1744989, at *1 (D.N.J. Apr. 29, 2014). The Court then observed several key facts about 

Multiservice, namely, that it billed ADG by invoice, had its own insurance, hired its own 

accountant, filed payroll taxes for Safarian, owned its own company vehicle (that Safarian 

used), and took advantage of various small business benefits. Id. Finally the Court 

discussed some statements Safarian made concerning his employment status in response 

to a tax issue and two offers of employment from ADG. Id.

In its analysis section, the District Court began by rightly noting that the totality of 

the circumstances and the Martin factors determine whether a worker is an employee or 

an independent contractor. Id. at *2–*3. Though the Court acknowledged that some facts 

favor each side, it found that Safarian benefitted from the structure of his relationship 

with ADG—by, for example, claiming certain deductions on Multiservice’s taxes—and 

thus was an independent contractor.

According to the majority, the Court’s analysis was overly formalistic. I disagree. 
3

Seven decades of precedent emphasize a flexible, totality-of-the-circumstances

employment-status inquiry; or, in other words, exactly the type of analysis conducted by 

the District Court.

The majority’s principal criticism of the District Court is that it didn’t rely on the

Martin factors. As noted above and further explained below, I don’t think it’s necessary 

for a court to organize its analysis according to the Martin factors. But even if such 

organization were required, the District Court’s opinion passes muster for the reasons that 

follow.

1. Control

The District Court touched on this factor when it noted that Safarian is an engineer 

and that ADG told Safarian where to go and what services to perform. Safarian’s 

technical expertise meant that he had a certain amount of discretion, even though ultimate 

decisions concerning his work were made by supervisors at ADG.

2. Opportunity for Profit or Loss

The second factor weighs in favor of Safarian because, as noted by the District 

Court, he was paid (through invoices to Multiservice) on an hourly basis rather than by 

each project he worked on.

3. Investment in Equipment and Helpers

This factor cuts in ADG’s favor because Multiservice owned various pieces of 

equipment that Safarian sometimes used when working for ADG, and Safarian then 
4

claimed deductions on Multiservice’s taxes for depreciation of that equipment. Though 

not mentioned by the District Court, it is undisputed that Safarian occasionally brought 

his nephew to ADG jobs as a helper and then billed ADG (through Multiservice) for his 

nephew’s work. App. 291, 302, 351–55.

4. Special Skill

Engineering is a profession that requires special skills, as indicated by Safarian’s 

undergraduate degree in nuclear science and nuclear engineering and his professional

license to work on gas turbine engines of unlimited horsepower. App. 283–84. Though 

the District Court only mentioned that Safarian was an engineer, it was sufficient 

shorthand for conveying the fact that he had special skills, especially when noted in 

conjunction with his work installing and servicing complex cogeneration systems.

5. Permanence 

The District Court observed that Safarian worked for ADG for over three years.

6. Integral to Business

Finally, the District Court noted that ADG is in the utility business and that 

Safarian serviced and installed ADG’s systems. Though the District Court could have 

described in more detail how Safarian’s work was integral to ADG, that would have been 

unnecessary (as indicated by ADG conceding this factor on appeal).

While the District Court elucidated facts supporting an analysis under the Martin

test, it candidly stated that “the question of employment status is far from 
5

straightforward,” Safarian, 2014 WL 1744989, at *3, and then discussed facts that don’t 

neatly conform to Martin’s analytical framework. In my view, two facts make this case 

exceptional enough to justify departing from a rigid application of the Martin factors in 

order to better reflect the economic realities of the relationship.

First, Safarian’s employment by Multiservice while performing work for ADG is 

unique.1In fact, neither Safarian nor the majority can point to a single decision where a 

court said that the business organization of an alleged employee is irrelevant in 

determining employment status under the FLSA. There was thus nothing improper about 

the District Court looking to the benefits Safarian received by performing work for ADG 

through Multiservice—all the District Court did was force Safarian to “take the bitter 

with the sweet.” Arnett v. Kennedy, 416 U.S. 134, 154 (1974) (plurality opinion). The

Tenth Circuit when confronted with a similar situation adhered to a common sense 

analysis that is more faithful to Supreme Court precedent than the majority’s approach 

here. See Barlow v. C.R. England, Inc., 703 F.3d 497, 506 (10th Cir. 2012) (considering

the implications of a worker performing services for the alleged employer through a 

company that the worker owned). The Supreme Court has also indicated that this 

consideration is legitimate. See Rutherford, 331 U.S. at 730 (“The group had no business 

organization that could or did shift as a unit from one slaughter-house to another.”).

 

1 The District Court expressly discussed the benefits Safarian obtained from 

working for ADG through Multiservice, noting, for example, that Multiservice claimed 

certain tax deductions.
6

The second unique feature of this case is that Safarian is an educated professional 

who was highly compensated—to the tune of almost $600,000 during his three-plus years

with ADG. If the central concern of the FLSA is preventing employers from taking 

advantage of a monopsony, see Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1542 (7th Cir.

1987) (Easterbrook, J., concurring), then applying its protections to Safarian would be 

anomalous to say the least. Moreover, while performing work for ADG, Safarian turned 

down an employment offer that apparently would have paid well into the six figures.

For the reasons stated, I join the panel’s opinion in all respects except that I would 

affirm the judgment of the District Court on Safarian’s FLSA claim.