Independent Contractors or Employees? New Court Ruling Focuses on Control

Misclassifying employees as independent contractors can leave employers facing significant wage-and-hour liability. 

DMV Protection LLC is a security service company that provides security personnel for clients.

Except for the owner, everyone at DMV – from security guards to the director of operations – is classified as an independent contractor (IC). Guards must sign an IC Agreement and an IC Handbook, which are DMV’s only written policy documents.

DMV pays guards $16.50 to $22 an hour, without overtime premiums. The owner set pay rates based on client rates, with no evidence guards negotiated pay. Guards made no upfront investment. Instead, DMV provided guards with branded uniforms, radios, badges, keys, vehicles and gas. 

How Much Control Over Independent Contractors Is Too Much?

The company assigned guards to client locations and typically established regular schedules. Guards couldn’t hire their own employees or subcontract shifts without supervisor approval. DMV used an app that required guards to clock in and out at every site, gave guards work instructions and conducted periodic check-ins; it also used GPS tracking and in-person site visits to supervise guards.

Guards were penalized for arriving late, leaving early, not wearing uniforms, smoking and using phones for non-work purposes. Penalties included pay deductions, suspensions and terminations.

In 2025, a guard filed a class action alleging misclassification and unpaid overtime under the Fair Labor Standards Act (FLSA) and state law. 

The court found DMV exercised extensive control over guards’ work. That control weighed heavily against IC classification. 

Other factors also supported employee status: Guards had little opportunity to increase earnings through business decisions because DMV set their hourly rates; security work was integral to DMV’s sole business; and DMV provided the equipment guards needed to perform their jobs. The ruling advances guards’ unpaid overtime claims.

Takeaways: An IC agreement doesn’t determine worker status. How a business operates – particularly who sets rates, assigns schedules, tracks time, supervises performance and imposes discipline – matters more.

More info: Rangel v. DMV Protection LLC