Employment: Multi-million dollar judgment against staffing company in misclassification suit

Where there was sufficient evidence to support the district court’s finding, after a multi-day bench trial, that a nursing staffing company misclassified approximately 1100 nurses as independent contractors, the nearly $10 million judgment was affirmed.

Background

Following a multi-day bench trial, the district court held that Staffing of America LLC, which supplied licensed nurses to multiple healthcare facilities located in Virginia and surrounding states, contravened multiple provisions of the Fair Labor Standards Act, or FLSA, by failing to properly classify approximately 1100 nurses as Steadfast “employees.” Steadfast was adjudged liable for unpaid overtime compensation to its nurses in a sum of almost five million dollars, plus a nearly equal sum of liquidated damages.

Liability

This court has consistently endeavored to “capture the economic realities of the relationship between the worker and the putative employer” by applying a test designed to balance six factors: (1) the degree of control that the putative employer has over the manner in which the work is performed; (2) the worker’s opportunities for profit or loss dependent on his managerial skill; (3) the worker’s investment in equipment or material, or his employment of other workers; (4)         the degree of skill required for the work; (5) the permanence of the working relationship and (6) the degree to which the services rendered are an integral part of the putative employer’s business.

Although Steadfast lacked control over certain specific aspects of the nurses’ work — such as day-to-day patient care tasks supervised by a client facility’s medical professionals — the evidence amply supports the proposition that the control factor weighs heavily in favor of their employee status. Perhaps most significantly, the court found that Steadfast unilaterally fixed the nurses’ hourly wages. Steadfast also controlled the nurses’ access to available shifts, thereby controlling when and where the nurses worked. And the evidence clearly demonstrates that Steadfast engaged in other actions consistent with exercising significant supervisory control over its nurses.

And at least four of the remaining five factors support the existence of an employment relationship between Steadfast and the Steadfast nurses. The totality of the circumstances clearly establishes an employer-employee relationship between the Steadfast nurses and Steadfast. The nurses are thus entitled to overtime wages under the FLSA.

Damages

Steadfast maintains that the district court erred when it ruled that Steadfast was not entitled to a good faith defense for periods from August 2015 to June 2021 and June 2021 to January 2022. That ruling subjected Steadfast to an assessment of statutory liquidated damages for each of those periods.

Steadfast “could not have classified their nurses as independent contractors in good faith prior to seeking legal counsel in June 2018.” Prior to that date, Steadfast had neither sought legal advice on the classification of its nurses nor taken any proactive steps to educate itself on the FLSA.

And Steadfast’s reliance on lawyer Bredehoft’s legal advice after June 2018 was neither in good faith nor objectively reasonable because Steadfast failed to provide him with the pertinent information needed for a “fully informed, reasonable legal opinion” concerning Steadfast’s employee classification practices.

Steadfast next argues that the district court erred in adopting the initial damages computations because they were “rife with false entries and prejudicial data entry errors.” Steadfast challenged the initial damages computations for the first time in its post-trial motion. The district court held that relief was unavailable under Federal Rules of Civil Procedure 52(b), 54(b) and 60(a)-(b).

It  also then ruled that Steadfast had waived any right to contest the initial damages computations because it had declined to contest them in a timely manner, that is, before or during the bench trial. And Steadfast had opted not to present evidence to counter the Initial damages computations. Furthermore, Steadfast had failed to timely object in any respect to those damages computations or their underlying methodologies. The court agrees.

Affirmed.

Dissenting opinion

Richardson, J., dissenting:

The majority is wrong on the facts and wrong on the law. On the facts, the majority ignores crucial testimony and glosses over clear mistakes from the district court that form the heart of Steadfast’s argument on appeal. On the law, the majority dismisses careful distinctions in our precedent, relies instead on out-of-circuit cases, and stretches the factor test so far that it could cover most any economic arrangement. I respectfully dissent.

Chavez-Deremer v. Medical Staffing of America LLC, Case Nos. 23-2176, 23-2284, July 17, 2025. 4th Cir. (King), from EDVA at Norfolk (Jackson). Abram John Pafford for Appellants. Anne Warren King for Appellee. VLW 025-2-266. 102 pp.