Donovan v. Dialamerica Mktg., Inc. - 757 F.2d 1376 (3d Cir. 1985)

Rule:

There are six specific factors for determining whether a worker is an "employee": 1) the degree of the alleged employer's right to control 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 helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6) whether the service rendered is an integral part of the alleged employer's business.

Facts:

DialAmerica Marketing, Inc. sold magazine subscription renewals over the telephone and hired home researchers to discover correct telephone numbers. It also allowed home distributors to pick up and deliver work to the researchers and to recruit new researchers. Ronald Donovan, as the Secretary of Labor, brought an action under the Fair Labor Standards Act (FLSA), 29 U.S.C.S. §§ 201-219, asserting that DialAmerica failed to pay the minimum wage or to keep required records. The trial court found for DialAmerica and Donovan appealed. 

Issue:

Did the district court properly apply the relevant legal test for determining "employee" status under the FLSA?

Answer:

No

Conclusion:

The court affirmed in part, finding that the distributors were independent contractors who exhibited management skills and who risked their own profit or loss. The court reversed the holding as to the researchers, however, finding that they were "employees" under the FLSA because of the relative permanence of their working relationship with DialAmerica and because their services were integral to DialAmerica’s business. The court remanded for a calculation of the researchers' back pay. The court also affirmed the denial of attorney fees to DialAmerica under the Equal Access to Justice Act, 28 U.S.C.S. § 2412 because Donovan’s position was substantially justified.