Brant v. Schneider Nat'l, Inc.

• Decision Date: 03 August 2022
• Docket Number: 21-2122
• Citation: 43 F.4th 656
• Parties: Eric R. BRANT, Plaintiff-Appellant, v. SCHNEIDER NATIONAL, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

43 F.4th 656

Eric R. BRANT, Plaintiff-Appellant,

v.SCHNEIDER NATIONAL, INC., et al., Defendants-Appellees.

No. 21-2122

United States Court of Appeals, Seventh Circuit.

Argued January 21, 2022

Decided August 3, 2022

Jennifer Kroll, Susan J. Martin, Attorneys, Martin & Bonnett, PLLC, Phoenix, AZ, Michael J. D. Sweeney, Attorney, Getman, Sweeney & Dunn, PLLC, Kingston, NY, Edward Tuddenham, Attorney, Edward Tuddenham, Paris, Ile de France, for Plaintiff-Appellant.

Jennifer Kroll, Susan J. Martin, Michael Licata, Attorneys, Martin & Bonnett, PLLC, Phoenix, AZ, for Appellant Aimee Henery.

Jennifer Kroll, Susan J. Martin, Michael Licata, Attorneys, Martin & Bonnett, PLLC, Phoenix, AZ, Michael J. D. Sweeney, Attorney, Getman, Sweeney & Dunn, PLLC, Kingston, NY, for Appellants Eric Alexander, Joshua Arrington, and Wayne R. Avery.

Matthew Allen Fitzgerald, Attorney, McGuirewoods LLP, Richmond, VA, Gilbert Dickey, Attorney, McGuirewoods LLP, Charlotte, NC, Michael R. Phillips, Joel H. Spitz, Attorneys, McGuirewoods LLP, Chicago, IL, for Defendants-Appellees.

Before Hamilton and Kirsch, Circuit Judges.^*

Hamilton, Circuit Judge.

Plaintiff-appellant Eric Brant appeals the district court's dismissal of his claims against Schneider National, Inc. and its two subsidiaries (together, "Schneider"). Schneider is engaged in the business of hauling freight and hires some drivers as employees, while bringing others on as purported independent contractors. Brant hauled freight for Schneider under an agreement that labeled him as an independent contractor in 2018 and 2019. Brant came to believe, however, that Schneider was engaged in a scheme to misclassify his employment status, and he filed this suit.

Brant claims that Schneider (i) violated minimum wage requirements under the federal Fair Labor Standards Act and Wisconsin law; (ii) unjustly enriched itself under Wisconsin law; and (iii) violated federal Truth-in-Leasing regulations. The district court granted Schneider's motion to dismiss all claims on the pleadings. Brant appeals.

We reverse and remand for further proceedings. The district court erred by giving decisive effect to the terms of Schneider's contracts. In many areas of the law, the district court's approach would be sound, but not under the Fair Labor Standards Act. As explained below, in determining whether a person is an employee under the Act, what matters is the economic reality of the working relationship, not necessarily the terms of a written contract. "The FLSA is designed to defeat rather than implement contractual arrangements." Secretary of Labor v. Lauritzen , 835 F.2d 1529, 1544–45 (7th Cir. 1987) (Easterbrook, J., concurring). Brant's allegations about the economic reality of his working relationship with Schneider state a viable claim under the FLSA, as well as under the other laws he relies upon.

I. Factual and Procedural Background

Schneider is a major motor carrier and in 2019 oversaw thousands of trucks in its freight business. Schneider hires most of its drivers as employees, but in 2020 it designated more than a quarter of its drivers as independent contractors. In the industry, such contractors are referred to as "owner-operators." They frequently own their own trucks and drive for carriers as they choose. Owning a truck for hauling freight requires a significant capital investment, and Schneider sought to recruit drivers who had not independently made that investment by leasing Schneider's trucks to some drivers who would then drive for Schneider under contract. Brant became an "owner-operator" under such an arrangement with Schneider, and he worked for the carrier from December 2018 to August 2019.

Brant's relationship with Schneider involved two related contracts: (i) the Lease, under which he leased a relatively new Freightliner truck from Schneider; and (ii) the Operating Agreement, under which Brant would lease the truck back to Schneider and receive 65% of the gross revenue for shipments he hauled for Schneider. The Operating Agreement purported to give Brant substantial control over his work. It also included provisions permitting him to haul loads for other carriers and to hire other drivers to assist if he desired. He was also responsible for all operating expenses under this contract. Schneider retained sole discretion, however, to deny him permission to haul loads for other carriers. The Lease also depended in part on the continuation of the Operating Agreement. Termination of the Operating Agreement would trigger a default on the Lease if Brant could not secure Schneider's permission to enter a new agreement with Schneider or another carrier. Defaulting on the Lease would be serious. Schneider reserved the right on default to take measures such as declaring as due the remaining sums for the entire two-year term of the Lease.

