Merrill v. Pathway Leasing

• Court: Court of Appeals for the Tenth Circuit
• Decided: August 26, 2022
• Docket: 21-1295
• Status: Unpublished

Opinion

Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 1 FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit

FOR THE TENTH CIRCUIT August 26, 2022 _________________________________ Christopher M. Wolpert Clerk of Court FRANKLIN MERRILL; ANTHONY GLOVER; KEITH HERRING; ANTHONY DENNIS; LARRY JURCAK; SAMI NASR; RONALD DENNIS; RODNEY LACY; JAMES NEWBERRY; TAMI POTIRALA; CRAIG WILLIAMS; ZIGMUND GUTOWSKI; JOSEPH HORION; ERIC ARD; TIM HOLLINGSWORTH,

Plaintiff Counter Defendants - Appellants,

v. No. 21-1295 (D.C. No. 1:16-CV-02242-KLM) MATTHEW HARRIS, (D. Colo.)

Defendants - Appellee,

and

PATHWAY LEASING LLC, a Colorado limited liability company,

Defendant Counterclaimant - Appellee,

XPO LOGISTICS TRUCKLOAD, INC., a Missouri corporation registered to conduct business in Colorado; TRANSFORCE, INC., a Canadian corporation; CON-WAY TRUCKLOAD, INC., a Missouri corporation registered to conduct business in Colorado,

Defendants. Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 2

_________________________________

ORDER AND JUDGMENT* _________________________________

Before TYMKOVICH, Chief Judge, CARSON, and ROSSMAN, Circuit Judges. _________________________________

This appeal involves the Fair Labor Standards Act (“FLSA”), which requires

employers to pay their employees a minimum wage. See 29 U.S.C. §§ 215(a)(2),

216(b). Plaintiffs are long-haul commercial truck drivers. They leased trucks from

Defendants Pathway Leasing LLC and its President, Matthew Harris, (collectively

“Pathway” or “Defendants”) and then used those trucks to haul freight for carrier

companies, including XPO Logistics Truckload, Inc.; CFI, Inc.; and Con-Way

Truckload, Inc. (collectively “XPO”).1 Plaintiffs sued Pathway and XPO under the

FLSA in federal district court in Colorado, alleging the two entities were joint

employers who intentionally misclassified them as independent contractors and

unlawfully denied them the statutorily required minimum wage. Plaintiffs voluntarily

dismissed XPO from this action before trial, but their FLSA claims proceeded against

Pathway.

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 1 XPO Logistics Truckload, Inc.; CFI, Inc.; and Con-Way Truckload, Inc. refer to the same entity. See, e.g., R. vol. 2 at 1232 n.4. 2 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 3

After a multi-day bench trial, the district court entered judgment for Pathway

on Plaintiffs’ FLSA claims.2 The district court concluded Plaintiffs were correctly

classified as independent contractors—regardless of whether Pathway alone was

considered Plaintiffs’ employer or XPO and Pathway were joint employers. Plaintiffs

timely appealed, challenging the district court’s classification decision and the

manner in which it was determined. Exercising jurisdiction under 28 U.S.C. § 1291,

we affirm.

BACKGROUND

I. The pretrial proceedings

Plaintiffs’ operative complaint, filed in February 2017, alleged five claims for

relief against Pathway and XPO, but only Plaintiffs’ FLSA minimum wage claims

against Pathway are at issue in this appeal.3 Plaintiffs claimed they leased trucks from

Pathway “believing they could operate those trucks as independent contractors and

improve their lives through the exercise of entrepreneurial spirit.” R. vol. 1 at 63. But

in reality, Pathway allegedly “controlled every aspect” of their work, id., structured a

2 All parties consented to the jurisdiction of a United States Magistrate Judge under 28 U.S.C. § 636(c). We will refer to the magistrate judge as the “district court” in our analysis. 3 The claims alleged were: “Failure to Pay [the] Minimum Wage in Violation of the FLSA” against Pathway and XPO; “Recission or Voiding of Lease Agreements, Warranties or Promissory Notes, and Restitution” against Pathway; “Unjust Enrichment and Restitution” against Pathway; “Quantum Meruit” against Pathway; and “Unlawful Retaliation” in violation of the FLSA against Pathway and XPO. R. vol. 1 at 81-85. The district court entered judgment in Pathway’s favor on these claims at trial. 3 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 4

joint employment relationship with XPO “to avoid the expense of retaining

employees,” and willfully misclassified them as independent contractors, id. at 75.

