147 F.4th 371
4th Cir.2025Background
- Steadfast Medical Staffing operated a nurse "registry" (2015–2023), placing ~1,100 CNAs/LPNs/RNs at client healthcare facilities; nurses completed an "application for employment" then signed "independent contractor" agreements containing non‑compete clauses.
- Steadfast unilaterally set hourly rates charged to clients and payments to nurses (kept a portion), required nurses to submit timesheets to Steadfast, and controlled shift notifications and assignments via phone/text/app.
- Steadfast handled payroll, insurance, hiring checks (background/drugs/license verification), discipline (removals, blocking access to shifts), and required nurses to notify Steadfast about lateness/absences rather than client facilities.
- DOL investigated (2017), concluded nurses were misclassified; DOL counsel advised compliance (2018); Steadfast retained outside counsel thereafter but did not fully implement advised changes.
- DOL sued (May 2018). After a 7‑day bench trial (Aug–Sept 2021), the district court found nurses were employees under the FLSA, rejected Steadfast’s good‑faith defense, accepted the DOL’s damages computations, and awarded unpaid overtime + liquidated damages (~$9.35M with interest).
- Fourth Circuit affirmed: agreed district court’s factual findings under the McFeeley (Silk‑derived) economic‑realities test, rejected good‑faith defense for the bulk of the period, and upheld the damages awards and waiver/Rule‑based denials of post‑verdict challenges.
Issues
| Issue | Plaintiff's Argument (Secretary) | Defendant's Argument (Steadfast) | Held |
|---|---|---|---|
| Worker classification under FLSA (employee v. independent contractor) | Nurses were economically dependent on Steadfast; McFeeley factors overall support employee status | Nurses chose shifts, worked elsewhere, exercised professional judgment — thus independent contractors | Affirmed: totality of McFeeley factors (control, profit/loss, investment, permanence, integrality) favor employee status (degree of skill only slightly favored contractor) |
| Allocation of burden of proof on classification | Secretary bears burden to prove employment relationship | Steadfast claimed district court shifted burden to it | Rejected: record shows district court applied proper allocation; no reversible burden‑shift error found |
| Control factor (most important) — scope of Steadfast’s control over manner of work | Steadfast fixed pay, controlled access to shifts, enforced policies and discipline, required timesheets → substantial control | Steadfast lacked day‑to‑day clinical supervision; client facilities directed clinical work; nurses had scheduling choice | Affirmed: control manifested in scheduling, pay setting, discipline, onboarding, and operational oversight; control factor weighed heavily for employee status |
| Good‑faith defense to liquidated damages (29 U.S.C. §260) | Steadfast failed to show objective good faith and reasonable grounds; limited, incomplete post‑investigation legal advice insufficient | Steadfast relied on counsel’s advice (Bredehoft) and did not act intentionally to violate FLSA | Affirmed: district court did not abuse discretion — pre‑counsel conduct, failure to provide counsel full facts, and continued pay practices after DOL notice defeated good‑faith defense for first two periods; good faith accepted for later period after compliance efforts |
| Damages computations & timeliness/waiver of challenges (Initial and Final computations) | DOL’s computations (based on Steadfast records) were accurate and adopted; Steadfast waived timely objection by failing to contest at trial | Computations contained data‑entry errors and methodology flaws; post‑verdict motions under Rules 52(b)/54(b)/60 sought correction | Affirmed: district court did not abuse discretion; Steadfast waived or untimely raised objections and failed to present counter‑computations at trial; post‑trial Rule challenges properly denied |
Key Cases Cited
- Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017) (discusses FLSA’s remedial purpose and economic‑realities inquiry)
- McFeeley v. Jackson Street Enter., LLC, 825 F.3d 235 (4th Cir. 2016) (adopts six‑factor Silk‑derived test for employee status)
- Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992) (broad construction of "employ" and discussion of agency/common‑law limits)
- NLRB v. Hearst Publ’ns., 322 U.S. 111 (1944) (historical grounding for broad statutory definitions)
- Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947) (economic‑realities focus in worker classification analysis)
- Burnley v. Short, 730 F.2d 136 (4th Cir. 1984) (good‑faith defense requires active steps to ascertain and follow FLSA)
- United States v. Brock (Mr. W Fireworks), 814 F.2d 1042 (5th Cir. 1987) (recognizes difficulty of economic‑realities analysis and relevance of control and dependence)