Revised December 7, 1998
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-10764
ALEXIS M. HERMAN, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF
LABOR,
Plaintiff-Appellant,
VERSUS
EXPRESS SIXTY-MINUTES DELIVERY SERVICES, INC., LYNN WILLIAMS
CLAYTON, CHARLES CLAYTON AND DEE ANN HOPKINS,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Texas
December 4, 1998
Before KING, SMITH, and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
The Secretary of Labor appeals from a take-nothing judgment
entered by the district court in this Fair Labor Standards Act
(FLSA) case. 29 U.S.C. §§ 201, et seq. We affirm.
Procedural Background
Appellant, the Secretary of Labor, brought this FLSA action
seeking to enjoin Appellee Express 60-Minutes Delivery Service,
Inc. (“Express”) from violating the minimum wage, overtime
compensation, and record keeping provisions of the Act. After a
six-day bench trial, the district court concluded that no violation
of the FLSA occurred because the courier delivery drivers were
independent contractors. The district court further concluded that
assuming that the drivers were employees, the Secretary failed to
meet her burden of establishing that the requested damages were
reasonable. Finally, the district court concluded that the
Secretary failed to establish that any office workers were owed
back wages.
Factual Background
A. Drivers
Express operates a courier delivery service in Dallas and
Tarrant Counties, Texas. Lynn Clayton is the president of Express,
Charles Clayton is the vice-president, and Dee Ann Hopkins is the
secretary-treasurer. Express contracts with various businesses,
including law firms, hospitals, and laboratories, to deliver
packages on a 24-hour basis in and around the Dallas-Fort Worth
metropolitan area. Over 50% of the packages delivered by Express
contain medical blood or tissue samples. Express averages around
525 deliveries each day. To make these deliveries, Express relies
on about fifty drivers on its payroll at any given time. The
2
drivers are recruited by Express through newspaper advertisements
and word of mouth.
Customers of Express choose among various delivery options
under which Express agrees to complete its deliveries within either
one, two, or four hours of when an order is placed. Express uses
a computer-dispatch system wherein orders are taken by customer
service personnel over the telephone, entered into the computer,
and transferred to dispatchers who assign the deliveries. The
dispatchers communicate with the drivers by pager, two-way closed-
channel radio, and telephone. While different factors guide their
decisions, the dispatchers generally offer a delivery to the last
on-duty driver to have received an offer who is closest to the
pick-up point.
Express bills its customers based upon several factors
including the size of the package, the priority of its delivery,
and the distance between the pick-up and delivery point. Express
negotiates special flat rates for approximately twenty-two regular
customers. Express also negotiates with its customers over how
much waiting time they will be allotted without additional charge.
Potential drivers are required to attend an orientation
session at which they must sign an “Independent Contractor
Agreement” providing that they will make deliveries for Express
using their own vehicles in exchange for receiving a commission for
each delivery equal to a percentage of the customer’s cost. Under
the agreement, drivers also pay the costs of their gasoline,
3
vehicle maintenance, and insurance. Most drive a vehicle that they
also use personally.
The “Independent Contractor Agreement” also provides that
drivers will furnish their own uniforms, radios and pagers, as well
as the biohazard bags and dry ice required for transporting medical
samples. These items are supplied to the drivers by Express, which
leases some of the items to the drivers and deducts the cost from
their first few paychecks. Drivers supply their own dollies and
MAPSCOs, and, if needed, their own tarps and cords for covering and
securing items.
The drivers can and do negotiate for increased commissions,
but most drivers do not negotiate their commissions. The drivers
have no input into how Express’s business is conducted, the amount
charged its customers, or the allocation or frequency of
deliveries.
The drivers may use only those radios supplied by the company,
because the radios operate on a private channel that Express
licenses from the Federal Communication Commission. Most drivers
wear a uniform consisting of a blue shirt and khaki pants. One
shoulder of the shirt has a patch with an Express logo and the
other shoulder sports an “Independent Contractor” patch. Uniforms
are not required, but preferred.
In signing the “Independent Contractor Agreement,” a driver
agrees to apply to become a notary public and to provide notary
service to Express and its customers free of charge. Express
4
supplies the drivers with the notary application, and deducts the
cost for the notary bond and stamp from each driver’s first ten
paychecks. Although not required, most drivers become notaries.
Pursuant to their contracts, drivers agree to make themselves
available to work on-call for Express’s 24-hour delivery service.
A majority of the drivers who testified stated either that they
were required to work on-call or that they had no input into when
their on-call time was scheduled. Express posts the on-call
schedules at its offices and informs drivers that if unable to
work, they are responsible for finding a replacement.
