Mednick v. Albert Enterprises, Inc.

• Decision Date: 13 February 1975
• Docket Number: No. 73-3781,73-3781
• Citation: 508 F.2d 297
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: 22 Wage & Hour Cas. (BN 166, 76 Lab.Cas. P 33,205 Charles R. MEDNICK, Plaintiff-Appellant, v. ALBERT ENTERPRISES, INC., and Bal Harbour Towers, Inc., Defendants-Appellees.

Page 297

508 F.2d 297

22 Wage & Hour Cas. (BN 166, 76 Lab.Cas. P 33,205

Charles R. MEDNICK, Plaintiff-Appellant, v. ALBERT ENTERPRISES, INC., and Bal Harbour Towers, Inc.,

Defendants-Appellees.

No. 73-3781.

United States Court of Appeals, Fifth Circuit.

Feb. 13, 1975.

Gene J. Tischer, Miami, Fla., for plaintiff-appellant.

W. Reynolds Allen, Donald T. Ryce, Jr., Robert L. Norton, Coral Gables, Fla., for defendant-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before THORNBERRY, GOLDBERG and GODBOLD, Circuit Judges.

GODBOLD, Circuit Judge:

This is a suit under the Fair Labor Standards Act, 29 U.S.C. 201 et seq., by one claiming to be an employee, seeking to recover wages, overtime pay and liquidated damages. ¹ The case was tried to the court, which found for the defendants on the sole ground that the plaintiff was not an employee but an independent contractor. Plaintiff appeals. The only issue to be reviewed is the finding that plaintiff was an independent contractor.

Plaintiff Mednick worked in Harbour House, the apartment house-hotel of the defendants, overseeing the operation of the cardrooms. These were rooms generally devoted to the playing of card games, such as bridge or gin rummy, on most afternoons and evenings. Mednick's principal obligation was to attend to the needs of the players. For the most part this consisted of supplying them with candy and fresh decks of playing cards, and occasionally of other amenities, such as ice, soft drinks, cigars and cigarettes, and sometimes other services, such as walking one regular patron back to her rooms. Mednick paid for the candy, cards, cigars and ice out of his own pocket, as was the practice for the person running the cardrooms. It was understood that his sole compensation would be the gratuities he received from the players. These apparently were fairly standardized-- $1.00 for the use of a table by four patrons, which included a candy bar for each, another 75 cents or a dollar when he supplied a deck of cards. Some patrons were more generous, and five dollar tips were not uncommon, and even larger tips not unheard of. These rooms were put to other uses of a group nature, primarily bingo, movies, card parties and occasional business meetings, for which Mednick provided some services by way of preparing the rooms for these activities. The groups were largely composed of Harbour House residents and were subsidized by Harbour House. For these services, Mednick rendered monthly handwritten bills to the groups.

Other pertinent facts found by the trial court or that fairly appear undisputed in the record, are as follows: Harbour House paid no health insurance premiums for Mednick, nor did it give him paid vacation or sick leave as it did for conceded employees. Mednick paid his own social security and withholding taxes, and his federal income tax returns were filed on the form for self-employed taxpayers. Harbour House did not set hours for operation of the cardrooms, nor did it even require that Mednick be present. He hired and fired his own employees, about ten in all over a five year period, who would work in the card-rooms in his stead four or five times a week for half-day periods. He never had more than one or two such sub-employees working for him at a time, and he made no profit from them when he did, remitting to them exactly what he would have received had he himself done the work. Further Harbour House manager Taplin was involved in decisions to hire and fire; occasionally he told Mednick he did not approve of certain applicants, whom Mednick then did not hire, or certain employees, whom Mednick then fired. Whether Taplin's statements on such occasions are deemed requests or orders, it was clear that all parties understood that they would be complied with.

Mednick received no specific orders from Taplin about the services he performed in the cardrooms. But Taplin did give Mednick a variety of orders concerning the care of the facilities. Although the rooms were normally cleaned by full-time Harbour House janitorial staff, Taplin ordered Mednick to do cleaning jobs a number of times. Taplin usually provided Mednick with a uniform jacket bearing the Harbour House name. The cardrooms were furnished with Harbour House furniture. The rooms assigned to cardroom use were not fixed by contract or agreement, and on occasion Taplin changed the room arrangements with no prior consultation with Mednick. Use of the rooms was limited to Harbour House tenants, their guests, members of the house clubs, and customers of the restaurant on the premises. Mednick did not advertise to increase his clientele.

