Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-00-07150/USCOURTS-caDC-00-07150-0/pdf.json

Parties Involved:
Kathleen M. Hanlon
Appellee
International Programs Consortium, Inc.
Appellee
Cynthia Miranda Morrison
Appellant

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 19, 2001 Decided June 22, 2001

No. 00-7150

Cynthia Miranda Morrison,

Appellant

v.

International Programs Consortium, Inc. and

Kathleen M. Hanlon,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 97cv01837)

Jerry R. Goldstein argued the cause for the appellant.

Ernest C. Baynard, III argued the cause for the appellees.

Before: Edwards, Chief Judge, Williams and Henderson,

Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

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Karen LeCraft Henderson, Circuit Judge: Appellant Cynthia Miranda Morrison appeals the district court's denial of

her motion for partial summary judgment and its grant of the

appellees' motion for judgment as a matter of law. She also

challenges the court's evidentiary ruling excluding documentation of an IRS assessment and levy. For the reasons that

follow, we affirm the district court's denial of summary judgment and its evidentiary ruling but reverse the court's grant

of judgment as a matter of law.

I. Background

In June 1994 appellee Katie Hanlon, president of appellee

International Programs Consortium, Inc. (IPC), hired Morrison as a consultant to perform recruiting and management

tasks pursuant to a series of written contracts. After the

contracts expired in late 1994 Morrison continued to perform

consulting work for IPC and also began to perform various

office tasks and was required to prepare daily activity sheets

for Hanlon. Morrison, however, continued to consider herself

an independent contractor and submitted invoices to IPC on

"C. Miranda Morrison Consulting" letterhead.

On July 5, 1995 Morrison wrote Hanlon to notify her that

as of August 1, 1995 she "will no longer be offering [her]

services as a consultant to IPC." Letter from C. Miranda

Morrison to Kathleen M. Hanlon (July 5, 1995), reprinted at

JA 319. She continued to work for IPC during July, concentrating primarily on a U.S. Agency for International Development (USAID) delivery order (the Moldova project). On July

28, 1995 Hanlon terminated Morrison for failing to take

direction as well as for taking days off from work without

permission. Morrison subsequently submitted her July 1995

time and expense statements which reflected $4061.64 for

hours worked (22 days at $184.62 per day) and $228.26 for

expenses she paid on behalf of IPC. Neither Hanlon nor IPC

paid Morrison for her time or expenses.

On January 8, 1996 Morrison filed with the IRS District

Director a request for "Determination of Employee Work

Status for Purposes of Federal Employment Taxes and InUSCA Case #00-7150 Document #605040 Filed: 06/22/2001 Page 2 of 10
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come Tax Withholding" on IRS Form SS-8. IPC responded

to the IRS's subsequent request for further information

through its certified public accountant, explaining why it

believed Morrison to be an independent contractor while she

worked for IPC. The IRS District Director then determined

that under 26 U.S.C. s 3121(d)(2) Morrison was an employee

rather than an independent contractor. The determination

noted, however, that "[a]s we are not in a position to personally judge the validity of the facts provided, our determination

is based on the information presented." Letter from Michael

M. Greenspan, IRS District Director, to Kathleen M. Hanlon

(July 1, 1996), reprinted at JA 356. It explained that "[w]e

have submitted an Information Report to the IRS District

Office having examination jurisdiction for your area. It may

be necessary to initiate an examination of your Federal

employment taxes in this matter." Id. The IRS ultimately

assessed taxes and penalties totaling $3530.64 against IPC on

the ground that Morrison had been an IPC employee during

the entire time she worked for IPC in 1995. The IRS

subsequently levied on IPC's bank account to satisfy the

assessment. Neither Hanlon nor IPC appealed the IRS

assessment or levy.

On August 14, 1997 Morrison brought suit in the district

court against the appellees,1 alleging that she had been an

IPC employee in 1995 and that the appellees had violated (a)

the Fair Labor Standards Act (FLSA), 29 U.S.C. s 216, by

failing to pay her minimum wages and overtime for weeks in

which she worked more than 40 hours in July 1995 (Count I),

(b) the D.C. Payment and Collection of Wages Law, D.C.

