The 5th Circuit Court awarded attorneys’ fees to a company that prevailed in what the court deemed a bad-faith independent contractor classification case brought by the US Department of Labor.

The case follows a ruling last year by the US District Court in Texas, which awarded attorneys fees to Gate Guard under the Equal Access to Justice Act’s (“EAJA”) substantially-justified provision, but denied fees under the EAJA’s bad faith provision. The DOL appealed, acknowledging that it had made mistakes in its IC case against Gate Guard, but asserted an attorneys’ fee award is unjustified.

Gate Guard supplies oil companies with gate attendants as independent contractors. Gate Guard does not supervise the attendants, who find their own relief workers, are not restricted from working with competitors, and are not evaluated or disciplined based on performance. The DOL began investigating the company in 2010 following a tip from a former attendant. After a brief investigation, the agency found the company’s 400 independent contractors to be misclassified and ordered the company to pay more than $6 million in back wages and overtime. Gate Guard later sued the DOL, seeking affirmation it was in compliance with the FLSA as well as attorneys fees.

Gate Guard ultimately prevailed after it became clear the DOL’s investigation was incomplete and poorly conducted, with the DOL ignoring facts that supported the classification of the attendants as independent contractors as well as interviewing few of the 400 ICs. The DOL appealed the attorneys’ fees award but not IC classification outcome.

The 5th Circuit concluded: “The EAJA allows for an attorneys’ fees award against the government whenever it has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons.’” Citing the government’s conduct before and during litigation as well as its legally insupportable case, the court found the “government’s conduct here was sufficiently egregious to warrant an award” under the EAJA’s bad-faith provision, sending the case back to the district court to calculate the award. The original award had been for $565,000.

Read the case judgment here.