In Gayle v. Harry’s Nurses Registry, Inc., 594 F.App’x 714 (2d Cir. 2014) (Summary Order), the court held that the plaintiffs were indeed employees, and not independent contractors. The decision is instructive as to the factors bearing on that analysis.
Plaintiffs, a class of nurses, sued to recover unpaid overtime under the Fair Labor Standards Act (FLSA). The Eastern District of New York granted summary judgment to plaintiffs, and the Second Circuit affirmed.
Defendants/appellants argued that he district court mistakenly determined that the nurses listed and placed by Harry’s were employees rather than independent contractors.
In affirming, the Second Circuit reiterated that whether a worker is treated as an “employee” or “independent contractor” under the FLSA is “determined not by contractual formalism but by ‘economic realities.'” The so-called “economic reality” test involves weighing several factors, namely:
(1) the degree of control exercised by the employer over the workers, (2) the workers’ opportunity for profit or loss and their investment in the business, (3) the degree of skill and independent initiative required to perform the work, (4) the permanence or duration of the working relationship, and (5) the extent to which the work is an integral part of the employer’s business.
The first factor, control, weighed in favor of the plaintiffs:
The district court here explored the first factor at length, finding that Harry’s exercises significant control over the nurses, both economically and professionally. We agree. Indicia of economic control present here include Harry’s policies that: prohibit a nurse from contracting independently with placements, although its nurses may be listed with other agencies; prohibit a nurse from subcontracting a shift to another nurse; prohibit a nurse from taking a partial shift, although a nurse may decline a whole shift; and prohibit a nurse who is unilaterally terminated from collecting contract damages, expectation damages, or liquidated damages, permitting only unpaid wages as damages. Furthermore, the hourly rate paid is not negotiated but is fixed by Harry’s. Indicia of professional control present here include: the work of Harry’s nursing director and nursing supervisors, who monitor the nurses’ daily phone calls reporting to shifts, collect documents and conduct on-site training four to five hours each month, communicate with doctors to ensure that their prescribed care is being carried out, and handle emergencies; the ability of a nursing supervisor to require a nurse to attend continuing education to maintain their licenses; an in-service manual that nurses had to certify having read and understood; training by Harry’s covering HIV confidentiality, ventilators, oxygen, and other medical subjects; and a requirement that each shift include a comprehensive assessment of the patient in the form “progress notes,” which nurses had to submit to get paid.
As to the second factor, the court noted:
Another critical factor is that the nurses have no opportunity for profit or loss whatsoever; they earn only an hourly wage for their labor and have no downside exposure. The nurses have no business cards, advertisements, or incorporated vehicle for contracting with Harry’s, and they are paid promptly regardless of whether the insurance carrier pays Harry’s promptly. We agree with the district court that this second factor weighs heavily in favor of the nurses’ status as employees.
As to the remaining factors:
That the nurses are skilled workers in a transient workforce reflects the nature of their profession and not their success in marketing their skills independently. Finally, the appellants cavil that the nurses are not integral to Harry’s Nurses Registry, notwithstanding that “Nurses” is—literally—Harry’s middle name. But placing nurses accounts for Harry’s only income; the nurses are not just an integral part but the sine qua non of Harry’s business.
The court concluded that “[c]onsidering all these circumstances … these nurses are, as a matter of economic reality, employees and not independent contractors of Harry’s.”
It quickly disposed of the appellants’ remaining arguments, finding (e.g.) that the nurses did not fall within the “companionship service” exemption to the FLSA; that the nurses’ reduction in workload from caring for “40 patients” at a hospital to “car[ing] only for one patient in a home” still qualified as overtime “work”; and that appellants failed to establish the affirmative defense necessary to overcome the presumption of liquidated damages.