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A federal appeals court on Thursday reversed a lower court’s summary judgment and sent back a case concerning whether drivers for a medical service were employees — and therefore subject to the Fair Labor Standards Act — or independent contractors.
The Department of Labor’s wage and hour division determined after an investigation that drivers for Eden, Prairie, Minnesota-based Alpha & Omega USA, which does business as Travelon Transportation, were employees and subject to the FLSA, according to the ruling by the 8th U.S. Circuit Court of Appeals in Cincinnati in Martin J. Walsh, Secretary of Labor, U.S. Department of Labor v. Alpha & Omega USA Inc., doing business as Tavelon Transportation; Viktor Cernatinskij, an individual.
The DOL sued Travelers and Mr. Cernatinskij, its owner, on behalf of 21 drivers who worked for the app-based business, which provides transportation for patients to and from medical appointments. The drivers claimed they were employees and that Travelon had violated the FLSA by not paying them a minimum wage and overtime and not maintaining proper records.
According to Thursday’s ruling, Travelon’s customers pay the company for the transportation service, and the company distributes the entire sum to the drivers. Drivers are responsible for paying Travelon weekly expenses, such as a dispatch fee.
The U.S. District Court in Minneapolis granted summary judgment in favor of the DOL in the case and was overturned by a unanimous three-judge appeals court panel.
The district court “resolved the case by granting summary judgment to the Secretary, thus indicating there were no material factual disputes. We disagree,” the panel said.
The appeals court ruling said in determining that the drivers were Travelon employees, the district court applied the six factors under the DOL’s “economic reality” test: the degree of control exercised by the alleged employer; the relative investments of the alleged employer and employee; the degree to which the employee’s opportunity for profit and loss is determined by the employer; the skill and initiative required in performing the job; the permanency of the relationship; and the degree to which the employee’s tasks are integral to the employer’s business.
“Travelon has offered evidence from which a rational driver of fact could find that ‘control,’ ‘profits and losses,’ and ‘integral to business’ factors weigh in favor of the drivers being independent contractors,” the ruling said.
For instance, on the control issue, “there is competing evidence as to whether drivers could reject trip assignments,” the ruling said. The owner also testified that “drivers were able to set their own schedule and could change their schedule daily.”
“In sum, the award of summary judgment was premature,” the ruling said. “While the Secretary has shown evidence supporting employment relationships between Travelon and its drivers, Travelon has also shown evidence of an independent contractor relationship.
“These competing narratives must be resolved before the district court makes its legal conclusion as to whether an employment relationship existed between Travelon and its drivers,” the ruling said, in reversing the lower court and remanded the case for further proceedings.
The DOL had no comment, while the company’s attorney did not respond to a request for comment.