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App-based drivers: Jury will decide
whether employees or contractors

Walsh v. Alpha & Omega USA (8th Cir 07/14/2022)
Sent to Custom Alerts™ subscribers on 07/16/2022

The U.S. Secretary of Labor sued Alpha & Omega – d/b/a Travelon – claiming violations of the Fair Labor Standards Act (FLSA) by misclassifying its medical transportation drivers as independent contractors instead of employees.

The trial court granted summary judgment in favor of the Secretary, finding the drivers were employees, but the 8th Circuit reversed and remanded because genuine issues of material fact needed to be resolved.

Travelon hires drivers to transport patients to and from medical appointments. Travelon provides equipment such as vans and electronic tablets to drivers and pays for costs such as internet service and insurance for the vans. Customers pay Travelon for the transportation services, and Travelon distributes the entire sum paid by the customers to the drivers. Drivers are then responsible for paying Travelon weekly expenses such as a dispatch fee, 35% of the commissions generated by the drivers' weekly trips (when the drivers' weekly income exceeds $300), insurance fees, vehicle lease fees, vehicle maintenance fees, and a tablet rental plus added costs for any additional gigabytes of data used. Travelon generates its revenue from these fees paid by the drivers.

Travelon's dispatch service assigns trips to drivers through an application called "MediRoutes" on the drivers' tablets. The app monitors the drivers' GPS locations and their availability. Dispatch also encourages drivers to notify dispatch when they are available to take trips. Dispatch then assigns a trip to the driver and provides instructions through the app such as pick-up/drop-off times and locations. Drivers set their own schedules and can change their schedules daily. Travelon, however, only provides dispatch services 5:00 a.m.–6:00 p.m. Monday–Friday, and 5:00 a.m.–4:00 or 5:00 p.m. on Saturdays.

The court applied the multi-factor "economic realities" test to determine whether the drivers were "employees" under the FLSA: (1) "the degree of control exercised by the alleged employer over the business operations;" (2) "the relative investments of the alleged employer and employee;" (3) "the degree to which the alleged employee's opportunity for profit and loss is determined by the employer;" (4) "the skill and initiative required in performing the job;" (5) "the permanency of the relationship;" and (6) "the degree to which the alleged employee's tasks are integral to the employer's business."

In applying the six factor "economic realities" test, the court said that a trier of fact could find the "control," "profits and losses," and "integral to business" factors weighed in favor of the drivers being independent contractors.

As to the "control" factor, there was competing evidence as to whether the drivers could reject trip assignments and the extent of control Travelon had over the drivers' hours.

As to the "profits and losses" factor, there were questions of fact over whether the drivers were able to transport multiple customers, use their personal vehicles, and perform services independent of their work with Travelon, all which would weigh in favor of an independent contractor relationship.

As to the "integral to business" factor, a rational trier of fact could agree with Travelon's characterization of its business model as merely a technology company supporting the drivers' medical transportation business, thus finding the drivers are not integral to Travelon's business.

The court concluded: "In sum, the award of summary judgment was premature. While the Secretary has shown evidence supporting an employment relationship between Travelon and its drivers, Travelon has also shown evidence of an independent contractor relationship. These competing narratives must be resolved before the district court makes its legal conclusion as to whether an employment relationship existed between Travelon and its drivers."

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