There was never any written contract between the parties, and no document reciting that Mednick was either an independent contractor or an employee. There was no writing as to the duration of the relationship, so presumably either party could terminate at will.

Prior to taking on the cardroom position in 1968, Mednick worked for Harbour House as a menial employee. He had no experience in operating card-rooms. He had never advertised or otherwise held himself out as a cardroom operator or concessionaire. He did not operate cardrooms for anyone else since at least 1970. ²

The terms 'independent contractor,' 'employee,' and 'employer' are not to be construed in their common law senses when used in federal social welfare legislation. N.L.R.B. v. Hearst, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944) (for purposes of the National Labor Relations Act); United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947), and Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947) (for purposes of employment taxes on employers under the Social Security Act, as amended); and Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947) (for purposes of the Fair Labor Standards Act). Rather, their meaning is to be determined in light of the purposes of the legislation in which they were used. 'In the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service.' Bartels, supra, 332 U.S. at 130, 67 S.Ct. at 1550, 91 L.Ed. at 1953. This court said in Fahs v. Tree-Gold Co-op. Growers of Florida, Inc., 166 F.2d 40, at 44 (CA5, 1948):

The ultimate criteria are to be found in the purposes of the act.

Under these decisions (Silk, Rutherford, Bartels and Hearst), the act is intended to protect those whose livelihood is dependent upon finding employment in the business of others. It is directed toward those who themselves are least able in good times to make provisions for their needs when old age and unemployment may cut off their earnings. The statutory coverage is not limited to those (whose work activities satisfy the common law 'control' test) but rather to those who, as a matter of economic reality, are dependent upon the business to which they render service.

And we said more recently in an employment tax case that the test is whether 'as a matter of economic reality, (the alleged employees were) dependent upon the taxpayers' business as their means of livelihood.' Shultz v. Hinojosa, 432 F.2d 259 (CA5, 1970). See also Walling v. Twyeffort, Inc., 158 F.2d 944 (CA2, 1947), where the court held that a tailor was an employee, despite some indicia of independent contractor status, because the presence of these factors 'did not relieve that tailor from exposure 'to the evils the statute was designed to eradicate',' id., at 947-948.

In Rutherford Food Corp. v. McComb, supra, the Supreme Court set out specific guidelines for distinguishing employees from independent contractors for purposes of the F.L.S.A.:

(1) The workers did a specialty job on a production line.

(2) The contractual terms did not vary in any material way as one worker succeeded another.

(3) The premises and equipment were those of the proprietor.

(4) The workers had no 'business organization' that could offer their services to others.

(5) The proprietor's manager kept close watch over the workers' activities.

(6) The workers could profit from 'efficiency,' but it was the efficiency of the pieceworker, not that of an 'enterprise that actually depended for success upon the initiative, judgment or foresight of the typical independent contractor.' 331 U.S. at 730, 67 S.Ct. at 1477, 91 L.Ed. at 1778. In United States v. Silk, supra, the companion case to Rutherford dealing with the meaning of employee for purposes of Social Security taxes, the Court cited other factors that should be taken into consideration: 'degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required in the claimed independent operation . . .' 331 U.S. at 716, 67 S.Ct. at 1469, 91 L.Ed. at 1769.

Both parties have selected Rutherford and Silk factors, showing their presence or absence in subsequent cases with results favorable to their own, arguing that therefore such selected factors should control the disposition of the present case. These arguments give too little weight to the ultimate criteria pointed out above. Additionally, the court below and the parties placed too great reliance on the bare legal powers which each of the parties had under their informal working agreement. The result was to permit potential powers of little or no effective significance in the actual operation of the working arrangement to overweigh the actual operation, the 'economic reality' of the situation. Under the Supreme Court's opinion in Goldberg v. Whitaker House Coop., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961), this was error.

Considered in isolation, the Rutherford and Silk criteria produce no clear cut conclusion in this case. Mednick's work was not specialized and could be learned in about an hour's time. But it was not an integrated part of the business of Harbour House in the same way as...