Brant and Schneider provide starkly different accounts of Brant's actual work. Brant alleges that he struggled to haul enough profitable shipments to keep ahead of his operating costs and charges from Schneider. In his account, Brant was not able to exercise his independent expertise to increase his margins. He simply had to say yes to as many loads from Schneider as he could, even when they were highly undesirable. For example, Brant claims that during the week of May 2, 2019, he drove over 3,000 miles hauling five shipments for Schneider, and because of the expenses that Schneider deducted from his pay he received zero net pay. In Brant's view, the Operating Agreement and Lease were designed to misclassify him as an independent contractor, while Schneider controlled him in the manner of an employee without respecting his rights under federal and state employment laws.

Brant claims that at one point he sought to terminate the Operating Agreement and haul freight in his leased truck for another carrier. He alleges that Schneider demanded such a large security deposit to allow him to haul for another carrier that he was unable to afford it. Schneider eventually seized Brant's truck when he later terminated the Operating Agreement and could not pay the additional security deposit.

Schneider sees things differently, relying on the terms of the written contracts. Schneider explains that it extended credit to Brant that allowed him to lease a truck and operate his own independent business. In Schneider's view, Brant freely engaged to haul freight for the carrier and was free to accept or reject the shipments he was offered while retaining total operational control of his business. To Schneider, the Operating Agreement and Lease show that Brant was an independent contractor whom Schneider enabled to manage his own operations, to hire additional drivers, or to haul loads for other carriers.

Brant sued Schneider in July 2020, claiming violations of federal and state law. First, Brant alleged that Schneider failed to pay him the federal minimum wage that he was due as an employee under the FLSA. Second, he alleged that Schneider also failed to pay him the minimum wage required for an employee under Wisconsin law. Third, Brant alleged that his contracts with Schneider were void as unconscionable, and that Schneider unjustly enriched itself by retaining certain money deducted from his pay in violation of Wisconsin law. Fourth, Brant alleged that Schneider violated certain Truth-in-Leasing regulations requiring the disclosure of information to owner-operators, giving him a cause of action under 49 U.S.C. § 14704(a)(2).

Before resolving whether Brant could proceed on his FLSA claim as a collective action under 29 U.S.C. § 216(b), the district court granted Schneider's motion to dismiss on the pleadings. Brant v. Schneider Nat'l, Inc. , 2021 WL 179597 (E.D. Wis. Jan. 19, 2021). The court gave Brant leave to amend and instructions on deficiencies he needed to cure if he could. Brant filed an amended complaint, but the district court found that he had not cured the problems with his complaint and entered judgment against him, dismissing the case with prejudice.

II. Analysis

We review de novo a district court's dismissal for failure to state a claim under Rule 12(b)(6). Sloan v. American Brain Tumor Ass'n , 901 F.3d 891, 894 (7th Cir. 2018). In evaluating the complaint's sufficiency, we accept as true all well-pled facts and make any reasonable inferences in the non-movant's favor. Id. at 893. Dismissal under Rule 12(b)(6) is appropriate if the complaint fails to provide "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A plaintiff needs to provide "enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief." Reger Development, LLC v. National City Bank , 592 F.3d 759, 764 (7th Cir. 2010), quoting Tamayo v. Blagojevich , 526 F.3d 1074, 1083 (7th Cir. 2008). If the complaint is plausible, the plaintiff "receives the benefit of imagination, so long as the hypotheses are consistent with the complaint." Chapman v. Yellow Cab Cooperative , 875 F.3d 846, 848 (7th Cir. 2017), quoting Twombly , 550 U.S. at 563, 127 S.Ct. 1955. We address Brant's claims in turn.

A. FLSA Claim

The Fair Labor Standards Act provides: "Every employer shall pay to each of his employees who in any workweek is engaged in commerce" the federal minimum wage, which is now $7.25 per hour. See 29 U.S.C. § 206(a). Employers who violate § 206(a) are liable to their employees for unpaid wages and may also be liable for liquidated damages. See §§ 216(b) & 260. There is no question that Brant engaged in commercial activities covered by the Act. Thus, to state a claim for violation of the FLSA's minimum wage provisions, he must allege facts giving rise to a plausible inference that he was an employee within the meaning of the Act and that he was underpaid for...