On August 3, 2022, the United States Court of Appeals for the Seventh Circuit reversed a Wisconsin federal court’s dismissal of a truck driver’s misclassification claims against hauling company Schneider National Inc. (“Schneider” or “the Company”). The Seventh Circuit found that driver Eric Brant (“Plaintiff”) plausibly alleged a viable claim under the Fair Labor Standards Act (“FLSA”), a federal law that protects workers from unfair employment practices by establishing requirements for minimum wage, overtime pay, recordkeeping, and child labor.
The Seventh Circuit held that workers are employees under the FLSA when they are dependent on the business to which they render service. The court pointed to the six-factor test set forth in the 1987 case, Secretary of Labor v. Lauritzen, to determine whether a worker is an employee rather than an independent contractor: (1) the nature and degree of the alleged employer’s control related to the way the work is performed, (2) a worker’s opportunity for profit or loss dependent on his managerial skills, (3) the worker’s investment in equipment required for the work, (4) whether the service rendered requires special skills, (5) the permanency and duration of the working relationship, and (6) the extent to which the worker’s service is an integral part of the employer’s business.
In this case, Plaintiff alleges that Schneider misclassified him and other truck drivers as independent contractors because he was unable to exercise his independent judgment to increase his margins and struggled to bring in enough profits to offset the expenses that Schneider deducted from his pay.
In evaluating these claims, the Seventh Circuit found that five of the six Lauritzen factors weighed in favor of Plaintiff’s employee status. In particular, the appellate court held that Plaintiff did not have true control over his work and was “totally dependent on Schneider to turn a profit.”
Schneider argued that the Operating Agreement and Lease that Plaintiff signed upon commencing work with the Company indicate that he was an independent contractor with the ability to manage his own operations. However, the Seventh Circuit explained that when determining whether a worker is an employee under the FLSA, what matters is the economic reality of the working relationship, not the terms of a written contract. According to the court, Plaintiff’s “theoretical ability to hire help bears little weight if it was not consistent with the economic reality of his control over his work.”
The Seventh Circuit also held that Plaintiff adequately stated claims for minimum wage violations under the FLSA and Wisconsin law, claims for unjust enrichment under Wisconsin law, and claims of violations of federal truth-in-leasing regulations.
Updates will be posted to this blog as the matter progresses. The case caption for this action is Brant et al. v. Schneider National Inc. et al., No. 21-2122, filed in the United States Court of Appeals for the Seventh Circuit, and Brant v. Schneider National Inc. et al., No. 1:20-cv-01049-WCG, filed in the United States District Court for the Eastern District of Wisconsin.
The legal team at Miller Shah LLP has significant experience representing misclassification matters. If you have any questions regarding this subject or this post, please contact Chiharu Sekino (cgsekino@millershah.com) or Anika Keuning (askeuning@millershah.com). The firm can also be reached toll-free at (866) 540-5505.
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