Drivers work for Express for varying lengths of time, with the
majority working for relatively short periods. Several drivers
testified that they had worked for other courier companies in the
Dallas-Fort Worth area either prior to or after working for
Express. Only one driver testified that he worked for another
courier company while working for Express. The “Independent
Contractor Agreement” does not contain a covenant-not-to-compete.
No prior experience is necessary to become a courier driver,
but couriers need to be able to drive, read maps, and be courteous
to customers. By using their judgment as to the best routes
available and their knowledge about area traffic patterns, drivers
may earn more money because they can make their deliveries faster
and be available to make more deliveries.
Under the terms of the contract, the drivers have the right to
accept or reject individual offers of delivery jobs, and have no
5
obligation to accept any specified number of jobs during any given
period. Drivers confirmed that they could decline offers without
being subjected to retaliation.
In addition to the drivers that Express considers independent
contractors, the company employs four drivers it considers
employees. The employee-drivers run errands for Express and make
routine deliveries when the office is busy. They attend the same
initial orientation session as the other drivers. Unlike the
contract drivers, the employee-drivers (1) report for work at a
specified time; (2) are paid by the hour; (3) work a set number of
hours that are determined by Express; (4) are required to wear a
uniform; (5) are provided with a company vehicle and all of the
necessary tools of the trade; (6) are reimbursed for expenses; (7)
are not allowed to turn down deliveries; and (8) are under the
control and supervision of Express.
B. Office Workers
The Secretary sought to establish an overtime claim on behalf
of eleven office workers at Express. During her investigation, the
Secretary determined that clerks worked fifty-five hours a week but
were not being paid overtime compensation for all hours worked over
forty. Lynn Clayton testified that much of the data on which the
Secretary’s calculations were based was incorrect. Specifically,
the employment dates of a number of individuals for whom overtime
was claimed was incorrect and in computed damages, a fifty-five
6
hour work week was assumed rather than the hours actually worked.
The district court found that the Secretary’s calculations on this
claim were neither reliable nor accurate, and that the Secretary
failed to present sufficient credible evidence to support claims
for back wages for the eleven office workers.
Analysis
A. Drivers
To determine employee status under the FLSA, we focus on
whether the alleged employee, as a matter of economic reality, is
economically dependent upon the business to which he or she renders
his or her services. Brock v. Mr. W Fireworks, Inc., 814 F.2d
1042, 1043, 1054 (5th Cir. 1987). In other words, our task is to
determine whether the individual is, as a matter of economic
reality, in business for himself or herself. Donovan v. Tehco,
Inc., 642 F.2d 141, 143 (5th Cir. 1981). To aid us in this task,
we consider five factors: the degree of control exercised by the
alleged employer; the extent of the relative investments of the
worker and alleged employer; the degree to which the worker’s
opportunity for profit and loss is determined by the alleged
employer; the skill and initiative required in performing the job;
and the permanency of the relationship. Reich v. Circle C.
Investments, Inc., 998 F.2d 324, 327 (5th Cir. 1993). No single
factor is determinative. Id.
7
We review the district court’s findings as to these five
factors for clear error, but we review the district court’s
ultimate determination of employee status de novo. Id.
1. Degree of control exercised by the alleged employer
The district court found that Express had minimal control over
its drivers. We agree. The drivers set their own hours and days
of work and can reject deliveries without retaliation. It is
preferred that drivers wear a uniform and become notaries, but it
is not required of all contract drivers. The drivers can work for
other courier delivery systems, and the “Independent Contractor
Agreement” does not contain a covenant-not-to-compete. Although
the drivers are required to attend an orientation session and
required to be on-call, these facts do not outweigh the other facts
indicating a lack of control and independent contractor status.
This result is even clearer when one contrasts Express’s employee-
drivers who, unlike contract drivers, report for work at a
specified time; are paid by the hour; work a set number of hours
that are determined by Express; are required to wear a uniform; are
not allowed to turn down deliveries; and are under the control and
supervision of Express.
The degree-of-control factor points toward independent
contractor status. Such a finding by the district court is not
8
clearly erroneous.
2. Relative investment of worker and alleged employer
The district court found that the investment on the part of
the drivers was significant. The district court first pointed out
that Express does not provide drivers with any equipment--drivers
were required to purchase or lease all the necessary tools of the
trade including a vehicle, automobile insurance, dolly, MAPSCO,
tarp, two-way radio, pager, and a medical delivery bag. The
drivers also were responsible for all fuel, maintenance, and
depreciation of their vehicles.
