SILENT WOMAN

585 F. Supp. 447 (1984) | Cited 0 times | E.D. Wisconsin | April 30, 1984

DECISION AND ORDER

The plaintiffs brought this action for declaratory reliefpursuant to 28 U.S.C. § 2201, seeking a declaration that theirbusiness relationship is not subject to the Fair LaborStandards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq.Alternatively, the plaintiffs claim that the defendant'sapplication of the FLSA to them constitutes a violation of dueprocess. The defendant, who seeks to enforce the FLSA againstthe plaintiffs, has counterclaimed to recover backpay. Thiscourt's jurisdiction is based on 28 U.S.C. § 1331 and 1337(a).The parties have filed cross-motions for summary judgment onthe issue whether the plaintiffs are covered by the FLSA and onthe due process issue. The defendant's motion will be granted,the plaintiffs' denied.

FACTS

The parties have stipulated to the relevant facts. Thecorporate plaintiff, Silent Woman, is organized under the lawsof Wisconsin and has its principal place of business in Ripon,Wisconsin. Silent Woman is engaged in the wholesale and retailsale of women's and children's outerwear.The firm operates retail shops in Ripon and in Boca Raton,Florida. Silent Woman has wholesale customers across theUnited States.

The nine individual plaintiffs are seamstresses who sew andembroider for Silent Woman in their homes. Since most of themhave minor children, the women do needlework for Silent Womanonly when their household duties allow. All nine of the womenare accomplished seamstresses. They own their own sewingmachines which cost an average of $700.00. Except for onewoman who had been a factory seamstress, none of the women hadsewn for money before working for Silent Woman, other than arelatively insignificant amount of work for neighbors, familyor friends.

All of the seamstresses except one have sewn for SilentWoman since at least 1981. All have worked regularly on apart-time basis since their relationship with Silent Womanbegan, except on the few occasions when a seamstress was sick,or when there was not enough work. Since beginning to sew forSilent Woman, none of the seamstresses, with one exception,has attempted to find other customers. The one seamstress whohas actively sought to expand her commercial activities begandoing so after this suit was filed. In the 1981-mid-1983period, none of the women had total earnings greater than$350.00 from non-Silent Woman sources. The women's totalearnings from Silent Woman since 1981 ranged from $1,932.00 toabout $15,000.00, with the seven in the middle all earningfrom $3,000.00 to $5,500.00.

Most of the seamstresses found work with Silent Womanthrough ads which the firm had placed in local newspapers.Silent Woman accepted applicants only after inspecting sampleneedlework. All qualified seamstresses were offered the samecontract, drafted by Silent Woman. Although the contract isentitled "Employment Contract," the seamstresses are referredto as "independent contractors" throughout the text. Under thecontract, seamstresses were permitted to sew professionallyfor others, but could not use designs created by Silent Womanfor other work. The duration of the contract was to beindefinite, but either party could terminate on five daysnotice.

The terms of the seamstresses' compensation were also setout in the contract. Silent Woman paid according to piecerates which applied equally to all seamstresses. The piecerate was based loosely on the minimum wage. Each time itcreated a new article of clothing or design, Silent Womanasked one of four seamstresses to sew the garment andcarefully record the total completion time. This time wasmultiplied by the minimum wage to yield the piece rate.Occasionally, Silent Woman has increased a piece rate based ona discussion with one or more of the seamstresses.

The seamstresses did not buy their cloth or other sewingmaterials. These were provided by Silent Woman in kits. Thecloth was pre-cut for each garment. Specifications anddesigns, including applique designs, were provided, and SilentWoman reserved the right to reject any garment which did notstrictly conform.

The seamstresses worked at home and set their own workinghours. Silent Woman imposed no quotas or deadlines. Theseamstresses could generally choose the garment they wished tosew. Silent Woman never inspected the seamstresses' homes orattempted to control the manner in which the work was done,insisting only that the finished product conform tospecifications.