Code ss 36-101 et seq., by failing to pay her for July wages

and expenses advanced on behalf of IPC (Count II), (c) the

D.C. Minimum Wage Act, D.C. Code ss 36-220 et seq., by

failing to pay her minimum wages and overtime (Count III)

and (d) its contractual obligation to reimburse her for $228.26

__________

1 Morrison sued Hanlon as well as IPC because IPC's corporate

charter had been revoked by the District of Columbia for nonpayment of the annual fee. The charter was not restored by the time

of trial.

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in expenses that she incurred on behalf of IPC (Count IV).

Before trial Morrison sought partial summary judgment on

counts I, II and III, maintaining that the IRS determination

had preclusive effect on the question of her status as an

employee under the FLSA and D.C. labor laws. At the time

she moved for summary judgment, she relied solely on the

IRS determination letter; she did not submit documents

relating to the assessment and levy because the appellees had

failed to produce them. The trial court denied the motion for

partial summary judgment because (1) Morrison failed to

produce evidence that the IRS ever investigated the matter

beyond its initial determination or that IPC paid any assessed

taxes and penalties; (2) the IRS did not act in a judicial

capacity when it issued the determination letter; and (3)

according to the definition of "employee" under IRS regulations Morrison was not entitled to any "employee" rights

under the FLSA, the D.C. Wages Law or the D.C. Minimum

Wage Act. See Morrison v. International Programs Consortium,

Inc., No. 97-1837, slip op. at 5-8 (D.D.C. filed Feb. 4, 2000).

Morrison appeals this ruling.

The case was then tried before a jury. At trial the

magistrate judge refused to admit documents detailing the

IRS assessment and levy because "the court finds that they

are not relevant to any issue which would be before the jury."

JA 267. This is the second ruling Morrison appeals. At the

conclusion of Morrison's case the judge provided Hanlon, who

was representing herself, a copy of Fed. R. Civ. P. 50 and

granted Hanlon's subsequent motion for judgment as a matter of law on all four counts, concluding that Morrison

presented no evidence to support her contention that she was

an employee of IPC. JA 299-303. This is the final ruling

Morrison appeals.

II. Analysis

We review de novo the trial court's ruling on Morrison's

motion for summary judgment, see Crawford v. Signet Bank,

179 F.3d 926, 928 (D.C. Cir. 1999), as well as its grant of

judgment as a matter of law to the appellees. Richardson v.

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Richardson-Merrell, Inc., 857 F.2d 823, 827-28 (D.C. Cir.

1988); McNeal v. Hi-Lo Powered Scaffolding, Inc., 836 F.2d

637, 640-41 (D.C. Cir.1988). We review findings of fact for

clear error, Fed. R. Civ. P. 52(a); Brock v. Mr. W Fireworks,

Inc., 814 F.2d 1042, 1045 (5th Cir. 1987), but review de novo

questions of law, including the question of employee status.

See Mr. W Fireworks, 814 F.2d at 1045; see also United

States v. Bridges, 175 F.3d 1062, 1065 (D.C. Cir. 1999).

Finally, our review of the trial court's evidentiary ruling is for

abuse of discretion. See FRE 103(a); see also United States v.

Clarke, 24 F.3d 257, 265-67 (D.C. Cir. 1994).

A. Summary Judgment

Morrison moved for summary judgment on counts I, II and

III of her complaint on the ground that the IRS had preclusively decided whether Morrison was an IPC employee under

federal and D.C. labor law. The district court denied the

motion. We affirm.

The United States Supreme Court has "long favored application of the common-law doctrines of collateral estoppel (as

to issues) and res judicata (as to claims) to those determinations of administrative bodies that have attained finality."

Astoria Fed. Savings & Loan Ass'n v. Solimino, 501 U.S.

104, 107 (1991). "When an administrative agency is acting in

a judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate, the courts have not hesitated to apply res

judicata to enforce repose." United States v. Utah Constr. &

Mining Co., 384 U.S. 394, 422 (1966). Acting in a judicial

capacity includes utilizing "procedure that seems an adequate

substitute for judicial procedure." 18 Wright, Miller & Cooper, Federal Practice and Procedure s 4475, at 764-65

(1981). There is no evidence that the issue of Morrison's

employment status was "actually and necessarily litigated and

decided in a prior final judgment." See Nasem v. Brown, 595

F.2d 801, 805 (D.C. Cir. 1979). The IRS was careful not to

decide the accuracy of the information Hanlon presented to it.