The Secretary counters that most drivers use their automobiles
for personal and recreational purposes as well as for business, so
that the capital risk on the part of the drivers is not
substantial. Further, the Secretary argues that the relative
investment of Express far exceeds that of the drivers, explaining
that Express operates offices in two locations, uses a
sophisticated computer system, purchases the equipment that it
leases to its drivers, pays to license a closed-channel radio
frequency from the Federal Communications Commission, and pays the
salaries of twenty-five office employees. While the Secretary did
not discuss in her brief the dollar amount of investment of
Express, an independent review of the record reveals the following:
a. monthly lease on Fort Worth office = $1500-$1900
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b. monthly lease on Dallas office = several hundred dollars
c. 60-65 radios at $600 a piece
d. air time for radio = $17 per month for each radio
e. biweekly payroll = approximately $19,000
f. four vehicles = approximately $14,000 each
g. fax machine = $250
h. computer system = $25,000
R.Vol. XI-117; XII-86-91.
The relative investment by Express is indeed significant.
Although the driver’s investment of a vehicle is no small matter,
that investment is somewhat diluted when one considers that the
vehicle is also used by most drivers for personal purposes. In
Carrell v. Sunland Construction, Inc., 998 F.2d 330 (5th Cir.
1993), the court found that welders were independent contractors
partly because the welders invested an average of $15,000 each for
welding equipment. There was no indication in Carrell that the
welding equipment also was being used for personal purposes.
Accordingly, the capital risk in Carrell was much greater. In
Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1051 (5th Cir.
1987), the court noted that a fireworks stand operator who used a
computer to assist him while working involved no investment because
he originally had purchased the home computer for school work.
Even considering the additional maintenance on a vehicle which is
used for a delivery service, we nonetheless conclude that the
10
district court clearly erred in finding the drivers’ relative
investment to be significant.
The district court also concluded that, although no direct
testimony was presented on this point, the aggregate investment of
all the contract drivers is substantially more than that of
Express. However, we find no support for the application of an
aggregation principle with respect to the relative investment
factor. See, e.g., Carrell v. Sunland Construction, Inc., 998 F.2d
330 (5th Cir. 1993) (court of appeals did not combine the welder’s
average individual investment of $15,000 in trucks, machines, and
tools when considering the relative investment factor).
The relative investment factor weighs in favor of the
Secretary and toward employee status.
3. Degree to which employee’s opportunity for profit and
loss is determined by the alleged employer
The district court found that the drivers are compensated on
a commission basis. According to the district court a driver’s
profit or loss is determined largely on his or her skill,
initiative, ability to cut costs, and understanding of the courier
business. The district court observed that the drivers who made
the most money appeared to be the most experienced and most
concerned with efficiency, while the less successful drivers tended
to be inexperienced and less concerned with efficiency.
11
Although the Secretary maintains that express controls
customer volume and the amount charged to customers, we cannot say
that the district court clearly erred in finding that the drivers’
opportunity for profit and loss was determined by the drivers to a
greater degree than Express. This is especially true because the
drivers had the ability to choose how much they wanted to work and
the experienced drivers knew which jobs were most profitable.
This factor points toward independent contractor status. The
district court did not clearly err.
4. Skill and initiative required
The district court found that once a job is offered to the
driver, the driver is not told which route to take--the driver must
rely on his own judgment, knowledge of traffic patterns and road
conditions in the Dallas-Fort Worth metroplex, ability to read a
MAPSCO, and ability to anticipate the need for an alternate route.
According to the district court, experienced drivers possess
specialized skills beyond that of merely driving an automobile, and
more experienced drivers tended to make more money than less
experienced drivers.
The Secretary argues that the contract drivers are more like
wage earners than independent entrepreneurs seeking a return on
their risky capital investment. The Secretary is correct. In Mr.
12
W Fireworks, 814 F.2d at 1053, we explained that “initiative, not
efficiency, determines independence.” In that case, the court
found clearly erroneous the district court’s finding that fireworks
stand operators had the skill and initiative indicative of
independent contractors. In doing so, the court referred to Usery
v. Pilgrim Equipment Co., 527 F.2d 1308, 1314 (5th Cir. 1976),
where the court reasoned that “routine work which requires industry
and efficiency is not indicative of independence and nonemployee
status.” The court further explained in Mr. W Fireworks that the
operators were unable to exert initiative as “all major components
open to initiative--advertising, pricing, and most importantly the
choice of fireworks’ suppliers with which to deal are controlled by
Mr. W.” Mr. W. Fireworks, 814 F.2d at 1053.
