Hageman v. Park West Gardens

• Decision Date: 14 January 1992
• Docket Number: No. 910193,910193
• Citation: 480 N.W.2d 223
• Court: North Dakota Supreme Court
• Parties: 30 Wage & Hour Cas. (BN 1198, 120 Lab.Cas. P 35,589 Scott A. HAGEMAN, Plaintiff and Appellant, v. PARK WEST GARDENS and Midwest Management, Defendants and Appellees. Civ.

Page 223

480 N.W.2d 223

30 Wage & Hour Cas. (BN 1198, 120 Lab.Cas. P

35,589

Scott A. HAGEMAN, Plaintiff and Appellant, v. PARK WEST GARDENS and Midwest Management, Defendants and Appellees.

Civ. No. 910193.

Supreme Court of North Dakota.

Jan. 14, 1992.

Hannig Law Office, Moorhead, for plaintiff and appellant; argued by Jeffrey R. Hannig.

Anderson & Bailly, Fargo, for defendants and appellees, argued by Gregory L. Thompson.

ERICKSTAD, Chief Justice.

Scott A. Hageman appeals from the judgment of the District Court for Cass County dismissing his complaint against Park West Gardens and Midwest Management. We reverse and remand.

On March 6, 1990, Hageman brought this action against Park West Gardens and Midwest Management for unpaid overtime compensation under the Fair Labor Standards Act, 29 U.S.C. section 201 et seq. An amended complaint was served on March 23, 1990, alleging, in addition, discriminatory discharge under the Act. After a bench trial, ¹ the district court determined, among other things, that Hageman was an independent contractor and not an employee for purposes of the Act, and thus entered judgment dismissing Hageman's complaint with prejudice. This appeal followed.

In March of 1988, Hageman was hired as a maintenance person for the Park West Gardens apartment complex in West Fargo, North Dakota. Park West Gardens consists of 14 separate buildings and 144 apartments owned by a general partnership (Park West Partners). The apartment complex was, however, managed by a separate entity, namely Midwest Management, Inc. ² Midwest replaced the former management company in August of 1988.

As a maintenance laborer, Hageman performed a variety of tasks including electrical, plumbing, heating and air conditioning repair, as well as general maintenance. He generally used his own tools, but Midwest purchased new tools for him when needed. In addition, Midwest provided Hageman with a $100 or $150 check to Menards each month for the purchase of supplies. Hageman could also charge some supplies at another hardware store. For his work, Hageman was paid $7 per hour. In addition, he received a $125 per month rent concession or credit on the rental of his apartment at Park West Gardens as well as a $10 per week gasoline allowance.

The work that Hageman performed usually started when a tenant made a request for repairs or maintenance to the resident manager of the apartment complex. The resident manager would then fill out a work order outlining the problem. Although Hageman had no set hours, he usually went to the office at Park West Gardens at approximately 10:00 a.m. daily to pick up the work orders. Additionally, Hageman was provided a voice pager, which was used to contact him in case of an emergency. After completing the work, Hageman filled out the form by indicating the work he had done, the materials used, the number of hours it took him, the date work was completed, and the amount due and affixed his signature. The form also required the signature of the resident manager before it could be forwarded to Midwest. Hageman, apparently, worked more or less under this arrangement for approximately two years.

I. EMPLOYEE STATUS

On appeal, Hageman first argues that the trial court incorrectly applied the law respecting who is a covered employee under the Fair Labor Standards Act. We agree. ³

The Fair Labor Standards Act was enacted in 1938 to combat the low wages and long working hours then endured by some laborers. As part of this remedial legislation, maximum working hours were established. 29 U.S.C. section 207(a)(1) states in relevant part:

"Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, 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 times the regular rate at which he is employed."

Thus, those laborers that are deemed employees under the Act must be paid time and a half for hours worked over 40.

The term "employee" is defined under the Act as "any individual employed by an employer." 29 U.S.C. section 203(e)(1). An "employer" is defined as including "any person acting directly or indirectly in the interest of an employer in relation to an employee...." 29 U.S.C. section 203(d). "Employ" is defined as including "to suffer or permit to work." 29 U.S.C. section 203(g). ⁴ Recognizing the remedial purpose of the Fair Labor Standards Act and similar legislation such as the Social Security Act, the United States Supreme Court while construing such terms has held that the common law distinctions between employees and independent contractors are not applicable. United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463, 1468, 91 L.Ed. 1757 (1947). Rather, the test is whether or not a worker is an employee as a matter of "economic reality." Id. See also Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 936, 6 L.Ed.2d 100 (1961).