The district court conditionally certified Plaintiffs’ FLSA collective action in June

2017.4 A few months later, Plaintiffs voluntarily dismissed XPO from the case.

Plaintiffs then moved for partial summary judgment, contending Pathway and

XPO were joint employers under the Fourth Circuit’s test in Hall v. DIRECTV, LLC,

846 F.3d 757 (4th Cir. 2017), and Salinas v. Commercial Interiors, Inc., 848 F.3d

125 (4th Cir. 2017) (“Hall-Salinas”). The Hall-Salinas framework articulates six

factors “[t]o assist lower courts in determining whether the relationship between two

entities gives rise to joint employment.” Hall, 846 F.3d at 769.5 Pathway opposed

4 A collective action is a suit brought under the FLSA by “any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” 29 U.S.C. § 216(b); see also Castaneda v. JBS USA, LLC, 819 F.3d 1237, 1245 (10th Cir. 2016), as amended on denial of reh’g and reh’g en banc (May 3, 2016) (“In an FLSA collective action an aggrieved employee can bring a claim against an employer on behalf of himself ‘and other employees similarly situated.’”) (quoting § 216(b)). 5 These six non-exhaustive factors include: (1) “Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the ability to direct, control, or supervise the worker, whether by direct or indirect means;” (2) “Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker’s employment;” (3) “The degree of permanency and duration of the relationship between the putative joint employers;” (4) “Whether through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;” 4 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 5

summary judgment, agreeing that whether two entities are joint employers for FLSA

liability is a legal question but disagreeing that Hall-Salinas should answer it.

Pathway advocated for application of the “economic realities” test in Baker v. Flint

Engineering & Construction Co., 137 F.3d 1436 (10th Cir. 1998), which examines

“whether the individual is economically dependent on the business to which he

renders service . . . or is, as a matter of economic fact, in business for himself.” 137

F.3d at 1440 (alteration in original) (quotation omitted). Regardless of the test

applied, Pathway argued, there was no joint employment relationship between it and

XPO. Pathway also filed a cross-motion for summary judgment contending Plaintiffs

were correctly classified as independent contractors under the FLSA.

The district court denied the cross-motions for summary judgment. The court

agreed with the parties that joint employment was a “threshold question in this case.”

R. vol. 2 at 753 (quotations omitted). If a “fact-finder [determined] that [Pathway]

and XPO were joint employers,” the district court explained, then evidence “bearing

on the relationship between [those two entities] on the one hand and Plaintiffs on the

other may be examined to determine whether Plaintiffs were independent contractors

or employees.” Id. at 768 (emphasis omitted).

(5) “Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another;” and (6) “Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.” Hall, 846 F.3d at 769-70. 5 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 6

The district court observed “the Tenth Circuit Court of Appeals has not yet

articulated the appropriate test to use in making [the joint employment] determination

in the FLSA context.” Id. at 753. In the “absence of binding precedent in this

Circuit,” id., the district court “agree[d] with Plaintiffs . . . that the test enunciated by

the Fourth Circuit in Hall and Salinas is appropriate and should be used here,” id. at

758. The court ultimately found disputed issues of material fact precluded resolving

the joint employment issue on summary judgment. Id. at 765.

In considering Pathway’s cross motion, the district court analyzed Plaintiffs’

employment classification under Baker “as though a joint employer relationship ha[d]

been established” between Pathway and XPO. Id. at 768. Assuming a joint

employment relationship between Pathway and XPO, the district court reasoned,

“[was] most favorable to Plaintiffs as the nonmoving party.” Id. The court examined

“all of the evidence bearing on the relationship between [Pathway] and XPO,” id., in

analyzing Plaintiffs’ employment classification but, given conflicting evidence,

determined the classification issue also could not be determined on summary

judgment, id. at 772.