See Letter from Michael M. Greenspan, IRS District to

Kathleen M. Hanlon (July 1, 1996), reprinted in JA 356. We

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do not accept Morrison's assertion that Hanlon's right of

appeal from the ruling converted the IRS determination into

an adjudication of Morrison's employment status under the

FLSA or D.C. labor laws.2 Accordingly, the IRS determination is not entitled to preclusive effect on the issue of Morrison's employment status and the district court properly denied Morrison's motion for summary judgment on counts I, II

and III.

B. Evidentiary Ruling

The district court excluded as irrelevant IPC's submissions

to the IRS as well as documents relating to the IRS assessment and levy on IPC's bank account. JA 268. Morrison

argues that the evidence was relevant to the issue of the

preclusive effect of the IRS action. She does not argue that

the evidence was relevant to any other issue, including whether she was an employee under the economic reality test.

Because the IRS action had no preclusive effect on whether

Morrison was an employee under the FLSA and D.C. labor

laws, its exclusion was proper; the evidence was not relevant

to any issue before the court. Fed. R. Evid. 402.

C. Judgment as a Matter of Law

Rule 50(a) provides that "[i]f during a trial by jury a party

has been fully heard on an issue and there is no legally

__________

2 Morrison's reliance on the order in Alten v. Ellin & Tucker,

Chartered, 854 F. Supp. 283 (D. Del. 1994), does not carry the day

for her. In Alten the district court gave preclusive effect to an IRS

assessment based on the taxpayer's wilful failure to meet his tax

obligations. When the taxpayer sought indemnification from his

accountants, the district court granted the defendants' motion for

summary judgment on the ground that one who "wilfully" violates

the law is not entitled, as a matter of law, to indemnification. Id. at

292. In giving the IRS assessment preclusive effect, the court

explained that the IRS had acted in a judicial capacity and that the

taxpayer, by choosing to sue for indemnification instead of appealing the IRS assessment, attempted to bypass the prescribed appeal

procedures of the agency. Id. The order, however, does not

address the question whether an IRS assessment is entitled to

collateral estoppel effect on the issue Morrison presents.

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sufficient evidentiary basis for a reasonable jury to find for

that party on that issue, the court may determine the issue

against that party and may grant a motion for judgment as a

matter of law against the party with respect to a claim or

defense that cannot under the controlling law be maintained

or defeated without a favorable finding on that issue." Fed.

R. Civ. P. 50(a). At the close of Morrison's case, the magistrate judge, after furnishing Hanlon a copy of Rule 50,

entertained a motion for judgment as a matter of law. The

judge then ruled from the bench that "there is no legally

sufficient evidentiary basis for a reasonable jury to find for

the plaintiff." JA 299. The court explained that during July

1995 Morrison was not an employee under the economic

reality test set forth by the Second Circuit in Brock v.

Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1988). In so

doing the court emphasized, inter alia, the following facts:3

(1) Morrison submitted her invoices on her own letterhead,

(2) she believed that she was an independent contractor, (3)

IPC filed 1099 tax forms, rather than W-2 tax forms, for her,

(4) she received only minimal direction from Hanlon, (5) there

was no evidence that Hanlon was present in the office on the

days in which Morrison worked, (6) there was no evidence

that Hanlon required Morrison to report on a daily basis, (7)

Morrison worked at home on "some occasions," (8) there was

no evidence that Morrison's work was an integral part of

IPC's business and (9) she had only one task for July 1995,

which was of limited scope and duration.

The FLSA defines "employee" as "any individual employed

by an employer." To "employ" includes "to suffer or permit

to work." 29 U.S.C. ss 203(e)(1), 203(g). "The definition is

necessarily a broad one in accordance with the remedial

purpose of the Act." Superior Care, 840 F.2d at 1058. The

statutory definition, however, provides no specific guidance.

__________

3 Whether an individual is an "employee" within the meaning of

the FLSA is a legal question. See Herman v. RSR Sec. Servs. Ltd.,

172 F.3d 132, 139 (2d Cir. 1999); Castillo v. Givens, 704 F.2d 181,

185 (5th Cir. 1983). Nevertheless, "[a]ny subsidiary factual issues

leading to this conclusion are, of course, questions of fact for the

jury." Castillo, 704 F.2d at 185 n.9.

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In Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33

(1961), the Supreme Court directed courts to look at "economic reality" rather than "technical concepts" to determine

employment status under the FLSA. The "test considers the

extent to which typical employer prerogatives govern the

relationship between the putative employer and employee."

Henthorn v. Department of Navy, 29 F.3d 682, 684 (D.C. Cir.

