On July 9, 2012, a federal appeals court in Georgia affirmed the dismissal of DHL Express, Inc., from a lawsuit brought by a class of current and former delivery drivers alleging overtime violations under the Fair Labor Standards Act ("FLSA").
Executive Summary: On July 9, 2012, a federal appeals court in Georgia affirmed the dismissal of DHL Express, Inc., from a lawsuit brought by a class of current and former delivery drivers alleging overtime violations under the Fair Labor Standards Act ("FLSA"). According to the court, an assessment of the economic realities of the case did not reveal an employment relationship between DHL and the drivers.
Applicable Law
Under the FLSA, an individual may have multiple employers who are jointly liable for violations such as failure to pay the appropriate minimum wage or overtime premium. To determine whether a company qualifies as a joint employer, courts examine the "economic realities" of the relationship between the employer and the employees. In the Eleventh Circuit, courts analyze numerous factors to determine whether an employment relationship exists, including: 1) the nature and degree of the employer's control over the employees; 2) the employer's supervision of the employees' work; 3) the employer's right to hire, fire, or modify employment conditions; 4) the employer's power to set employee pay; 5) the employer's role in preparing payroll; 6) the employer's ownership of the employees' work facilities; 7) whether the employees performed a specialty job integral to the employer's business; and 8) the relative investment in equipment and facilities by the purported joint employers. Ultimately, courts determine whether an employment relationship exists on a case-by-case basis by looking at the "totality of the circumstances."
The Case
From 2005 to 2009, DHL contracted with Sky Land Express, Inc. ("Sky Land") to deliver packages in Alabama. The companies operated under a Cartage Agreement, which deemed Sky Land an independent contractor of DHL. Pursuant to the agreement, Sky Land employed drivers to serve as couriers, and supplied these drivers with vehicles which Sky Land owned. DHL furnished the warehousing facilities out of which Sky Land operated as well as all other equipment.
Each day, after receiving the go ahead from DHL, the drivers sorted and scanned packages for delivery using scanners leased from DHL by Sky Land, and loaded the packages on their trucks. Before the drivers made deliveries, DHL employees would periodically inspect the drivers' vehicles and uniforms to ensure they conformed to the requirements under the Cartage Agreement. The drivers spent the rest of the day making pick-ups and deliveries in their vehicles. As they worked, DHL sent the drivers information regarding customer complaints, requests for deliveries, and other non-routine matters. The drivers used scanners to record when they made deliveries or pick-ups, which they returned to the warehouse at the end of each day to be charged overnight and to allow DHL to download the record of the day's transactions to its data server.
In August 2008, a former Sky Land driver brought a collective action against both Sky Land and DHL for unpaid overtime compensation under the FLSA. The trial court dismissed DHL, finding it was not a joint employer. On appeal, the U.S. Court of Appeals for the Eleventh Circuit agreed.
In its analysis, the Eleventh Circuit noted DHL did not pre-determine how the drivers accomplished their ultimate duty – delivering the packages. Thus, even though DHL determined when the drivers could start their workday and sometimes added un-planned routes to the drivers' schedules, the court found DHL did not exert sufficient control over the drivers to qualify as their employer. The court also found DHL did not subject the drivers to employer-like supervision through its use of scanners because DHL did not monitor the scanners in real time. Moreover, aside from requiring that all couriers pass a basic background check, the court found DHL exerted no influence over Sky Land's hiring process. Importantly, DHL did not set drivers' hours or pay rates, and did not prepare their payroll. Furthermore, the court noted the drivers spent the majority of their day in their vehicles, which Sky Land owned, and which Sky Land could use to make deliveries for other companies. Lastly, because both Sky Land and DHL made significant investments in facilities and equipment, this factor did not influence its decision. In light of the totality of the circumstances, the court determined DHL was not a joint employer of the drivers.
Employers' Bottom Line
The Eleventh Circuit's decision is good news for DHL and others operating under similar joint-operations agreements. The court's analysis emphasizes the need for a written agreement setting forth each employer's responsibilities with regard to employees, and highlights the relevant factors which courts will examine to determine whether a company qualifies as a joint employer for the purposes of liability under the FLSA.
If you have any questions regarding the issues addressed in this Alert, please contact the author, Joshua Sudbury, an attorney in our Nashville office, at jsudbury@fordharrison.com or the FordHarrison attorney with whom you usually work.