The defendant concluded from these facts that theseamstresses were Silent Woman's employees and, therefore,protected by the FLSA which applies to employers engaged ininterstate commerce. 29 U.S.C. § 215; Dickenson v. UnitedStates, 353 F.2d 389 (9th Cir.), cert. denied 384 U.S. 908, 86S.Ct. 1345, 16 L.Ed.2d 360 (1965). The defendant alleges thatSilent Woman has violated the Act by failing to pay theseamstresses the minimum wage, contrary to 29 U.S.C. § 206 and215(a)(2), and by failing to keep wage, hour andcondition records, contrary to 29 U.S.C. § 211 and 215(a)(5).The plaintiff argues that the FLSA is inapplicable because theplaintiff seamstresses are not Silent Woman employees, butrather are independent contractors.

FAIR LABOR STANDARDS ACT

The FLSA definition of employ, "to suffer or permit towork," 29 U.S.C. § 203(g), is too broad to be useful indistinguishing an employee from an independent contractor.Where statutory definitions are inadequate, social welfarelegislation is to be construed to achieve its purposes. UnitedStates v. Silk, 331 U.S. 704, 712, 67 S.Ct. 1463, 1467, 91L.Ed. 1757 (1947); Usery v. Pilgrim, 527 F.2d 1308, 1309, 1311n. 6 (5th Cir. 1976). New Deal legislation such as the NationalLabor Relations Act, the Social Security Act and the Fair LaborStandards Act was intended to aid those whose ability toprovide for themselves depended largely on forces beyond theircontrol. Thus, the courts have defined "employee" in these Actswith the protected class in mind: ". . . [I]n the applicationof social legislation, employees are those who as a matter ofeconomic reality are dependent upon the business to which theyrender service." Bartels v. Birmingham, 332 U.S. 126, 130,67 S.Ct. 1547, 1549, 91 L.Ed. 1947 (1947); Accord, Goldberg v.Whitaker House Corp., 366 U.S. 28, 33, 81 S.Ct. 933, 936, 6L.Ed.2d 100 (1961).

In Bartels and Silk, cases construing the Social SecurityAct, the Court listed five factors which might be useful indetermining whether a worker is an employee or an independentcontractor: (1) degree of control which the employer exercisesover the manner in which the work is performed, (2)opportunities for profit or loss, (3) investment in facilities,(4) permanency or the relationship, and (5) skill required inthe claimed independent operation. Silk, 331 U.S. at 716, 67S.Ct. at 1469; Bartels, 332 U.S. at 130, 67 S.Ct. at 1549. Asthe Silk Court said of these factors, "No one iscontrolling nor is the list complete." Silk, 331 U.S. at 716,67 S.Ct. at 1469. In Rutherford v. McComb, 331 U.S. 722, 67S.Ct. 1473, 91 L.Ed. 1772 (1947), a case construing the FLSAdecided the same day as Silk, the Court emphasized that thedetermination of the relationship depends on "the circumstancesof the whole activity." Rutherford, 331 U.S. at 730, 67 S.Ct.at 1477.

Because the parties have based their arguments on it andbecause it is a useful means of orientation, I shall considerthe five-part test of Silk. This test will not, however, beallowed to obscure the ultimate test of the seamstresses'status, which involves the economic realities under all thecircumstances.

The plaintiffs argue that the seamstresses' independentcontractor status is strongly indicated by the fact thatSilent Woman exercises no control over the manner in which theseamstresses perform their work. The seamstresses havecomplete freedom in setting their working hours and may useany needlework technique they choose. I agree with theplaintiff that this factor is in their favor, but I alsobelieve that it cannot be accorded significant weight in lightof the relevant case law.

While Silent Woman exercises no control over theseamstresses' manner of performance, the same can be said ofalmost all employers of homeworkers. Nevertheless, it isestablished that Congress intended the FLSA to apply toemployees working at home. For a short period after enactmentof the FLSA in 1938, the Department of Labor attempted toenforce the Act's child labor, overtime, and minimum wageprovisions in the homework setting. When this proved to bedifficult, the Department conducted a study and determinedthat evasion of the FLSA by employers of homeworkers was sosimple and widespread that enforcement was impractical.Wage & Hour Div., Dept. of Labor, Findings and Opinion of theAdministrator 13 (1942), reprinted in I Joint Appendix 79. In1943, the Department banned homework in certain industries,including the women's outerwear industry. In Gemsco, Inc. v.Walling, 324 U.S. 244, 65 S.Ct. 605, 89 L.Ed. 921 (1945),the Supreme Court upheld the ban as a proper exercise of theDepartment's authority to enforce the FLSA.

