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Court remands employee-or-contractor case

A federal appellate court has reversed an award of summary judgment to U.S. Labor Secretary Martin Walsh in a fair labor suit brought against a Minnesota company. The court determined that the competing narratives of “employment relationship” and “independent contractor relationship” must be resolved before any violation of the Fair Labor Standards Act could be found. It remanded the case to the trial court.

Travelon is a company based in the Twin Cities area that provides transportation for medical services. Drivers take patients to and from medical appointments. Trips are assigned through an application called “MediRoutes.” When a driver indicates availability, the dispatch service will instruct the driver about the route and times. Customers pay Travelon, which then distributes the entire sum paid to drivers. Travelon generates profit through driver fees. Drivers must pay 35% of commissions after earning $300 a week. They must also pay fees for insurance, vehicle leasing, vehicle maintenance, and tablet rental.

Drivers were classified as independent contractors by Travelon, and they were paid as such by the company. The Department of Labor’s Wage and Hour Division determined, after a FLSA compliance investigation, that the workers were actually employees. Consequently, the department sued Travelon on behalf of 21 drivers, claiming that Travelon violated the FLSA by failing to pay minimum wage to eleven of the drivers and failing to pay overtime to 21 drivers.

A U.S District Court granted summary judgment to the DOL, finding the workers were employees and awarding damages for back wages. Travelon appealed.

The case centered on a fundamental disagreement about the nature of the working relationship between Travelon and the drivers. In characterizing the working relationship between Travelon and its drivers, the 8th Circuit focused on three of the six factors in its application of the multifactor “economic realities” test: control, profits and losses, and integrality to business. It concluded that genuine issues of material fact existed with respect to all of these factors, which could lead a rational trier of fact to determine that the drivers were independent contractors.

Regarding whether Travelon had control over the way that drivers performed their job duties, the 8th Circuit found that the lower court did not consider evidence in the light most favorable to Travelon.

The court noted that drivers could accept or reject trips without fear of being penalized. Additionally, the court highlighted that the drivers exercised autonomy because they were able to set their own hours and could even change their schedule on a daily basis.

With respect to Travelon’s control over profits and losses, the court found that, while Travelon limited drivers’ opportunity for profit or loss through setting fares and other restrictions, drivers also had the ability to earn additional income. They were able to transport multiple customers to earn more money per trip, or use their own vehicles to save on fees. The court determined that a trier of fact needed to weigh the competing evidence.

Finally, the court concluded that whether the drivers were integral to Travelon’s business was an unresolved question. The parties disagreed as to whether Travelon was a special transportation services provider or a technology company supporting the drivers. Travelon argued that it was an intermediary company linking drivers with customers and only deriving revenue through driver fees, not the passengers.

The court concluded that summary judgment was premature and that issues of material fact had to be resolved first.