Labor & Employment Law Daily Wrap Up, WAGE-HOUR—OVERTIME—4th Cir.: Staffing company liable as employer for more than $9.3 million on overtime claims, (Jul 18, 2025)

By Jason Albright, J.D.

The company maintains what it calls a “registry” of its nurses, and it connects those nurses with work opportunities at its client healthcare facilities.

A company that does business as Steadfast Medical Staffing was liable as an employer for the unpaid overtime claims—totaling more than $9.3 million—of approximately 1,100 nurses improperly treated as “independent contractors” under the FLSA, the Fourth Circuit affirmed. The appeals court rejected the company’s contentions that the district court misallocated the burden of proof on the worker classification issue, that the district court’s analysis of the “control factor” conflicts with Fourth Circuit worker classification precedent, that each of the other “economic realities” factors favor the company, and that the company proved its good faith affirmative defense against an award of liquidated damages. Judge Richardson dissented (Chavez-DeRemer v. Medical Staffing of America, LLC, Nos. 23-2176 and 23-2284 (4th Cir. July 17, 2025)).

Medical staffing company. Steadfast, according to the court, is a Virginia medical staffing services business that was founded in Norfolk in 2015. It supplies licensed nurses to multiple healthcare facilities located in Virginia and surrounding states, and in order to do so, it maintains what it calls a “registry” of its nurses and connects those nurses with work opportunities at its client healthcare facilities.

Application to become “employee.” To qualify for inclusion in registry, a nurse was required to complete an “application for employment”—a document that referred to Steadfast as the “employer” and to the nurse as the “employee.” The application included, among other things, questions about the nurse’s credentials, skills, and employment history. After the employment application was completed, Steadfast paid for and executed several pre-hiring requirements, including a background investigation, a drug screening, and a tuberculosis test. Steadfast also verified that the applicant possessed a valid nursing license.

“[I]ndependent contractor” agreement. A nurse found qualified after submitting an application for employment and completing Steadfast’s pre-hiring requirements would then enter into what Steadfast called its “independent contractor” agreement, and the nurse would be included in Steadfast’s registry. Notably, these agreements with its nurses contained a “non-compete clause” that prohibited employment with any of Steadfast’s “competitors” for 12 months after expiration or termination of the agreement.

Discipline of nurses. Steadfast not only addressed and resolved violations of its internal policies with its nurses, it also administered sanctions for poor work or disciplinary infractions reported by the client healthcare facilities. Although Steadfast requested that its client facilities provide feedback concerning each nurse’s performance, those facilities were contractually barred from disciplining the Steadfast nurses. Client facilities were instead required to contact Steadfast regarding problems with its nurses. Steadfast, rather than the client facility, would then address a disciplinary matter—including punishment for unprofessional conduct, declining or cancelling shifts, working for competitors, discussing compensation with coworkers or the client facilities, or even contacting a client facility concerning work schedules or pay rates.

Hourly pay rates. Steadfast also “unilaterally dictated its nurses’ hourly pay rates,” according to the appeals court, and it negotiated fixed hourly rates for the work its nurses performed at the client healthcare facilities. In turn, Steadfast would retain a percentage of the hourly rate paid to Steadfast by the client facility. As such, the Steadfast nurses could not directly negotiate their hourly pay rates with the client facilities where they worked. Rather, the Steadfast nurses could earn more only one way—by working additional hours.

Clients prohibited from recruiting its nurses. The contracts between Steadfast and the client healthcare facilities also contained provisions that prohibited the client facilities from recruiting Steadfast nurses to fill open positions at those facilities. Steadfast sometimes enforced this contract prohibition through a “buyout” clause, which required a client facility to purchase the nurse’s contract from Steadfast, if the facility had an interest in doing so. Otherwise, a Steadfast nurse recruited by a client facility could be disciplined or terminated by Steadfast.

DOL investigation. In 2017, the Wage and Hour Division conducted an investigation that found Steadfast had improperly and willfully classified its aides and nurses as independent contractors, rather than employees. The staffing agency had paid its workers straight-time wages instead of time-and-a-half for overtime. Steadfast, the agency found, also did not maintain accurate records of the total number of weekly hours worked. Both of these actions violated the FLSA, and this finding led to litigation by the DOL’s Solicitor of Labor.

Bench verdict. A bench trial of the litigation was conducted in federal district court in Norfolk over a period of about seven trial days in August and September of 2021, and the court, in its judgment, found that Steadfast had exercised extensive control over its nurses’ manner of work, and so had employed them under the FLSA. This control was manifest in the staffing agency’s scheduling of work, training and insuring its workers, setting the pay rate, paying wages, tracking the nurses’ hours, and the supervision and discipline it exercised. The court rejected Steadfast’s good-faith defense that it had been advised by legal counsel that its workers were likely properly classified as independent contractors, finding that position objectively unreasonable.

In its bench verdict, the district court also explained that, both prior to and during the bench trial, the court had urged and directed Steadfast to review and assess the accuracy of the initial damages computations. The bench verdict found, however, that Steadfast had failed to conduct those court-ordered reviews. Indeed, Steadfast had not sought to either refute or contest the initial damages computations. And the bench verdict emphasized that Steadfast had not presented any counter-computations of unpaid overtime compensation to oppose those presented by the Secretary.

Post-trial dispute of initial damages computations. About two months after the bench verdict, on March 11, 2022, the Secretary, in compliance with the district court’s directive, submitted what was called an “Updated Back Wage Computations Notice” for the court’s consideration. Two days later, on March 13, 2022—for the first time in the litigation—Steadfast sought to dispute DOL’s Initial damages computations, specifically seeking to challenge their methodologies and accuracy.