As the Gemsco Court noted, homeworkers "generally arepart-time pieceworkers." 324 U.S. at 252, 65 S.Ct. at 611. Itis in the nature of homework that the workers set their hoursand work unsupervised, yet the Court upheld a ban on homeworknotwithstanding the possibility that homework was per seoutside the scope of the FLSA. The Gemsco decision does notmean that all homeworkers are employees under the FLSA, but itdoes indicate that the plaintiff cannot successfully rely onthe control factor to demonstrate that they are independentcontractors.

The second of the five factors listed in Silk is the worker'sopportunity for profit or loss. The plaintiffs argue thatseamstresses have an opportunity to profit because the amountthey earn depends upon the speed and skill with which they cancomplete items for Silent Woman. It is clear, however, that theconcept of profit is not relevant here. "Profit" is the gainrealized from a business over and above its expenditures.Citizens National Bank v. Corl, 225 N.C. 96, 33 S.E.2d 613, 616(1945); Fairchild v. Gray, 136 Misc. 704, 242 N.Y.S. 192, 196(1930). The only "expenditure" for which the plaintiffseamstresses obtain a return is their own labor; in my opinionthis return is properly denominated "wages," not "profit."

The fact that the women have purchased sewing machines isnot a cogent factor because Silent Woman compensates itsseamstresses only for their labor at uniform rates. There isno bargaining through which a seamstress might obtaincompensation sufficient to recover the cost of her sewingmachine.

The third factor to be considered under the Silk test is theworker's investment in the claimed independent operation. Theplaintiffs point out that all of the seamstresses own sewingmachines, costing an average of $700.00. The plaintiffs havealso deducted heat, telephone, electricity and mileage costs asbusiness expenses. Moreover, one of the plaintiff seamstressesclaims to have spent thousands of dollars on an addition to herhome in order to accommodate her sewing activities.

The named expenditures are not persuasive on the issue ofthe plaintiffs' status. Almost all homeworkers incur heating,electricity and telephone expenses. The significance of thesewing machines is diminished by the fact that theseamstresses owned their sewing machines before beginning tosew professionally.

Next, the plaintiffs argue that their independent status isindicated by the fact that the seamstresses' relationship withSilent Woman is not permanent in nature. The plaintiffs citetheir contract, which allows either party to terminate therelationship on five days notice and permits the women toperform work for others.

While the contract gives the seamstresses the right toterminate their contract on five days notice, all of theplaintiff seamstresses have actually worked steadily forSilent Woman over a period of two years. It is obvious thatthe parties regard their relationship as a continuing one;work done for outside parties does not undermine thepermanency of the Silent Woman work. Earnings from thisoutside work, generally performed sporadically for family andacquaintances, have been relatively insignificant.

The final consideration in the Silk analysis is skill. Theplaintiffs point out that embroidery and applique are skilledcrafts. This is undoubtedly true, but it is not particularlyrelevant to the issue whether the seamstresses are independentcontractors. The skills indispensable to an independentoperator such as organizational, management, and financialskills are not required of the plaintiffs. While the five-partSilk test strongly suggests that the plaintiff seamstresses areemployees rather than independent contractors, a common-senseexamination of the total situation removes any unresolveddoubt.

When one is an employee, his livelihood depends immediatelyupon others. Thequalities that tend to distinguish the independent contractorin the economy are those essential to his individual success:initiative, judgment and foresight. The latter three wordswere used in Rutherford Food Corp. v. McComb, 331 U.S. 722,730, 67 S.Ct. 1473, 1477, 91 L.Ed. 1772 (1947), an FLSA casewherein the Supreme Court explicitly disassociated thesequalities from piecework: "While profits to the boners dependedupon the efficiency of their work, it was more like pieceworkthan an interprise that actually depended for success upon theinitiative, judgment or foresight of the typical independentcontractor."

Silent Woman designs clothes based upon its assessment ofthe public taste, finds wholesale and retail buyers for itsmerchandise and sets prices for its garments at a level whichmust cover the cost of carrying inventory, maintaining retailoutlets, advertising and a payroll, including thequasi-minimum wage rate payments to the plaintiffseamstresses. Commission of serious errors with respect to anyof these matters could be fatal to Silent Woman. Preciselythis element of risk marks the independent economic agent.United States v. Silk, 331 U.S. at 719, 67 S.Ct. at 1471(1947).

