Healthcare staffing company failed to pay overtime

Where a healthcare staffing company controlled the nurses’ schedules and assignments, invested in their training and insurance, set their rates and received payments from clients, the nurses were employees, and not independent contractors. Because the company failed maintain pay records or pay overtime, it was found liable for violating the Fair Labor Standards Act, or FLSA.

Background

The court issues this memorandum opinion after a bench trial to resolve the Department of Labor, or DOL’s, claims against Medical Staffing of America LLC and Lisa Pitts for failing to pay overtime and maintain pay records in accordance with the FLSA.

Merits

The court must determine whether the nurses are employees of  Steadfast or independent contractors by considering: (1) the degree of control Steadfast had over the manner in which the nurses performed their work; (2) the nurses’ opportunities for profit or loss based on their managerial skill; (3) the nurses’ investment in equipment or material, or the employment of other workers; (4) the degree of skill required for the nurses’ work; (5) the permanence of the working relationship between the nurses and Steadfast and (6) the degree to which the nurses’ services are integral to Steadfast’s business.

First, the record clearly establishes that defendants have an extensive degree of control over the scheduling and assigning of work between the nurses and client-facilities. Defendants also invest in the nurses’ training and insurance, which weighs in favor of an employment relationship. Defendants admit that they set the nurses’ pay rate, an action typical of an employer.

And like an employer, defendants receive continuous payments from client-facilities for the nurses’ services. Further, defendants are acting as the nurses’ employer by guaranteeing direct payment of wages from defendants’ own financial accounts. Defendants’ efforts to maintain detailed and accurate records of the nurses’ time, moreover, is more like the efforts of an employer than an agency providing a mere administrative function. The record also reflects that defendants exercise excessive control over the nurses by supervising the nurses’ performance and disciplining then when defendants deem necessary.

Finally, virtually all the remaining factors – workers’ opportunities for profit/loss, the permanence of the working relationship, workers’ investment in equipment/other workers and the degree to which the work is integral to defendants’ business – indicate that defendants are the nurses’ employer.

Defense

Defendants allege that they have a reasonable, good faith belief that they are not violating the FLSA after being advised by legal counsel that their nurses are likely properly classified as independent contractors. Ultimately, defendants’ alleged good faith belief is not objectively reasonable.

Initially, defendants failed to present any evidence that it sought legal advice on the classification of its nurses or took any proactive steps to educate themselves on the FLSA prior to meeting Mr. Bredehoft in June 2018. Moreover, defendants’ continuing reliance on Mr. Bredehoft’s legal opinion on and after June 2018 is not objectively reasonable.

First, the DOL conducted a multi-year administrative investigation into defendant’s pay practices and informed defendants in 2018 that their pay practices violated the FLSA. Second, defendants admit that they are familiar with FAB 2018-4, which expressly identifies several of defendants’ pay practices as indicative of an e1nployment relationship with the nurses. Finally, defendants failed to prove that they provided Mr. Bredehoft all the information he would have needed to provide a fully informed, reasonable legal opinion on defendants’ pay practices.

Remedies

Defendants declined to include an overtime-tracking function in the Zira app and otherwise failed to accurately record the nurses’ total overtime pay and total additions or deductions from wages for each pay period. Therefore, defendants are liable to plaintiff for failing to meet the recordkeeping requirements under the FLSA. The evidence demonstrates that defendants have never complied with the FLSA and will continue to violate the FLSA, rendering injunctive relief appropriate.

Judgment for plaintiff.

Walsh v. Medical Staffing of America LLC, Case Nos. 2:18-cv-226; 2:19-cv-475, Jan. 14, 2022. EDVA at Norfolk (Jackson). VLW 022-3-017. 31 pp.