II. The bench trial

The case proceeded to a six-day bench trial in June 2018.6 Plaintiffs called

eighteen witnesses, including all named Plaintiffs. Mr. Harris, Pathway’s president,

6 Although Plaintiffs’ other claims proceeded to trial, our summary of the proceedings focuses only on the record relevant to Plaintiffs’ FLSA minimum wage claims. 6 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 7

testified for Pathway. To prevail on their FLSA claims, Plaintiffs needed to prove

they were employees of Pathway and misclassified as independent contractors.

Plaintiffs proceeded on a theory of joint employment, offering testimony that

Pathway and XPO collectively exercised control over their work. Pathway defended

against the notion that it was a joint employer with XPO. For example, Mr. Harris

testified XPO was not involved in Pathway’s formation and that XPO and Pathway

did not share office space, bank accounts, or any joint policies. See R. vol. 3 at 864,

883. According to Mr. Harris, Pathway was not involved in telling Plaintiffs what

type of freight they could haul, what routes to drive when hauling freight, or when to

take rest breaks or time off. See id. at 917-19. Though Pathway and XPO had

executed a carrier agreement, Mr. Harris testified Pathway had also entered into

agreements with other carriers. See id. at 982.

The district court acknowledged the parties submitted a “lot of evidence”

about the relationship between Pathway and XPO, id. at 1107, and described the

joint-employment question as a “close call,” id. at 1099. At the conclusion of the

bench trial, the district court had yet to decide whether Pathway and XPO were joint

employers. After trial, the district court determined “Plaintiffs were independent

contractors, regardless of whether Defendant Pathway [was] considered

independently as an employer or whether XPO and Defendant Pathway [were]

considered collectively as joint employers.” R. vol. 2 at 1253.7

7 Pathway filed a post-trial motion to decertify Plaintiffs’ collective action. The district court granted Pathway’s motion, dismissing the thirty opt-in Plaintiffs’ 7 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 8

III. The district court’s post-trial findings of fact and conclusions of law

The district court first described the trial evidence presented about the

commercial trucking industry. In general, commercial long-haul truckers could work

as company drivers for a commercial freight company or become owner-operators.

Owner-operators lease or own their own trucks and sell their hauling services to the

companies with whom they contract “as [they] desire[].” R. vol. 2 at 1231. Company

drivers work for a specific company and are bound by its polices about when and

how to haul freight.

The district court found Plaintiffs were owner-operators who leased trucks

from Pathway. To lease a truck, each Plaintiff signed Pathway’s “Equipment Lease

Agreement.” Plaintiffs could execute single-person or team leases. The terms of these

fixed lease agreements stated Plaintiffs were responsible for “truck payments,

maintenance and repairs, fuel costs, business liability insurance,” and paying their

own “business-related taxes.” Id. at 1245.

The district court acknowledged Pathway and XPO had entered into a “Carrier

Agreement.” The Carrier Agreement generally provided that Pathway would make a

lease financing program available to XPO’s owner-operators, XPO would “[a]ssist in

closing the lease financing arrangement between Pathway and the [owner-

operators],” and Pathway would lease trucks to XPO’s owner-operators. See Supp.

FLSA minimum wage claims. The remaining Plaintiffs decided not to move for a new trial. 8 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 9

App. at 73-74. Either entity could terminate the Carrier Agreement with 120 days’

notice.

XPO offered Plaintiffs a two-year freight-hauling contract, called a

“Contractor Hauling Agreement.” XPO required Plaintiffs to secure a lease or own a

truck before they could execute a Contractor Hauling Agreement. The contract terms

permitted either party to terminate the Contractor Hauling Agreement with ten days’

notice. Plaintiffs could drive their trucks individually or hire other drivers to assist in

hauling freight for XPO. Several Plaintiffs drove in teams. The Contractor Hauling

Agreement required Plaintiffs to supervise anyone they hired.

