Karlson v. Action Process Service & Private Investigations, LLC
2017 U.S. App. LEXIS 11377
8th Cir.2017Background
- Karlson worked as a process server for APS under a written agreement labeling him an independent contractor; he used his own car, phone, and computer and was paid a flat rate per service via 1099.
- APS notified servers of assignments; Karlson chose which assignments to accept, set his own schedule, and occasionally accepted work from competitors.
- Karlson sued APS and owner Foster seeking unpaid overtime under the FLSA and parallel Arkansas law, claiming he was an employee.
- The district court tried the case to a jury on the ultimate question (employee vs. independent contractor) with an economic-realities instruction; the jury found Karlson was not an employee.
- The district court adopted the jury verdict, denied Karlson’s renewed JMOL, excluded evidence of the defendants’ total business expense amounts, and entered judgment for defendants.
- On appeal, Karlson argued he was an employee as a matter of law and that the court abused discretion in excluding comparative expense figures.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Karlson an "employee" under the FLSA/AMWA or an independent contractor? | Karlson asserted undisputed facts established employee status as a matter of law. | APS/Foster contended economic reality showed independent-contractor status (control, investments, profit/loss, schedule). | Affirmed: evidence, viewed favorably to the verdict, was sufficient to support independent-contractor finding; jury verdict adopted by district court reviewed deferentially. |
| Standard of review when jury decides ultimate legal issue (employee status) | Karlson sought de novo legal finding in his favor. | Defendants relied on Jarrett precedent requiring deferential review where parties consented to submit the ultimate question to the jury. | Court applied Jarrett: where court adopted a jury verdict on a legal issue submitted with parties’ consent, affirm if evidence supporting verdict when viewed most favorably to jury. |
| Admissibility of defendants’ total business expense figures | Karlson argued the amounts showed disparity and supported employee status. | Defendants argued the raw totals were prejudicial and not probative of economic realities. | No abuse: district court properly excluded billboarded large numbers as minimally relevant and unfairly prejudicial while allowing evidence about nature of investments. |
| Whether trial judge must make independent legal determination after jury verdict | Karlson asserted the judge should have independently concluded he was an employee. | Defendants pointed to parties’ consent to submit the legal question to the jury and to precedent limiting review. | Held that when parties consent to jury decision and court adopts it, appellate review is deferential (affirmed). |
Key Cases Cited
- Rutherford Food Corp. v. McComb, 331 U.S. 722 (broad definition of “employ” under wage statutes)
- United States v. Silk, 331 U.S. 704 (economic-realities factors: control, profit/loss, investment, permanency, skill)
- Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290 (FLSA test is one of economic reality)
- Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (distinction between FLSA economic test and common-law agency tests)
- Donovan v. Trans World Airlines, Inc., 726 F.2d 415 (ultimate employee status is a legal question)
- Jarrett v. ERC Props., Inc., 211 F.3d 1078 (when court submits legal issue to jury with parties’ consent, affirm if evidence supports verdict viewed favorably to jury)
- Ernster v. Luxco, Inc., 596 F.3d 1000 (court must review legal issue de novo even if submitted to jury; but Jarrett standard governs where verdict adopted)
- Alexander v. Avera St. Luke’s Hosp., 768 F.3d 756 (tax reporting and business deductions indicate independent-contractor status)