As we found in Pilgrim Equipment, the “key missing ingredient
in the lower court’s determination is initiative.” 527 F.2d at
1314. The district court did not discuss initiative during its
evaluation of this factor. We agree with the Secretary that the
skill and initiative factor points toward employee status. The
district court clearly erred in finding to the contrary.
5. Permanency of the relationship
The Secretary conceded at oral argument that the district
court correctly determined the permanency issue. We agree. The
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majority of drivers work for Express for a short period of time.
Drivers are able to work for other courier delivery companies, and
the “Independent Contractor Agreement” does not contain a covenant-
not-to-compete. The permanency factor points toward independent
contractor status.
6. Other factors
Both sides encourage the court to look to other factors in
addition to the preceding five factors. The Secretary emphasizes
that the work performed by the drivers is an integral and
indispensable part of Express’ business. Express argues that the
contract provided that the drivers were independent contractors and
the drivers’ uniforms indicate same.
The determination of employee status is very fact intensive,
and “as with most employee-status cases, there are facts pointing
in both directions. Carrell v. Sunland Construction, Inc., 998
F.2d 330, 334 (5th Cir. 1993). In this case, three of the five
traditional factors point toward independent contractor status. We
conclude that the district court did not err in finding that the
drivers were independent contractors.
We are confident in this result not only because the various
factors weigh in favor of independent contractor status, but also
14
because of Supreme Court precedent with respect to this issue. In
United States v. Silk and Harrison v. Greyvan Lines, Inc., 331 U.S.
704 (1947), a consolidated case, the court concluded that the
drivers were independent contractors. In Silk, Albert Silk, doing
business as Albert Silk Coal Co., sold coal at retail. His
coalyard consisted of two buildings, one for an office and the
other a gathering place for workers. Silk owned no trucks himself
but contracted with workers who owned their own trucks to deliver
coal at a uniform price per ton. When an order for coal was taken
in the office, a bell rang in the building used by the truckers.
The truckers voluntarily adopted a call list upon which their names
came up in turn, and the top man on the list had the opportunity to
deliver coal. The truckers could and often did refuse to make a
delivery without penalty. The truckers were not instructed how to
do their jobs, but were merely given a ticket telling them where
the coal was to be delivered and whether to collect the charge.
Any damage caused by the truckers were paid by the company. The
truckers could go as they please and could haul for others when
they pleased. The truckers paid all expenses of operating their
trucks.
Greyvan Lines involved an interstate trucking business
carrying mostly household furniture. Here the truckers were
required to haul exclusively for Greyvan; furnish their own trucks
and necessary equipment; furnish their own insurance; pay for all
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loss or damage to shipments; pay all expenses of operation;
indemnify the company for any loss caused by the truckers; paint
the designation “Greyvan Lines” on their trucks; collect all money
due the company from shippers or consignees; personally drive their
trucks at all times or be present on the truck when a competent
relief driver was driving; and follow all rules, regulations, and
instructions of the company. As remuneration, the truckers
received from the company a percentage of the tariff charged by the
company. The contract was terminable at any time by either party.
A contract between the company and Local No. 711 of the
International Brotherhood of Teamsters, Chauffeurs, Stablemen and
Helpers of America was in effect.
In both Silk and Greyvan Lines, the Court concluded that the
truckers were independent contractors. The Court reasoned that
these drivers owned their own trucks and were small businessmen.
The control exercised, the risk undertaken, and the opportunity for
profit from sound management led the Court to conclude that the
truck drivers were independent contractors. In Greyvan Lines, the
drivers were required to haul exclusively for the company and to
paint the company logo on their vehicles; nonetheless, the Supreme
Court concluded they were independent contractors. Comparatively,
it is easier to conclude independent contractor status for the
drivers in the case at bar.
Finally, the Secretary maintains that the drivers in this case
16
are analogous to piece-workers who have been held to be employees
in numerous instances. See, e.g., McLaughlin v. Seafood, Inc., 867
F.2d 875 (5th Cir. 1989) (seafood backers, pickers, and peelers are
employees under FLSA); Usery v. Pilgrim Equipment Co., 527 F.2d
1308 (5th Cir. 1976) (operators of laundry pickup stations are
employees under FLSA); Dole v. Snell, 875 F.2d 802 (10th Cir. 1989)
(cake decorators are employees under FLSA). We disagree. More
analogous to the Express contract drivers are the welders in
Carrell and the truck drivers in Silk and Greyvan Lines.
The conclusion of the district court that the drivers were
independent contractors is affirmed. Accordingly, we need not
address whether the Secretary met her burden of establishing that
the requested damages were reasonable.