The district court further found Plaintiffs, as owner-operators, were not subject

to the many restrictions XPO imposed on its company drivers. For example, Plaintiffs

did not have to comply with “forced dispatch.” “Forced dispatch” required company

drivers to haul loads at XPO’s direction, except in limited circumstances, such as

when they were ill. R. vol. 2 at 1240. As owner-operators, Plaintiffs could decline

loads for reasons besides illness—including if it would not be profitable for them to

haul a particular load. When Plaintiffs accepted a load, they were exposed personally

to the risk of monetary loss if the fuel cost exceeded what XPO paid them to

transport the load.

Plaintiffs did not need to request or receive permission from XPO—or

Pathway—to choose where to drive or which routes to take to their destination. XPO

did not require Plaintiffs, unlike its company drivers, to adhere to fueling

requirements or abide by XPO’s “driver handbook.” As owner-operators, Plaintiffs

9 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 10

set their own schedules. And XPO paid its owner-operators an incentive bonus to

drive more miles each month. The district court concluded that, despite these

differences, “[m]any of the work duties performed by owner-operators were the same

as those performed by company drivers.” R. vol. 2 at 1235.

At times, Plaintiffs needed to maintain or repair the trucks they leased from

Pathway. To cover repair costs Plaintiffs could not otherwise afford, Pathway offered

Plaintiffs loans, documented by promissory notes. Some Plaintiffs received little

“take-home pay” from XPO after making payments on their notes to Pathway. Id. at

1251.

Seven Plaintiffs ultimately completed their leases and purchased trucks from

Pathway. Some Plaintiffs also established their own trucking companies. Once

drivers completed their leases with Pathway, they had no further interaction with

Pathway unless they leased another truck. Plaintiffs who completed their Pathway

leases often continued to drive for XPO.

After making these factual findings, the district court addressed the ultimate

question—whether Plaintiffs were misclassified as independent contractors under the

FLSA. The district court considered each of the six Baker factors and found five

favored independent contractor status while one was neutral. The district court

concluded Plaintiffs were independent contractors, not employees, regardless of

whether XPO and Pathway were considered collectively as joint employers. After

“[c]onsidering the totality of the circumstances,” the district court determined,

“Plaintiffs were ‘in business for [themselves]’” and therefore “preclude[d] . . . from

10 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 11

coverage under the FLSA.” R. vol. 2 at 1259-60 (second alternation in original)

(quotation omitted).

The district court entered judgment in Pathway’s favor on Plaintiffs’ FLSA

minimum wage claims. This timely appeal followed.

DISCUSSION

Plaintiffs seek reversal on two grounds. First, Plaintiffs contend the district

court erred by failing to decide after trial whether Pathway and XPO were joint

employers under the Fourth Circuit’s test in Hall-Salinas—the framework the court

applied at summary judgment—before deciding, under Baker, whether Plaintiffs were

misclassified as independent contractors. This post-trial legal mistake, Plaintiffs

argue, caused the district court to give insufficient attention to the relationship

between Pathway and XPO in the classification analysis and yielded clearly

erroneous factual findings on some of the Baker factors. Second, Plaintiffs challenge

the district court’s conclusion that they are independent contractors under the FLSA.

We reject both arguments. We discern no error in the district court’s post-trial

decision to forego a joint employment analysis because the court explicitly assumed,

as Plaintiffs contended, that Pathway and XPO were joint employers. Having

reviewed the trial record de novo, we affirm the district court’s ultimate legal

determination that Plaintiffs are independent contractors, not employees, under the

FLSA.

11 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 12

I. Applicable law and standard of review

An employer-employee relationship is a prerequisite to an FLSA claim. See 29

U.S.C. §§ 201-19. The FLSA defines an employee as “any individual employed by an

employer,” id. § 203(e)(1), and “employer” as “any person acting directly or

indirectly in the interest of an employer in relation to an employee,” id. § 203(d).

