Tag: economic realities test

Facts: Fitzgerald, a tractor-trailer driver, was injured on the job when he fell from the top of the tanker trailer he used to deliver oil. The trailer was owned by Montgomery Tank Lines, defendant, and leased to Mobil Oil. The tractor was owned by another party, Rieger, and also leased to Mobil Oil. Plaintiff’s employment situation was complex and confusing: Fitzgerald was hired to deliver oil from Mobil Oil’s plant to various Mobil Oil customers. Fitzgerald was initially hired by Rieger. Before he could be hired by Riger, Fitzgerald had to pass a road test that was administered by Mobil Oil at a Mobil Oil facility. Another company, TLI, would pay Fitzgerald.  Mobil Oil would then reimburse TLI for driver wages and other expenses, including worker’s compensation insurance premiums. Mobil Oil and TLI had a contract that specifically disclaimed the existence of an employer/employee relationship between Mobil Oil and TLI-supplied drivers.

Issue: Whether Mobil Oil can be consider plaintiff’s employer. (In this case, Fitzgerald did not want Mobil Oil to be considered his employer because it would limit his recovery to Worker’s Comp under the “exclusive remedy provision.”)

Holding: Mobil Oil was Fitzgerald’s employer.

Reasoning:

The court went through the four elements of the Economic Realities Test and determined that, under the totality of the circumstances, Mobil Oil was the employer of Fitzgerald (even though Mobil Oil had expressly disclaimed an employer/employee relationship):

1. Control of a worker’s duties,

Fitzgerald telephoned a Mobil dispatcher at least once a day for work assignments. The Mobil dispatcher told him where to deliver oil and how much oil to deliver. In addition, Fitzgerald kept his truck at Mobil Oil’s facility and hauled exclusively for Mobil Oil. However, Fitzgerald was trained by an employee of Rieger, submitted his travel logs to Rieger, refused an assignment when Rieger told him not to take it, and Riger arranged for repairs of Fitzgerald’s tractor.

2. Payment of wages,

Although it was indirect, Mobil Oil was liable to TLI for reimbursement of driver wages and benefit payments

3. The right to hire and the right to discipline, and

Mobil Oil had the right to refuse Fitzgerald’s services and if it had, Fitzgerald would have been, at least temporarily, without an assignment. The court stated that, “the power to stop Fitzgerald from engaging in the daily tasks he relied on for wages is enough to satisfy the test.”

4. The performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.

Fitzgerald’s work constituted an integral part of Mobil Oil’s business as delivery of oil is an ongoing and necessary function of the business.

Facts: Ansoumana and 500 other workers brought a class action under the Fair Labor Standards Act (FLSA). Ansoumana and the rest of the class (the plaintiffs) were delivery workers for supermarkets and drugstore chains. The plaintiffs were hired by the Hudson/Chelsea group of defendants and assigned to Duane Reades stores, another defendant. Duane Reade is a large retail drugstore chain in the New York metropolitan area. The plaintiffs would make deliveries to customers on foot and provide general in-store services, as directed by Duane Reade’s store supervisors. Duane Reade paid Hudson/Chelsea $250 to $300 per week, per worker. Hudson/Chelsea would pay the plaintiffs $20-$30 per day as independent contractors. Many of the plaintiffs would work eight to eleven hours a day, six days a week, and were still paid this flat rate; lower than minimum wage and not compensated for overtime as required by FLSA. However, independent contractors do not receive protection under FLSA.

Issues: (1) Whether the Hudson/Chelsea defendants were employers of the plaintiffs. (2) Whether Duane Reade was a joint employer of the plaintiffs.

Holding: Duane Reade and the Hudson/Chelsea defendants were employers of the plaintiffs under FLSA.

Judgment: Duane Reade and the Hudson/Chelsea defendants are jointly and severally obligated for underpayments of minimum wage and overtime.

Reasoning: In answering whether the Hudons/Chelsea defendants were employers of the plaintiffs, the court applied the economic reality test which distinguishes between employees and independent contractors:

1. The degree of control exercised by the employer over the workers;

2. The workers’ opportunity for profit or loss and their investment in the business;

3. The degree of skill and independent initiative required to perform the work;

4. The permanence or duration of the working relationship; and

5. The extent to which the work is an integral part of the employer’s business

“No one factor is dispositive; the ultimate concern is whether, as a matter of economic reality, the workers depend upon someone else’s business for the opportunity to render service or are in business for themselves.”

In answering whether Duane Reade is a joint employer with the Hudson/Chelsea defendants, the court mentioned the economic reality test. The court also applied another four-part test to determine whether Duane Read were “employers” required to pay minimum wages: (1) who hired and fired the works; (2) who supervised and controlled their work schedules and conditions of employment; (3) who determined the rate and method of payment; and (4) who was to maintain employment records.

Facts: Wells, a bookkeeper for eleven years at Clackamas Gastroenterology Associates, brought an action under the ADA for unlawful discrimination on the basis of disability. Clackamas moved for summary judgment on the basis that it did not have 15 employees which is required for the ADA to apply. Clackamas is a professional corporation which has 14 employees. In addition to the 14 employees, however, Clackamas is owned by four physicians who are actively engaged in the medical practice.

Issue: Whether the four physician shareholders and directors of Clackamas, who are actively engaged in medical practice, should be counted as “employees” under the ADA.

Procedural History: The district court applied the economic realities test and concluded that the four doctors were not employees for purposes of the ADA. The Ninth Circuit Court of Appeals reversed because it saw “no reason to permit a professional corporation to secure the best of both possible worlds.”

Holding: The trial court must apply the common-law tests, specifically the element of control, to determine whether the physicians are employees or the employer.

Judgment: Reversed and remanded to the district court.

Reasoning: Because Congress did not “helpfully define” the term employee, the Court believed that “Congress intended to describe the conventional master-servant relationship as understood by common law agency doctrine.” Therefore, the majority looked to the Restatement (Second) of Agency and six (non-exhaustive) similar factors submitted by the EEOC. The court focused on the factor of control stating, “We think that the common-law element of control is the principal guidepost that should be followed in this case.” Under this factor, the physicians appear not to be employees of the clinic. For example, the physicians apparently control the operation, share the profits, and are personally liable for malpractice claims.

Ginsburg’s Dissent: Ginsburg did not agree with the Court’s placement of “overriding significance” on the one factor of control. In addition, the same physicians had defined themselves as “employees” under ERISA; which defined employee the same way as the ADA. (But see Yates v. Hendon). Furthermore, the physicians are covered by Oregon’s workers’ compensation law. Ginsburg concluded that Clackmas, the professional corporation, is the employer and the physicians are employees of the corporation. This conclusion came from the fact that the professional corporation was created in order to limit the physicians’ liability for the debts of the practice and that the physicians had to adhere to the corporation’s policies and procedures.

Compare to Yates v. Hendon, 541 US 1 (2004) which the Supreme Court decides the next term.