From Compensation.BLR.com, Brittany Smith discusses a case in which the United States Department of Labor alleged that nurses had been misclassified as independent contractors. The District Court found that the nurses had been misclassified and the case has been appealed. Brittany discusses the case and offers advice for employers. She writes:
Background
Steadfast was founded in 2015 with the goal of helping nurses achieve more flexibility with higher pay. It uses a roster of nurses to “fill” shift openings from healthcare provider clients. In 2021 and 2022, its roster included over 1,100 nurses.
Steadfast and Pitts classified their nurses as independent contractors. The DOL, however, contends they violated the FLSA by failing to classify the nurses as employees. After what Steadfast and Pitts deem “several years of contentious litigation,” the district court issued a memorandum opinion on January 14, 2022, agreeing with the DOL and concluding that Steadfast’s nurses should be classified as employees. The $9 million dollar “employee vs. independent contractor” debate now rests with 4th Circuit.
District Court’s Order
In determining whether Steadfast’s nurses should be classified as independent contractors or employees under the FLSA, the district court applied the 4th Circuit’s “economic realities test,” examining:
- The nature and degree of Steadfast’s control;
- The nurses’ opportunities for profit or loss;
- The investment of the nurses and Steadfast;
- The skill required for the nurses to complete their work;
- The permanence of the relationship between Steadfast and the nurses; and
- Whether the services rendered by the nurses is an integral part of Steadfast’s business.
The court paid special attention to the first factor – control. According to the court, Steadfast exercises extensive control over the nurses’ work through, among other things, scheduling and assigning work, investing in training and insurance, determining and paying nurses’ hourly rates, and providing supervision and discipline.
After concluding that “virtually all the remaining factors” also weighed in favor of an “employee” classification, the court held that Steadfast and Pitts violated the FLSA by misclassifying the nurses as independent contractors and failing to pay overtime wages. The court further rejected Steadfast’s and Pitts’ “good faith defense,” which is on appeal to the 4th Circuit. Ultimately, the court entered judgment in favor of the DOL for over $9 million dollars in back wages and liquidated damages.
Read the full story at Improperly Classifying Workers Risks Years of Litigation, Huge Damages