When determining whether an individual is an employee under the FLSA or an

independent contractor exempt from its coverage, “our inquiry is not limited by any

contractual terminology or by traditional common law concepts of ‘employee’ or

‘independent contractor.’” Henderson v. Inter-Chem Coal Co., 41 F.3d 567, 570

(10th Cir. 1994) (quotation omitted), as modified on denial of reh’g (Dec. 5, 1994).

Our circuit uses the “economic realities” test in Baker, 137 F.3d at 1440, to

determine whether a worker should be classified as an employee under the FLSA.

Baker articulated six factors to guide the classification inquiry:

(1) the degree of control exerted by the alleged employer over the worker; (2) the worker’s opportunity for profit or loss; (3) the worker’s investment in the business; (4) the permanence of the working relationship; (5) the degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employer’s business. Id. (citation omitted); see also Acosta v. Paragon Contractors Corp., 884 F.3d 1225,

1235 (10th Cir. 2018). No factor “in isolation is dispositive; rather, the test is based

upon a totality of the circumstances.” Dole v. Snell, 875 F.2d 802, 805 (10th Cir.

1989) (citing Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)).

Ultimately, the “economic realities of the relationship govern, and ‘the focal point is

whether the individual is economically dependent on the business to which he renders

12 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 13

service . . . or is, as a matter of economic fact, in business for himself.’” Baker, 137

F.3d at 1440 (alteration in original) (quotation omitted).

In applying Baker’s “economic realities” test, a district court must “make

findings of historical facts surrounding the individual’s work.” Id. Then, “drawing

inferences from the findings of historical facts, the court must make factual findings

with respect to” the six Baker factors. Id. Finally, “employing the findings [of fact]

with respect to the six factors, the court must decide, as a matter of law, whether the

individual is an ‘employee’ under the FLSA.” Id. (citation omitted).

Baker also explains the standards governing appellate review of a

classification decision. “In reviewing the district court’s decision on appeal, we

review the two types of factual findings (findings of historical fact, and findings with

respect to the six factors) for clear error.” Id. at 1441. Clear-error review requires us

to “view the evidence in the light most favorable to the district court’s ruling” and to

“uphold any district court finding that is permissible in light of the evidence.”

Sw. Stainless, LP v. Sappington, 582 F.3d 1176, 1183 (10th Cir. 2009) (quotation

omitted); see also Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985)

(“Where there are two permissible views of the evidence, the factfinder’s choice

between them cannot be clearly erroneous.” (citations omitted)). “The burden on

appellants to prove clear error . . . is a heavy one.” Stephens Indus., Inc. v. Haskins &

Sells, 438 F.2d 357, 360 (10th Cir. 1971). “We will reverse under the clear error

standard only if the district court’s finding ‘is without factual support in the record or

if, after reviewing all the evidence, we are left with a definite and firm conviction

13 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 14

that a mistake has been made.’” Acosta v. Foreclosure Connection, Inc., 903 F.3d

1132, 1134 (10th Cir. 2018) (quotation omitted). We review de novo the “ultimate

determination of whether an individual is an employee or an independent contractor”

under the FLSA. Baker, 137 F.3d at 1441 (citation omitted).

II. The district court did not err in foregoing a post-trial joint employment analysis because it assumed, as Plaintiffs contended, Pathway and XPO were joint employers.

Plaintiffs have consistently maintained XPO and Pathway are joint employers

for purposes of liability under the FLSA. In their complaint, Plaintiffs claimed

Pathway and XPO, working together, exercised “complete control over the working

relationship.” R. vol. 1 at 75. Plaintiffs alleged, “Despite [Pathway and XPO] having

tried to structure their relationship with Plaintiffs for the purpose of avoiding an

employer-employee relationship, the economic realities of the relationship dictate

that Plaintiffs are in fact Defendants’ employees.” Id. At the summary judgment

stage, the district court agreed joint employment was a “threshold question in this

case,” R. vol. 2 at 753 (quotations omitted), and then, as Plaintiffs had advocated,

analyzed the issue under the Fourth Circuit’s test in Hall-Salinas.

