580 F.Supp.3d 216
E.D. Va.2022Background:
- The U.S. Department of Labor sued Medical Staffing of America, LLC d/b/a Steadfast Medical Staffing and owner Lisa Pitts for willfully misclassifying nurses as independent contractors and violating the FLSA (overtime and recordkeeping); after a bench trial the Court entered judgment for the DOL.
- Steadfast operated a nurse registry that contracted with healthcare facilities, assigned and scheduled shifts (by phone, text, email, and a Zira app), set nurses' hourly rates, invoiced facilities, and retained a markup.
- Nurses completed Steadfast credentialing and signed “independent contractor” agreements but were paid directly by Steadfast (from its accounts), guaranteed straight-time weekly pay, wore Steadfast badges, could not negotiate rates with facilities, and had to notify Steadfast about absences; Steadfast trained, insured, and disciplined nurses (including removal from schedules).
- Steadfast did not pay overtime (time-and-a-half over 40 hours), declined to include overtime-tracking in its app, and failed to maintain required overtime and pay records; DOL’s provisional backpay calculation totaled about $3.62 million for Aug. 18, 2015–June 27, 2021.
- Procedural posture: cross-motions for summary judgment were denied; bench trial held (Aug. 2021); court found nurses were employees, held Defendants liable for FLSA overtime and recordkeeping violations, rejected a good-faith defense, and entered an injunction; DOL to provide updated backpay/liquidated damages calculations.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether nurses were employees or independent contractors under the FLSA | Nurses were economically dependent on Steadfast: Steadfast controlled scheduling, set rates, paid wages, supervised/disciplined, trained and insured nurses, and retained facility payments | Nurses were independent contractors per written agreements and registry model; minimal control over medical judgment | Court: Nurses are employees under the six-factor "economic realities" test (control is the dominant factor) |
| Whether Defendants willfully violated FLSA and are liable for liquidated damages; good-faith defense | Willful violation: Defendants knew or should have known; DOL investigation and practices show willfulness; liquidated damages appropriate | Relied on counsel’s opinion (post-investigation) that classification was proper; claimed good-faith, reasonable reliance on legal advice | Court: Willful violation; good-faith defense rejected as objectively unreasonable (counsel relied on incomplete facts; DOL had already notified violations) |
| Recordkeeping compliance | DOL: Steadfast failed to maintain records of overtime, hours, additions/deductions as required by 29 U.S.C. § 211 and 29 C.F.R. § 516 | Steadfast offered no adequate rebuttal or accurate records to refute DOL calculations | Court: Steadfast violated FLSA recordkeeping rules and is liable |
| Remedy — injunctive relief to prevent future violations | Injunction needed: Defendants have not complied historically and indications show risk of continued violations | Injunctive relief not necessary if Defendants will comply | Court: Injunction granted to restrain future overtime and recordkeeping violations; DOL to submit updated damage calc; Defendants must cooperate |
Key Cases Cited
- McFeeley v. Jackson St. Entm't, 825 F.3d 235 (4th Cir. 2016) (articulating the six-factor economic-realities test for employee status under the FLSA)
- Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298 (4th Cir. 2006) (FLSA employee/independent-contractor analysis)
- Burnley v. Short, 730 F.2d 136 (4th Cir. 1984) (addressing liquidated damages where employer deliberately circumvented FLSA)
- Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111 (4th Cir. 2015) (good-faith defense and burden to prove objective reasonableness)
- Reich v. Southern New England Telecomm. Corp., 121 F.3d 58 (2d Cir. 1997) (advice-of-counsel and employer obligations under FLSA)
- Richard v. Marriott Corp., 549 F.2d 303 (4th Cir. 1977) (employer liability where aware of opinion indicating illegality)
- Van Dyke v. Bluefield Gas Co., 210 F.2d 620 (4th Cir. 1954) (statutory good-faith defense interpretation)
- Fuentes v. CAI Int'l, Inc., 728 F. Supp. 2d 1347 (S.D. Fla. 2010) (requirements to establish good-faith reliance on legal advice)