Transportation Law Update: Seventh Circuit Reinstates FLSA Minimum Wage Case Against Motor Carrier
Brant v. Schneider National, Inc., et al., 43 F.4th 656 (7th Cir. 2022).
On August 3, 2022, the United States Court of Appeals for the Seventh Circuit ruled on a case involving alleged violations of the Fair Labor Standards Act (“FLSA”).
Eric Brant (“Brant”) appealed the decision of the United States District Court for the Eastern District of Wisconsin to the Seventh Circuit, after the District Court granted Schneider National, Inc.’s (“Schneider”) motion to dismiss Brant’s claims.
Schneider is in the business of hauling freight and hires some drivers as employees, while engaging other drivers as independent contractors. Brant was engaged by Schneider to haul freight under an agreement that deemed him as an independent contractor; however, Brant came to believe that Schneider was misclassifying his employment status and filed this lawsuit alleging violations of the FLSA and Wisconsin state law.
Brant’s claims against Schneider are that Schneider: (1) violated the minimum wage requirements under the federal FLSA and Wisconsin law; (2) unjustly enriched itself under Wisconsin law; and (3) violated federal Truth-in-Leasing regulations. The District Court granted Schneider’s motion to dismiss on all counts. Brant appealed to the Seventh Circuit, contesting the District Court’s decision on the motion to dismiss. On appeal, the Seventh Circuit considered whether the district court erred by dismissing Brant’s claims.
The FLSA 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.” The Seventh Circuit found that there was “no question that Brant engaged in commercial activities covered by the Act.” Thus, Brant just needed to allege facts that would establish a plausible inference that he was an employee within the meaning of the FLSA and that he was underpaid for at least one workweek to state a claim for violation of the FLSA’s minimum wage provisions.
Brant had alleged that he was not paid for one week of work in May 2019, which satisfied the second part of the required inference. As such, Brant only needed to establish on appeal that he alleged facts that would support a plausible inference that he was an employee within the meaning of the FLSA. In determining whether Brant alleged plausible facts that he was an employee, the Seventh Circuit turned to the Lauritzen1 six-factor test “to determine whether economic reality indicates a worker is an employee.” The six factors include: (1) control; (2) opportunity for profit or loss; (3) the alleged employee’s investment; (4) special skill; (5) permanency and duration; and (6) integral part of alleged employer’s business. No single factor of the Lauritzen test is determinative—the ultimate conclusion is made by examining the totality of the circumstances.
The Seventh Circuit went through each of the six factors of the Lauritzen test in detail, determining that five of the six factors weighed in favor of a determination that Brant was an employee of Schneider and that one factor was neutral, at best, for Schneider. As such, the Seventh Circuit determined that Brant alleged facts supporting the plausible inference that “he was so controlled by and dependent on Schneider that he must be considered an employee as a matter of economic reality” and stated a legally viable claim for FLSA minimum wage violations.
While the prima facie case for violations of Wisconsin’s minimum wage law is similar to that for FLSA violations, the Seventh Circuit treated Brant’s claim for minimum wage violations under Wisconsin law separately. Wisconsin law in this area focuses heavily and consistently on control. The Seventh Circuit found that Brant pleaded sufficient facts to support a plausible inference that Schneider controlled his work as an employee and stated a viable claim for minimum wage violations under Wisconsin state law.
Brant also made claims for unjust enrichment, which were dismissed by the District Court. If Brant entered a valid contract with Schneider, he could not recover for unjust enrichment. Thus, to make a claim for unjust enrichment, Brant needed to allege facts that would allow the inference that (1) he gave a benefit to Schneider; (2) Schneider appreciated or had knowledge of the benefit; and (3) Schneider accepted the benefit under circumstances which would make it inequitable to do so.
In support of his claims for unjust enrichment, Brant argued that the contracts were not valid because they were unconscionable—both procedurally and substantively—under Wisconsin law. The Seventh Circuit found that Brant alleged “a mismatch in bargaining power and inability to obtain an explanation of the contract’s terms that allows a plausible inference of low-grade procedural unconscionability.” The appellate court also found that Brant alleged a strong “inference of substantive unconscionability based on the indemnity and rescission provisions,” which, in combination, alleged “more than enough for [the Court] to infer plausibly that his contracts were so ‘unreasonably favorable’ to Schneider that they were void as unconscionable.”
Finally, the Seventh Circuit addressed Brant’s claims that Schneider violated several Federal Motor Carrier Safety Administration (“FMCSA”) Truth-in-Leasing regulations. The appellate court found that Brant had alleged sufficient facts for each of the three alleged violations to state a claim that would survive a motion to dismiss.
As the Seventh Circuit found that Brant alleged sufficient facts to support plausible inferences for each of his claims in his Complaint, the Seventh Circuit vacated the District Court’s dismissal order and remanded the case to the District Court for further proceedings consistent with its opinion.
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1 Secretary of Labor v. Lauritzen, 835 F.2d 1529 (7th Cir. 1987).