Under the Hall-Salinas framework, a court considers the relationship between

a worker’s putative joint employers, and then separately considers the worker’s

relationship to all the putative joint employers in the aggregate. See Hall, 846 F.3d at

768. The district court acknowledged our circuit has not adopted Hall-Salinas—or

any test unique to determining joint employment under the FLSA—but found its

application appropriate under the circumstances, particularly absent any contrary

14 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 15

circuit precedent. Ultimately, the district court concluded genuine issues of material

fact precluded summary judgment on the joint employment issue. After trial, rather

than resolving the issue under Hall-Salinas, the district court assumed joint

employment for purposes of the classification analysis, concluding “Plaintiffs were

independent contractors, regardless of whether Defendant Pathway [was] considered

independently as an employer or whether XPO and Defendant Pathway [were]

considered collectively as joint employers.” R. vol. 2 at 1253.

On appeal, Plaintiffs argue the district court erred by failing to engage in a

post-trial analysis of joint employment using the Hall-Salinas framework and ask us

to “remand for the lower court to conduct the Hall-Salinas test in the first instance.”

See Aplts.’ Br. at 15-16, 34. Plaintiffs advance two supporting contentions, which we

consider and reject.

First, Plaintiffs contend “had the lower court conducted the Hall-Salinas

inquiry first, it would have found that Pathway and XPO were joint employers.” Id. at

16. Plaintiffs proceed from a faulty premise. The district court did find that Pathway

and XPO were joint employers; it made that assumption before resolving

classification under Baker. As Pathway correctly observes, “the court addressed the

issues in the right sequence. It addressed joint employment first. It simply assumed,

rather than decided, that Pathway and XPO were joint employers before addressing

whether they had misclassified plaintiffs.” Aplees.’ Br. at 24. Plaintiffs thus spend

considerable time on appeal seeking to win a point they already proved in the district

court.

15 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 16

Our precedent does not command a district court to address joint employment

under Hall-Salinas. In our circuit, district courts must apply the “totality-of-the-

circumstances” approach in Baker, 137 F.3d at 1440 (citation omitted), to determine

whether a worker is an independent contractor or an employee under the FLSA. Thus,

even if Hall-Salinas offers an appropriate test for analyzing whether two entities are

joint employers, there was no need, under the circumstances, for the district court to

analyze an issue already decided in Plaintiffs’ favor.8

Second, Plaintiffs insist the threshold legal mistake—assuming a joint

employment relationship instead of conducting a joint employment analysis under

Hall-Salinas—caused the district court to give insufficient attention to the

relationship between Pathway and XPO under the Baker factors. “[T]he inputs to the

six-factor FLSA employee analysis would have changed had the [Hall-Salinas] test

been conducted first,” Plaintiffs contend, so “skipping” the test “was harmful.”

Aplts.’ Br. at 23, 33. We understand this argument to challenge as clearly erroneous

the district court’s factual findings under the six Baker factors. We are not persuaded.

The district court appropriately focused on the relationship between Pathway and

XPO—and not just on Plaintiffs’ relationship to each entity separately—in deciding

Plaintiffs were correctly classified as independent contractors.

8 Plaintiffs ask us to adopt the Hall-Salinas test, but we decline the invitation in this case. See Griffin v. Davies, 929 F.2d 550, 554 (10th Cir. 1991) (“We will not undertake to decide issues that do not affect the outcome of a dispute.” (citation omitted)). 16 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 17

As the record squarely confirms, the district court understood the classification

analysis in this case required inquiry into the combined influence of Pathway and

XPO. At the summary judgment stage, the district court explained that here, where

joint employment was a threshold question, evidence “bearing on the relationship

between [Pathway] and XPO . . . may be examined to determine whether Plaintiffs

were independent contractors or employees.” R. vol. 2 at 768. After trial, the district

court acknowledged the parties submitted a “lot of evidence” about Pathway and

XPO’s relationship, R. vol. 3 at 1107, and recognized its obligation “to consider” and

“sort through” that evidence and “make a conclusion about [it],” id. The district court

also remarked “the issue of whether there was joint employment here [was] a close

call.” Id. at 1099. Ultimately, the district court determined Plaintiffs were

independent contractors “regardless” of whether XPO and Pathway “are considered

collectively as joint employers.” R. vol. 2 at 1253.