B. Office Workers
Section 207 of the FLSA provides in pertinent part:
. . . [N]o employer shall employ any of his employees
. . . for a workweek longer than forty hours unless such
employee receives compensation for his employment in
excess of the hours above specified at a rate not less
than one and one-half the regular rate at which he is
employed.
29 U.S.C. § 207(a)(1). The Secretary claims that office workers at
Express were not paid for their overtime worked. It is well-
settled that the Secretary’s burden is met if it is proved that the
employee has in fact performed work for which he or she was
improperly compensated and if the employee produces sufficient
17
evidence to show the amount and extent of that work as a matter of
just and reasonable inference. See Reich v. Gateway Press, Inc.,
13 F.3d 685, 701 (3d Cir. 1994) (citing Anderson v. Mt. Clemens
Pottery Co., 328 U.S. 680, 687-88 (1946)).
The Secretary’s claim for back wages was supported at trial by
the testimony of Shirley Kenyon who presented an exhibit purporting
to reflect the overtime due these employees. Kenyon’s testimony
was rebutted by Lynn Clayton’s testimony which indicated that the
employment dates Kenyon used were incorrect and that Kenyon assumed
that each employee worked a 55-hour week, rather than the 45-hour
week actually worked. Lynn Clayton further testified that her
office employees were being paid time and a half for overtime hours
worked prior to the Secretary’s investigation. Although Clayton
had changed her method of record keeping, she testified that the
office employees were being paid the same amount today as they were
getting paid before the Secretary’s investigation. R. Vol. XI-214-
15. The district court concluded that the Secretary failed to
present sufficient credible evidence to support claims for back
wages for the office workers. We perceive no error in this
conclusion, and the Secretary fails to point to any evidence in the
record and fails to cite any binding precedent to support its
position that a violation of the Act occurred. The Secretary’s
citation of Nunn’s Battery & Electric Co. v. Goldberg, 298 F.2d 516
(5th Cir. 1962) offers no assistance to the court because in that
18
case the Secretary introduced evidence into the record indicating
that no explicit understanding existed between the parties as to
the existence of a regular wage rate that is increased for overtime
hours. The court pointed to abundant testimony by numerous
employees that they were not told what their hourly rate of pay
was. The Secretary points to no such evidence in the record and
makes no inference in her brief to that effect. Based upon the
limited briefing and record citation on this issue, the court
cannot discern how the Secretary proved that a violation of the Act
even occurred.
Because we agree with the district court that the Secretary
failed to provide sufficient evidence to support her claims, we
need not address whether the Secretary produced sufficient and
accurate evidence of damages.1
For the foregoing reasons, the judgment of the district court
is affirmed.
AFFIRMED.
1
We note that the Secretary’s post-trial brief with respect to
this issue focused solely on whether it accurately calculated
damages for overtime pay. The brief did not address the merits of
whether a violation of the Act even occurred. R. Vol. VI-1191-93.
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KING, Circuit Judge, concurring in part and dissenting in part:
I agree with the district court that the evidence proffered by
the Secretary of Labor on damages was deficient and I would
therefore affirm the district court’s take nothing judgment. I
disagree, however, with the district court’s decision, affirmed by
the majority, that Express’s drivers are independent contractors,
and I therefore respectfully dissent from the majority’s decision
to affirm the denial of an injunction ordering prospective
compliance with the minimum wage, overtime compensation and
recordkeeping requirements of the Fair Labor Standards Act.
I agree with and applaud the majority’s conclusion that two of
the district court’s findings of fact are clearly erroneous---the
finding regarding the relative investment of the worker and the
employer and the finding regarding the skill and initiative
required by the worker. But I also would hold clearly erroneous
the district court’s finding regarding the degree to which the
worker’s opportunity for profit or loss is determined by the
employer. In my opinion, this factor also weighs in favor of
employee status. Further, in view of the entirety of the
circumstances, I would hold that Express’s drivers are employees
20
rather than independent contractors.
Although the district court’s findings in connection with each
of the Silk factors are reviewed for clear error,
we must ensure that the factfinding of the district court is
performed with the proper legal standards in mind. Only then
can the inferences that reasonably and logically flow from the
historical facts represent a correct application of law to
fact. The district court’s analysis, of course, is subject to
plenary review by this court, to ensure that the district
court’s understanding of the law is proper.
Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1044-45 (5th Cir.
1987). In order to evaluate the district court’s finding regarding
the ability of Express’s drivers to control their opportunity for
profit or loss, it is therefore necessary to understand the
principles that inform the courts’ evaluation of this factor. The
ultimate conclusion as to whether the workers are employees or
independent contractors is reviewed de novo. See id. at 1045. I
address each inquiry in turn.
