Herman v. Express Sixty-Minutes Delivery Service, Inc.

• Decision Date: 04 December 1998
• Docket Number: SIXTY-MINUTES,No. 97-10764,97-10764
• Citation: 161 F.3d 299
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: 136 Lab.Cas. P 33,769, 5 Wage & Hour Cas.2d (BNA) 7 Alexis M. HERMAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. EXPRESSDELIVERY SERVICE, INC., Lynn Williams Clayton, Charles Thomas Clayton and Dee Ann Hopkins, Defendants-Appellees.

Page 299

161 F.3d 299

136 Lab.Cas. P 33,769, 5 Wage & Hour Cas.2d (BNA) 7

Alexis M. HERMAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. EXPRESS SIXTY-MINUTES DELIVERY SERVICE, INC., Lynn Williams Clayton, Charles Thomas Clayton and Dee Ann Hopkins, Defendants-Appellees.

No. 97-10764.

United States Court of Appeals Fifth Circuit.

Dec. 4, 1998.

William J. Stone, Ellen Randi Edmond, U.S. Dept. of Labor, Washington, DC, for Plaintiff-Appellant.

James K. Peden, III, David Norman Kitner, Earl Jeffery Story, Strasburger & Price, Dallas, TX, William Bryan Peterson, Brown & Thompson, Fort Worth, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Texas.

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 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, 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 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 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 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.

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...