As we will explain, we agree with Plaintiffs that the district court’s analysis of

the sixth Baker factor—the extent to which the work performed is “integral to the

business”—does not fully conform to its assumption that Pathway and XPO were

joint employers. But we discern no reversible error because the district court properly

ruled, under the totality of the circumstances, Plaintiffs were independent contractors.

III. The district court did not err in concluding Plaintiffs were independent contractors, rather than employees, under the FLSA.

Our six-factor test in Baker applies to Plaintiffs’ misclassification claim. No

one factor is dispositive because Baker contemplates a “totality-of-the-circumstances

17 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 18

approach.” 137 F.3d at 1441 (citation omitted). Recall, we review the district court’s

factual findings under Baker for clear error and its ultimate classification decision de

novo. Id. “The existence and degree of each factor is a question of fact while the

legal conclusion to be drawn from those facts—whether workers are employees or

independent contractors—is a question of law.” Dole, 875 F.2d at 805 (quotation

omitted).

Plaintiffs contend the district court erred in finding they were not employees of

Pathway.9 According to Plaintiffs, every Baker factor supports employee status under

the FLSA. Pathway responds that the district court’s findings under Baker are not

clearly erroneous and that, under the totality of the circumstances, the district court

correctly concluded Plaintiffs were properly classified as independent contractors. As

we will explain, Plaintiffs successfully challenge some components of the district

court’s Baker analysis, but a proper application of the standard of review compels

affirmance. The district court’s factual findings are firmly supported by the record,

9 On appeal, Plaintiffs argue they “should be considered employees under the FLSA when looking to either Pathway alone or to Pathway and XPO as joint employers.” Aplts.’ Br. at 35 n.10. The district court said it assessed Pathway’s liability under the FLSA, not just collectively with XPO, but also “independently as an employer.” R. vol. 2 at 1253. But, as Pathway correctly observes, “the district court never analyzed [P]laintiffs’ relationship with Pathway as a separate employer.” Aplees.’ Br. at 26 (emphasis added). Indeed, we struggle to see how Pathway alone— that is, outside of a joint employment relationship with XPO—could be considered Plaintiffs’ sole employer under the FLSA. Cf. 29 U.S.C. § 203(d), (g) (defining “employee” as “any individual employed by an employer” and “[e]mploy” as “to suffer or permit to work”). With XPO out of the case and only Pathway remaining as a defendant, it seems there would have been no basis to engage with the classification analysis under Baker had the district court not assumed—as it did here, in Plaintiffs’ favor—that Pathway and XPO were joint employers. 18 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 19

and we discern no error in its legal conclusion that Plaintiffs were “in business for

[themselves].” R. vol. 2 at 1260 (alteration in original) (quoting Baker, 137 F.3d at

1443).

1. Degree of control

The first Baker factor is the degree of control the putative employer exercises

over the worker, and whether the “work situation makes it possible to view [the

workers] as persons conducting their own businesses.” Baker, 137 F.3d at 1440

(citation omitted). The district court found this factor favored independent contractor

status because the trial evidence “demonstrate[d] a relatively low degree of control

exerted by [Pathway] and/or XPO over Plaintiffs.” R. vol. 2 at 1254. Plaintiffs

advance several challenges to this factual finding, but none is availing.

First, notwithstanding Plaintiffs’ contrary assertion, the district court, having

assumed a joint employment relationship, did consider the combined influence of

Pathway “and/or XPO” in its analysis of the “degree of control” factor—indeed, it

expressly stated as much. Id.

Second, Plaintiffs marshal trial evidence to show Pathway exerted significant

control over critical elements of their daily jobs. Plaintiffs contend, “Pathway

controlled who [Plaintiffs] worked for, what loads were assigned to them, and how

they maintained their trucks. Under these circumstances, the control factor weighs in

favor of finding that [Plaintiffs] were employees.” Aplts.’ Br. at 41. Plaintiffs seem

to challenge the district court’s factual finding by urging us to reweigh the evidence.