A court’s most important task in analyzing the profit or loss
factor is to ascertain which party controls the major determinants
of the worker’s ability to make a profit. See Reich v. Circle C.
Investments, Inc., 998 F.2d 324, 328 (5th Cir. 1993); Mr. W
Fireworks, 814 F.2d at 1050; Usery v. Pilgrim Equip. Co., 527 F.2d
1308, 1313 (5th Cir. 1976). If the employer largely controls these
major determinants, this points toward a finding of employee
status. On the other hand, if the workers themselves exert
substantial control over their ability to profit or over the
likelihood that they will suffer loss, they are more like
21
independent contractors. See Circle C. Investments, 998 F.2d at
328; Mr. W Fireworks, 814 F.2d at 1051; Pilgrim Equip., 527 F.2d at
1313.
We have defined “profit” as the “gain realized from a business
over and above its [capital] expenditures.” Mr. W Fireworks, 814
F.2d at 1050-51 (alteration in original) (internal quotation
omitted); see Silent Woman, Ltd. v. Donovan, 585 F. Supp. 447, 451
(E.D. Wis. 1984). Thus, the extent to which the workers have
invested capital that is subject to the risk of loss is also
relevant. See Mr. W Fireworks, 814 F.2d at 1050-51; Pilgrim
Equip., 527 F.2d at 1313. If the workers have sizeable capital
investments at stake, they are more akin to “independent
entrepreneurs seeking a return on their risky capital investments,”
than to employees. Mr. W Fireworks, 814 F.2d at 1050-51; see
Pilgrim Equip., 527 F.2d at 1313 (finding that no opportunity for
loss of capital investment indicates dependence, and, thus,
employee status).
A line of Fifth Circuit precedent has clarified which
determinants of profit are most relevant in determining whether a
worker’s opportunity for profit or loss is controlled by an
employer. Several factors reoccur throughout the case law. In
finding that the employer controlled the major determinants of
profit in Usery v. Pilgrim Equipment Co., the court emphasized that
the employer, an owner of laundry pick-up stations, controlled the
prices charged, the location of each store, and the advertising for
22
the business. See 527 F.2d at 1313. The court concluded that
these factors outweighed the factors controlled by the operators---
the convenience of the hours of operation, extra services provided,
and rapport with customers. See id. Moreover, the court refused
to find that the operators’ risk of losing their capital investment
was significant where the only risk of loss faced was the risk of
bad-check and theft losses and it was the employer who placed this
burden upon the operators. See id.
Similarly, in Brock v. Mr. W Fireworks, Inc., the court found
that the employer, an owner of fireworks stands, controlled the
largest determinants of profit---again emphasizing the prices
charged, the location of the stands, and the advertising. See 814
F. 2d at 1050. The court acknowledged that the factors controlled
by the employees---experience and good customer rapport---increased
earnings, but did not consider these to be as relevant as the
factors controlled by the employer. See id. As in Pilgrim
Equipment Co., the court further found that the stand operators
were subject to a minimal risk of loss because their capital
investment was limited to the burden of bearing bad-check and theft
losses, a burden forced upon them by their employer. See id. at
1050-51. The court therefore concluded that the profit and loss
factor weighed in favor of employee status. See id. at 1051.
Most recently, in Reich v. Circle C. Investments, Inc., the
court found that the employer, a nightclub operator, controlled the
determinants of profit or loss to a greater extent than the dancers
23
who worked at the nightclubs because the employer was responsible
for advertising, location of the clubs, business hours, maintenance
and appearance of facilities, and the refreshments served. See 998
F.2d at 328. These factors controlled customer volume, which,
according to the court, was the largest factor that influenced a
dancer’s ability to profit. See id. Moreover, in the court’s
view, control over customer volume was more relevant in determining
profit than the dancers’ initiative, hustle, and costume. See id.
In light of these cases, it is clear that the district court
did not properly assess the drivers’ ability to control their
profits or losses. The district court found, in essence, that
Express’s drivers have control over the hours they work, their
efficiency, experience, and skill,2 and the amount of their
commissions.3 These findings, even if true, are vastly outweighed
2
The district court’s finding that a “driver’s profit or loss
is determined largely by his or her skill, initiative, ability to
cut costs, and understanding of the courier business,” is clearly
erroneous in light of the legal principles discussed above. While
a driver’s skill, initiative, ability to cut costs, and
understanding of the business may certainly contribute to the
amount of money that he or she earns, as discussed further infra,
by far the larger determinants of the drivers’ ability to profit
are the number of runs available to each driver, the number of runs
actually offered to each driver, and the price charged per run---
all factors controlled by Express. It was clearly erroneous for
the district court to overlook these larger determinants of profit
or loss.
