Seventh Circuit reverses district court ruling in case against Schneider

A case between Schneider National Carriers Inc. and a truck driver will resume after the U.S. Court of Appeals for the Seventh Circuit determined that a district court erred by allowing the terms of the trucking company’s contract to be the deciding factor.

Truck driver Eric Brant, who hauled freight for Green Bay, Wis.-based Schneider as an “owner-operator” from December 2018 until August 2019, alleges that he was misclassified as an independent contractor. As part of his lawsuit, Brant claimed that Schneider violated Truth-in-Leasing regulations, as well as minimum wage requirements under the Fair Labor Standards Act and Wisconsin law.

The district court sided with Schneider, dismissing all of Brant’s claims.

On Aug. 3, however, the Seventh Circuit reversed the decision, saying the district court gave too much weight to the terms of the contract. The Seventh Circuit returned the case back to the district court.

“We reverse and remand for further proceedings,” the Seventh Circuit wrote. “The district court erred by giving decisive effect to the terms of Schneider’s contracts. In many areas of the law, the district court’s approach would be sound, but not under the Fair Labor Standards Act … In   determining whether a person is an employee under the act, what matters is the economic reality of the working relationship, not necessarily the terms of a written contract. “The FLSA is designed to defeat rather than implement contractual arrangements.”

According to court records, Brant leased a “relatively new” Freightliner from Schneider and received 65% of the gross revenue for shipments he hauled for Schneider. Brant’s operating agreement with Schneider permitted him to haul loads for other carriers and to hire other drivers to assist. He was also responsible for all operating expenses under his contract.

However, Schneider retained sole discretion to deny Brant permission from hauling loads for other carriers. In addition, the truck lease required him to continue the operating agreement with Schneider. Termination of the operating agreement would trigger a default on the lease.

According to Brant, he struggled to haul enough profitable loads to keep ahead of his operating costs and charges from Schneider. He said Schneider didn’t allow him to haul freight for other companies and that he was compelled to accept as many Schneider loads as possible, even when they were “highly undesirable.”

During a week in May 2019, Brant claims he received zero net pay after driving 3,000 miles to haul five shipments for Schneider.

Brant said he tried to terminate the operating agreement and haul freight in his leased truck for another carrier. However, he said Schneider demanded such a large security deposit to haul for another carrier that he couldn’t afford it. Eventually, Brant terminated the operating agreement, and Schneider seized the truck.

Schneider argues that the contracts allowed him to haul for another carrier and that it extended credit to Brant that allowed him to lease a truck and operate his independent business.

In July 2020, Brant sued Schneider for wage and leasing regulation violations. In 2021, the district court granted Schneider’s motion to dismiss.

The Seventh Circuit said that while Schneider points to the contract as evidence that Brant had control of his business, the allegations paint a different picture.

According to Brant, Schneider controlled his personal appearance and limited him to driving no faster than 70 mph even when the posted speed limit was faster.

The appeals court said the contract’s “theoretical ability to hire help can bear little weight if it was not consistent with the economic reality of his control over his work.”

The Seventh Circuit’s decision means the case will return to the district court.

“Brant had alleged legally viable claims for relief under the Fair Labor Standards Act, Wisconsin minimum-wage law, Wisconsin law of unjust enrichment and the federal Truth-in-Leasing regulations,” the Seventh Circuit wrote. LL