This month, two New York federal judges reviewing a claim of misclassification rejected a claim for overtime compensation, agreeing that a business properly classified two translators as independent contractors rather than as “employees” under the Fair Labor Standards Act and the New York Labor Law. See Mateo v. Universal Language Corp., 2015 U.S. Dist. LEXIS 128638 (E.D.N.Y. Sept. 4, 2015), aff’d by 2015 U.S. Dist. LEXIS 128377 (E.D.N.Y. Sept. 23, 2015).

In Mateo, after the defendant stopped participating in the litigation, the court struck its answer and permitted the named plaintiff and the twelve opt-in plaintiffs to seek the entry of default. The plaintiffs then moved for a default judgment, seeking overtime wages under the FLSA and the NYLL.

Following an evidentiary hearing regarding Plaintiffs’ alleged damages, Magistrate Judge James Orenstein sua sponte recommended that the district court deny the motion, decertify the collective action under the FLSA, and dismiss the complaint with prejudice as to the named plaintiff and without prejudice as to the opt-in plaintiffs, finding that the named plaintiff and the opt-in plaintiff who testified at the inquest were not defendant’s employees. Contrary to the complaint’s allegations, both these plaintiffs testified that they were responsible for providing their own computer equipment and headphones; the defendant agency’s clients (rather than the defendant) furnished the software they used; they were not reimbursed for work-related expenses; they typically worked at the clients’ offices or in their own homes; they were not assigned office space at defendant’s office; they could and did sometimes refuse work assignments from defendant; and they could and did work for other companies during the period they provided translation services to defendant’s clients. Despite the presence of several uncontroverted allegations tending to support employee status – including that plaintiffs lacked their own stationery reflecting independent businesses, defendant’s training and dress code requirements, defendant’s identification of replacement translators for its clients when necessary, and defendant’s web site reference to translators as “employees” – Magistrate Judge Orenstein held that the economic reality of the relationship was that the named plaintiff and one of the opt-in plaintiffs were independent contractors.

Reviewing the Magistrate’s report, District Judge Nicholas Garaufis adopted it in full, finding that “Courts in th[e Second C]ircuit have found facts similar to these indicative of an independent contractor relationship.” As a result, the district court denied the motion for default judgment, decertified the collective action, and dismissed the named plaintiff’s claims with prejudice and the opt-in plaintiffs’ claims without prejudice.

The translation and interpretation industry has long relied on the use of independent contractors to provide sporadic, often highly specialized services. Employers in all industries should continue to be vigilant in reviewing their classifications of individuals as employees or independent contractors