1994). In Henthorn we explained that we ask "whether the

alleged employer (1) had the power to hire and fire the

employees, (2) supervised and controlled employee work

schedules or conditions of employment, (3) determined the

rate and method of payment, and (4) maintained employment

records." Id. (citation omitted). In Superior Care, the Second Circuit case relied upon by the magistrate judge, the

court set forth a different, although similar, set of factors.

These include: (1) the degree of control exercised by the

employer over the workers, (2) the workers' opportunity for

profit or loss and their investment in the business, (3) the

degree of skill and independent initiative required to perform

the work, (4) the permanence or duration of the working

relationship and (5) the extent to which the work is an

integral part of the employer's business. Superior Care, 840

F.2d at 1058-59. No one factor standing alone is dispositive

and courts are directed to look at the totality of the circumstances and consider any relevant evidence. See Herman,

172 F.3d at 139; Superior Care, 840 F.2d at 1059; see also

Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1311-12 (5th Cir.

1976) ("It is dependence that indicates employee status.

Each test must be applied with that ultimate notion in mind.

More importantly, the final and determinative question must

be whether the total of the testing establishes the personnel

are so dependent upon the business with which they are

connected that they come within the protection of the FLSA

or are sufficiently independent to lie outside its ambit."

(emphasis original)).

Under Rule 50 the court was required to view the facts in

the light most favorable to Morrison. So viewing the facts

manifests that IPC "had the power to hire and fire" her,

"supervised and controlled [her] work schedules or conditions

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of employment" and "determined the rate and method of

payment." Henthorn, 29 F.3d at 684. The evidence also

showed that Hanlon and IPC exercised a considerable "degree of control" over Morrison and that she had little "opportunity for profit or loss" and made no "investment in the

business." Superior Care, 840 F.2d at 1058.

The district court stressed Morrison's description of herself

as a consultant. "[F]acile labels and subjective factors[,

however,] are only relevant to the extent that they mirror

'economic reality.' " Mr. W Fireworks, 814 F.2d at 1044; cf.

Superior Care, 840 F.2d at 1059 (employer's admission that

individual was employee is "highly probative"). And Morrison's self description may not reflect economic reality. For

example, Morrison presented evidence that she did "everything from recruiting, planning meetings, going to the bank,

going to the post office, doing administrative things, [and]

watering the plants." JA 63. She also testified that she was

required to prepare daily activity sheets as well as weekly "to

do lists" and summaries of her weekly activities. See JA 66-

70, 314, 317, 318. Although the trial court found that Hanlon

exercised infrequent supervision, Morrison's testimony, the

"to do lists" (Plaintiff's Exhibit 7) and Hanlon's request for a

weekly plan of activities (Plaintiff's Exhibit 11) indicate that

Hanlon exercised more than minimal supervision. See JA

314, 318. Supervision need not be frequent under the economic reality test. See Superior Care, 840 F.2d at 1060.

Morrison introduced evidence, including requests for time off,

that tended to show that Hanlon regulated Morrion's hours.

JA 67-68, 315, 316. In fact, Morrison was ultimately fired, in

part, for taking "Monday and Tuesday" off. See JA 323.

The fact that Morrison sometimes worked irregular hours or

that she worked at home does not preclude a finding that she

was an employee under the economic reality test. Likewise,

Hanlon's absence from the office during the time Morrison

performed her work is largely irrelevant in view of the

restrictions Hanlon otherwise imposed on Morrison's work

schedule. Hanlon paid Morrison on a daily or hourly basis,

including overtime pay on occasion. See JA 77, 325-26.

Finally, although Morrison was assigned a specific task for

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July 1995 (the Moldova project), she testified that she continued to perform her "regular duties" and kept working for

IPC after the tour ended on July 21st. See JA 71-72, 116-17,

328-29, 335. Based on our review of the record, we conclude

that the district court erroneously granted the appellees'

motion for judgment as a matter of law on all counts of

Morrison's complaint.4

III. Conclusion

We affirm the trial court's denial of Morrison's motion for

partial summary judgment as well as the court's evidentiary

ruling. We reverse, however, its grant of judgment as a

matter of law to the appellees and remand for further proceedings.

So ordered.

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4 Moreover, the district court erroneously dismissed count IV of

Morrison's complaint, which sought reimbursement for expenditures she made during the Moldova project. Reimbursement for her

expenses did not depend on her work status at IPC.

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