3
A review of the record indicates that the district court erred
in finding that “Express drivers can and do negotiate for increased
commissions.” The vast majority of drivers do not negotiate for
increased commissions. At the onset of employment, the drivers are
given a standard form contract to sign which already contains the
commission rates that drivers receive for various runs. Only two
24
by Express’s ability to affect the drivers’ profits by exerting
control over the volume of customers, the prices charged to the
customers, and the number and profitability of the runs assigned to
the drivers.
For example, Express can increase its customer base through
increasing its advertising, or through altering the prices it
charges per run; the more runs that are available, the greater a
driver’s ability to profit. Similarly, the prices that Express
charges its customers determine the amount of commission that
drivers earn. Finally, Express’s dispatchers control the
assignment of runs to the drivers. While the dispatchers try to
assign runs first to the nearest on-call operator who last received
a run, the dispatchers’ ability to make assignments is
circumscribed by the location of the drivers and the priority of
the delivery. In other words, drivers have limited control over
the number of runs they receive because a driver’s location at the
of the forty drivers who testified stated that they had negotiated
a slightly higher commission than that contained in the standard
contract. Moreover, “it is not what the [drivers] could have done
that counts, but as a matter of economic reality what they actually
do that is dispositive.” Mr. W Fireworks, 814 F.2d at 1047. As a
matter of economic reality, Express exerts substantial, if not
exclusive, control over the commissions earned by its drivers.
Finally, even were the drivers able to negotiate the amount of
their commissions, this ability has a negligible effect on their
actual profits in light of the fact that it is Express who controls
the number and quality of the runs assigned to each driver. A
higher percentage commission is meaningless if the drivers receive
a limited number of runs to which this higher commission applies.
The district court clearly erred in giving weight to this factor.
25
time contributes to whether that driver will be assigned a
particular run.
Thus, Express, and not its drivers, controls the largest
determinants of profit---customer volume, advertising, price, and
the assignment of runs. In Pilgrim Equipment, Mr. W Fireworks, and
Circle C. Investments, the employer’s ability to control at least
these first three factors outweighed, in the court’s view, the
workers’ ability to control factors such as experience, efficiency,
initiative, and hustle. While an increase in a driver’s hours or
efficiency could certainly have a positive impact on the amount of
money he or she earns, even the most industrious and efficient
driver will not be able to profit if the prices charged (and thus
the commissions available) are not significant, if there are few
runs available to assign the driver, or if the driver is not in the
right place at the right time in order to be offered runs. Drivers
lack control over these vital determinants of profit.
Moreover, although not mentioned by the district court in
connection with its analysis of this factor, the drivers’ risk of
investment loss is small. For the most part, the only investment
that the drivers make is in their own labor. See Mr. W Fireworks,
814 F.2d at 1050; Silent Woman, 585 F. Supp. at 451. As recognized
by both the district court and the majority, the record indicates
that the vast majority of drivers do not invest in vehicles for
purposes of their jobs. Rather, they drive their own personal
vehicles. Similarly, while Express requires them to bear the cost
26
of the equipment needed to perform their jobs by deducting from the
drivers’ paychecks the cost of certain equipment that it supplies
to the drivers, such as uniforms, radios and pagers, biohazard
bags, and dry ice, the deductions terminate once the drivers leave
Express’s employment and they return the equipment to Express.
Thus, in comparison to true independent contractors, the workers do
not make considerable capital investments subject to the risk of
loss if the business fails. Instead, the drivers need only earn
enough to pay their “rent” on their Express equipment and their
automobile expenses. As discussed above, the largest determinants
of whether the drivers will make enough to compensate for these
expenses are customer volume, advertising (which affects customer
volume), the prices charged (which affect both customer volume and
the amount of commission received by the drivers), and the
assignment of runs to drivers. Express controls all of these
factors, and thus controls the drivers’ ability to profit and the
likelihood that they will suffer loss.
In crediting the district court’s findings on this factor, the
majority erred. The drivers’ control over such factors as the
number of hours they work, their experience,4 and their efficiency
4
The court in Mr. W Fireworks noted that experience is a
quality that can enhance the commissions of all commissioned
employees and of all employees earning gratuities. See 814 F.2d at
1050. Consequently, the ability to earn more with experience does
not distinguish an independent contractor from an employee.