By contrast, the plaintiff seamstresses' arrangement isquite uncomplicated. When a seamstress wants to earn money,she simply obtains pre-cut, pre-designed garments from SilentWoman. For her work, she receives approximately the minimumwage. The initiative in establishing the homework opportunitylay in Silent Woman's placement of advertisements. Theseamstresses' earnings do not depend upon their judgment orforesight. It is apparent, in fact, that the plaintiffseamstresses do not undertake any of the risks inherent inindependent status. They are occupied with familyresponsibilities and are satisfied with the opportunity toearn supplemental income in their spare time.

The seamstresses' dependence on Silent Woman is also shownby their lack of bargaining power. Rather than treat itsseamstresses as independent agents, Silent Woman offers allthe same terms, a piece rate designed to yield the minimumwage. It is a "take it or leave it" proposition. Silent Womandoes not negotiate with anyone individually. That the firmoccasionally increases the piece rate for all seamstresses maydemonstrate fair dealing but it does not demonstrate that theseamstresses are independent contractors.

In assessing the plaintiff seamstresses' dependence, it isrelevant to ask how they might fare if Silent Woman failed. Infact, the women are extremely ill-prepared to find new marketsfor their needlework, and almost none had attempted to do soat the time the facts were stipulated. Since this lawsuitbegan, one of the plaintiffs has put together her own catalogand price list and has begun to seek other buyers for herneedlework. This individual woman's initiative, designjudgment, customer diversity and bargaining power may make heran independent contractor relative to her new buyers, butthese factors are absent from her relationship with SilentWoman, and she remains its employee.

The issue decided here is not new. Almost identical factsituations arose in Walling v. American Needlecrafts,139 F.2d 60 (6th Cir. 1943), and Mitchell v. Nutter, 161 F. Supp. 799(N.D.Me. 1958). Both courts found that women doing needleworkin their spare time at home were employees under the FLSA. Inboth cases, the women worked for one major employer who paiduniform piece rates at or below the minimum wage equivalent,and determined, or at least approved, all designs. In neithercase had the women taken any significant steps to developalternative buyers for their work. My decision today isconsistent with these decisions. See also Goldberg v. WhitakerHouse Cooperative, 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100(1961), (home part-time needleworkers held employees of theircooperative under the FLSA), and Walling v. Twyeffort,158 F.2d 944 (2d Cir. 1947), (tailors with shops at home held to beemployees under the FLSA).

DUE PROCESS

Finally, the plaintiffs charge that the defendant hasdeprived them of property without due process of law.Specifically, the plaintiffs contend that their right to workat home is a property interest protected by the due processclause, that they were entitled to a hearing before beingdeprived of this property interest, and that the defendant'suse of an irrebuttable presumption that homeworkers areemployees deprived them of their right to be heard.

Assuming that the plaintiffs' interest in working at home isprotected by the due process clause, and assuming that thegovernment determined the seamstresses to be employees byapplying an irrebuttable presumption, there can still be nodue process violation because the defendant has no power toeffect a deprivation of the claimed interest. The FLSA grantsthe defendant broad investigative powers, 29 U.S.C. § 211, butno power to close down any enterprise it determines to be inviolation of the Act.

In order to restrain FLSA violations such as those allegedlycommitted by Silent Woman, the defendant must bring an actionin federal district court. 29 U.S.C. § 217. Any presumptionsentertained by the defendant are irrelevant in an enforcementproceeding because the district court is bound to determine anindividual's status solely according to Supreme Court and otherfederal court decisions construing the FLSA or relatedlegislation. It is thus apparent that the plaintiffs areprovided with due process.

This decision and order resolves the plaintiffs' claimsentirely. The parties should continue their trial preparationson the defendant's counterclaim alleging that Silent Womanowes its seamstresses back wages.

Therefore, IT IS ORDERED that the plaintiffs' motion forsummary judgment be and hereby is denied.

IT IS ALSO ORDERED that the defendant's motion for summaryjudgment be and hereby is granted.

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