Steadfast’s waiver. Following an interlocutory appeal to the Fourth Circuit regarding an injunction aspect of the bench verdict not at issue here, the district court denied multiple challenges to the initial damages computations on their merits, further finding that, even if Steadfast could have identified a valid basis for relief under one of the multiple Civil Rules it relied on, Steadfast had simply “waived [its] right to attack [the Initial damages computations].”

Judgment of more than $9.3 million below. On December 11, 2023, the district court entered its final judgment, completing the court proceedings and record underlying these appeals. See Su v. Medical Staffing of Am., LLC, No. 2:18-cv-00226 (E.D. Va. Dec. 11, 2023). The final judgment was that Steadfast owed the Secretary, on behalf of the Steadfast nurses, the aggregate sum of $9,346,663.23 in unpaid overtime compensation and liquidated damages, with interest. The award represented $4,809,020.40 in unpaid overtime compensation, plus $4,537,642.83 in liquidated damages. In addition to those damages, the judgment again enjoined Steadfast from further violations of the FLSA, specifically incorporating the provisions of the injunction the court had previously imposed.

In December 2023, Steadfast appealed to the Fourth Circuit.

“Employees.” Applying multi-factor economic realities test enunciated in McFeeley v. Jackson Street Ent., LLC, 825 F.3d 235 (4th Cir. 2016), the appeals court found that district court carefully assessed all six factors based on the trial evidence and properly concluded that the nurses were employees covered by the FLSA. The six McFeeley factors are (1) the degree of control that the putative employer has over the manner in which the work is performed; (2) the worker’s opportunities for profit or loss dependent on his managerial skill; (3) the worker’s investment in equipment or material, or his employment of other workers; (4) the degree of skill required for the work; (5) the permanence of the working relationship; and (6) the degree to which the services rendered are an integral part of the putative employer’s business.

Control factor. Significantly, the appeals court agreed with the district court that the control factor pointed toward an employment relationship between Steadfast and its nurses. Although Steadfast lacked control over certain specific aspects of the nurses’ work—such as day-to-day patient care tasks supervised by a client facility’s medical professionals—the evidence “amply supports the proposition that the control factor weighs heavily in favor of their employee status.”

Fixed hourly wages. Perhaps most significantly, according to the Fourth Circuit, the district court found that Steadfast unilaterally fixed the nurses’ hourly wages. As the bench verdict explained and emphasized, Steadfast’s wage-setting protocol meant that the nurses’ ability to negotiate their pay rates with Steadfast was “limited by the extent to which changing the pay rate would benefit [Steadfast.]” Steadfast, the appeals court found, “unilaterally determined the hourly rates that the client facilities paid to Steadfast for the nurses’ work. And, in turn, Steadfast retained a portion of each nurses’ hourly rate.”

Scheduling. The district court also found that Steadfast exercised extensive control over the scheduling of its nurses’ shifts, completely controlling “what information, if any, nurses receive[d] regarding available shifts at client facilities.”

Other McFeeley factors. Even though the bench verdict determined that one of the remaining McFeeley factors—the nurses’ degree of skill—plausibly weighed in favor of an independent contractor status, the district court did not err, the Fourth Circuit concluded, in assessing the totality of the nurses’ economic dependence on Steadfast, finding that the other factors significantly outweighed the single factor relating to the degree of skill. Among other things, the appeals court noted, the non-compete clause in the nurses’ contracts limited their ability to work for other agencies, and this fact reinforced the existence of a permanent relationship.

Good faith defense. Upholding the liquidated damages award, the Fourth Circuit also found that Steadfast failed to establish its defense that it acted in good faith under 29 U.S.C. § 260. Steadfast argued that it reasonably believed that it had complied with the FLSA in consulting with a lawyer, but “a brief or incomplete consultation with a lawyer regarding FLSA conformity does not satisfy the standards of the good faith defense,” and the limited engagement Steadfast had with the lawyer failed to satisfy the Act’s requirements. Notably, Steadfast sidestepped the fact that it only sought the lawyer’s advice after DOL conducted its investigation. And even then, Steadfast did not provide the attorney with the relevant facts. As the evidence demonstrated, the attorney did not interview any of the Steadfast nurses, did not visit any of the client facilities, and did not review any of Steadfast’s memoranda regarding best practices. Because Steadfast failed to provide the lawyer with the relevant facts regarding its business operations, the lawyer could do little more than offer a general opinion, predicated on incomplete facts, that Steadfast might have been correct in its classification decision.

Damages computations. Finally, observing that Steadfast challenged the district court’s initial damages computations for the first time in a post-trial motion, seeking relief under Federal Rules of Civil Procedure 52(b), 54(b), and 60(a)-(b), the appeals court affirmed that the employer waived any right to contest the these computations because it had declined to do so in a timely manner before or during the bench trial.

Dissent. In his dissent, Judge Richardson argued that the majority’s decision “well illustrates the peril of judicially contrived, many-factor tests.” “Nurses use Steadfast’s registry as one of many ways to find workplaces and pick up shifts,” he said. “That service is valuable. But the nurses do not depend on it. Economically, the nurses are in business for themselves. For that reason, Steadfast rightly treats them as contractors rather than employees.”

The case is No. 23-2176 and 23-2284.

Judge: King, R.

Attorneys: Jennifer S. Brand, U.S. Department of Labor, for Lori Chavez-DeRemer. Abram John Pafford (McGuireWoods) for Medical Staffing of America, LLC.

Companies: Medical Staffing of America, LLC

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