The majority finds relevant the fact that the experienced drivers
knew which runs were most profitable. However, this knowledge
would be of little use to a driver who was not offered profitable
27
is not the type of control over profit that is the true mark of an
independent contractor. See Rutherford Food Corp. v. McComb, 331
U.S. 722, 730 (1947); Silent Woman, 585 F. Supp. at 451. While
industry, experience, and efficiency can and do impact profit, the
work of Express’s drivers more closely resembles “piecework than an
enterprise that actually depend[s] for success upon the initiative,
judgment or foresight of the typical independent contractor.”
Rutherford Food Corp., 331 U.S. at 730; see Silent Woman, 585 F.
Supp. at 452. I would therefore find clearly erroneous the
district court’s conclusion that the drivers controlled their
opportunity for profit or loss.
With three factors pointing toward a finding of employee
status, and considering the totality of the circumstances, I would
conclude that these drivers are in fact employees rather than
independent contractors. As the courts have consistently held, the
central question is whether the workers, as a matter of economic
reality, are dependent for their livelihood on their relationship
runs. It is undisputed that the drivers had little control over
which runs they were offered and could choose only to accept or
reject the runs offered. Turning down an unprofitable run would be
no guarantee that the driver would be in the right place to receive
an offer for a more profitable run, or that the next run offered
would be more profitable than the last. In fact, the record
reveals that many drivers were reluctant to turn down runs for fear
that the dispatchers would retaliate against them by not giving
them good runs in the future. Moreover, because the number of runs
available was limited, many drivers testified that they rarely
turned down runs when offered. Therefore, knowing which runs are
profitable has little impact on the drivers’ ability to realize
profit.
28
with their employer. See Carrell v. Sunland Constr., Inc., 998
F.2d 330, 332 (5th Cir. 1993); Mr. W Fireworks, 814 F.2d at 1043;
Robicheaux v. Radcliff Material, Inc., 697 F.2d 662, 666 (5th Cir.
1983); Silent Woman, 585 F. Supp. at 450; see also Rutherford Food
Corp., 331 U.S. at 730 (determining whether a worker is an employee
“does not depend on . . . isolated factors but rather upon the
circumstances of the whole activity”). Express’s drivers clearly
depend for their livelihood on Express. They are “not specialists
called in to solve a special problem, but unskilled laborers who
perform[] the essential, everyday chores of [Express’s] operation.”
McLaughlin v. Seafood, Inc., 867 F.2d 875, 876-77 (5th Cir. 1989).
They have invested little more than their labor and, unlike true
independent contractors, they lack the ability to grow their
business.
United States v. Silk, 331 U.S. 704 (1947), and its companion
case, Harrison v. Greyvan Lines, Inc., are clearly distinguishable.
In concluding that the driver-owners of coal trucks in Silk and
moving vans in Greyvan Lines were independent contractors, the
Supreme Court’s analysis relied heavily on the drivers’ investment
in the business and the management skills they exercised. It was
the drivers’ considerable investment, the risk of loss of that
investment, and the drivers’ management of others that properly
placed the Silk and Greyvan Lines drivers in the category of
independent entrepreneurs seeking a return on their risky
investments.
29
[W]e agree with the decisions below in Silk and Greyvan that
where the arrangements leave the driver-owners so much
responsibility for investment and management as here, they
must be held to be independent contractors. These driver-
owners are small businessmen. They own their own trucks.
They hire their own helpers. In one instance they haul for a
single business, in the other for any customer. The
distinction, though important, is not controlling. It is the
total situation, including the risk undertaken, the control
exercised, the opportunity for profit from sound management,
that marks these driver-owners as independent contractors.
Id. at 719. In comparison, Express’s drivers have a much smaller
investment at stake (the family Geo is a far cry from the coal-
hauling trucks and moving vans at issue in Silk and Greyvan Lines),
and, consequently, are subject to a much smaller risk of loss
because they overwhelmingly do not use vehicles purchased for the
purpose of becoming a driver. They do not hire their own
assistants. They rarely, if ever, work for anyone other than
Express. Therefore, they differ considerably from the drivers in
Silk and Greyvan Lines. Compare Tobin v. Anthony-Williams Mfg.
Co., 196 F.2d 547, 549-50 (8th Cir. 1952) (distinguishing Silk,
court found truck drivers who hauled lumber were employees rather
than independent contractors where truck drivers did not have
substantial investment in trucks, and amount they could earn was
largely within control of defendant) with Goldberg v. Bellotto, 207
F. Supp. 499, 500 (S.D. Fla. 1962) (truckers, who supplied their
own tractors and, occasionally, trailers, hired their own
assistants, and were authorized to solicit business for defendant,
were independent contractors). Express’s drivers are more
accurately described as employees dependent for their livelihoods
30
on their employer, and I would so hold and order the district court
to grant the requested injunctive relief.
31