In discerning the "economic realities" of a given working relationship, a number of factors, derived in part from United States v. Silk, 331 U.S. 704, 715, 67 S.Ct. 1463, 1469, 91 L.Ed. 1757 (1947), have developed. These factors include: "1) the nature and degree of the alleged employer's control as to the manner in which the work is to be performed; 2) the alleged employee's opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee's investment in equipment or materials required for his task, or his employment of workers; 4) whether the service rendered requires a special skill; 5) the degree of permanency and duration of the working relationship; 6) the extent to which the service rendered is an integral part of the alleged employer's business." Secretary of Labor, United States Department of Labor v. Lauritzen, 835 F.2d 1529, 1535 (7th Cir.1987). However, "[t]hese factors are not exhaustive, nor can they be applied mechanically to arrive at a final determination of employee status." Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1043 (5th Cir.1987). "Rather they must always be aimed at an assessment of the 'economic dependence' of the putative employees, the touchstone for this totality of the circumstances test." Id. The Fifth Circuit in Brock, quoting Usery v. Pilgrim Equipment Company, Inc., 527 F.2d 1308, 1311-1312 (5th Cir.1976), further put it as follows:

"No one of these considerations can become the final determinant, nor can the collective answers to all of the inquiries produce a resolution which submerges the dominant factor--economic dependence.... The five tests are aids--tools to be used to gauge the degree of dependence of alleged employees on the business with which they are connected. It is dependence that indicates employee status. Each test must be applied with that ultimate notion in mind. More importantly, the final and determinative question must be whether the total of the testing establishes the personnel are so dependent upon the business with which they are connected that they come within the protection of the FLSA or are sufficiently independent to lie outside its ambit. [Emphasis in original.]"

Brock v. Mr. W Fireworks, Inc., 814 F.2d at 1044. Stated another way, the question is whether or not the factors demonstrate that the workers are "independent contractors in the 'critically significant' sense that they [are] 'in business for themselves.' " McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir.1989) (amending 861 F.2d 450 (5th Cir.1988)), quoting Beliz v. W.H. McLeod & Sons Packing Co., 765 F.2d 1317, 1327-1328 (5th Cir.1985). ⁵

A. CONTROL

The first of the above-listed "economic reality" factors deals with "control." The trial court made the following findings which seem to address this factor:

"11. Hageman did all of his maintenance work on site at Park West Gardens. Although he was not restricted by the Defendants from doing outside work, Hageman had no other employment while at Park West Gardens.

* * * * * *

"24. None of the Defendants supervised Hageman or his work. There was no requirement that Hageman's work be inspected before he was paid.

"25. If Hageman could not do the work, it was within his discretion to notify Skaurud, who would then get someone else to do the job.

* * * * * * "31. Neither Midwest nor Park West Partners had direct control over Hageman. If Hageman failed to show up or do a particular job, the Defendants had no right to fire him. If Hageman's work was not satisfactory or was not done in a timely manner, the Defendants could choose to no longer use Mr. Hageman's services.

"32. Hageman was not told to report for work at any specific time each day.

"33. If Hageman did not pick up a work order or do a job on a particular day, Midwest would find someone else to do the job.

"34. The Defendants required no verification of Hageman's work hours.

"35. The Defendants did not inspect Hageman's work before he was paid for it. However, beginning in July, 1988, Midwest required the tenant to sign the work order to show the work was completed before Hageman turned the work order in for approval and payment.

* * * * * *

"42. On occasion, Hageman used his son Mike to help move appliances or help make repairs. Hageman did not need the Defendants' prior approval to do so."

What is conspicuously missing from these findings regarding control and the trial court's ultimate decision is how this degree of control demonstrates Hageman's economic independence. Determining the degree of control an employer has over a worker is not an end in and of itself. Rather, determining the degree of control is only an aid "to be used to gauge the degree of dependence of the alleged employees on the business with which...