This we cannot do. In applying the clear-error standard, our limited role requires we

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review the district court’s work, not undertake it. See Anderson, 470 U.S. at 573 (“In

applying the clearly erroneous standard to the findings of a district court sitting

without a jury, appellate courts must constantly have in mind that their function is not

to decide factual issues de novo.” (quotation omitted)).

Third, we reject Plaintiffs’ contention that the district court “misread[]” our

decision in Acosta v. Paragon Contractors Corp., 884 F.3d at 1235, and thus

“applied the wrong legal test for control.” Aplts.’ Br. at 41. “[W]hen a lower court’s

factual findings are premised on improper legal standards or on proper ones

improperly applied, they are not entitled to the protection of the clearly erroneous

standard, but are subject to de novo review.” In re Kretzinger, 103 F.3d 943, 946

(10th Cir. 1996) (quotation omitted). In Acosta, we held the degree-of-control factor

supported classification of the worker “as an independent contractor rather than an

employee.” 884 F.3d at 1236 (citation omitted). In so concluding, we affirmed the

district court’s decision to take “various considerations” into account, “such as [the

worker’s] independence in setting his own work hours and other conditions and

details of his work, the extent of the [putative employer’s] supervision of [him], and

the degree of [his] ability to work for other employers.” Id. at 1235 (citations

Plaintiffs contend the district court misconstrued Acosta as defining the control

factor only in terms of whether a worker “could set his own hours and determine how

best to perform his job within broad parameters.” Aplts.’ Br. at 41 (quotation

omitted). According to Plaintiffs, this interpretation was too narrow, when “the

20 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 21

proper control inquiry in [the Tenth] Circuit is broader, and includes (as Acosta did)

whether the Lease Drivers were ‘free to offer their services to third parties.’” Id. at

42 (quoting Dole, 875 F.2d at 808). We disagree.

Acosta stands for the proposition that, when analyzing degree of control under

Baker, district courts may consider whether putative employees can work for third

parties. 884 F.3d at 1235-36. Whether workers may offer their services to third

parties is not a dispositive consideration to be addressed in every misclassification

case but is generally relevant to the Baker analysis, which demands inquiry into the

totality of the circumstances. As Pathway correctly observes, the district court did not

misunderstand Acosta but applied it correctly to the facts here.

Finally, Plaintiffs argue the district court “made clear factual errors” in finding

they used their own “business judgment to determine whether to decline loads.”

Aplts.’ Br. at 42 (quotation omitted); see also Reply Br. at 17. Plaintiffs also contend

the district court “ignor[ed] that [they] in effect could not work for other carriers.”

Aplts.’ Br. at 42. For instance, Plaintiffs point to Plaintiff Zigmund Gutowski who

testified if he was offered an XPO load but “didn’t like it” and declined the load,

“there [were] consequences,” such as later “get[ting] lower miles.” R. vol. 3 at 679.

Mr. Harris testified that Plaintiffs had to secure Pathway’s permission before they

could drive for another carrier, and that, with one owner-operator, Pathway required

the payment of outstanding debts before approving his switch. And if they wanted to

drive for a carrier that did not have a “payment direction letter” with Pathway,

Plaintiffs had to pay a down payment before driving for that carrier. R. vol. 3 at 909.

21 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 22

According to Plaintiffs, this evidence shows they “had limited discretion” in

performing their work, and the district court clearly erred in finding otherwise.

Aplts.’ Br. at 39.

Even if Plaintiffs have correctly recited the trial evidence, they have not

identified reversible error. “Plaintiffs must show more than the viability of their own

theory to warrant remand under the clear error standard. They must demonstrate the

district court’s findings were impermissible.” Obeslo v. Great-W. Life & Annuity Ins.

Co., 6 F.4th 1135, 1148 (10th Cir. 2021) (citation omitted). Plaintiffs have not carried

that heavy burden here.

For example, the record confirms neither Pathway nor XPO decided for

Plaintiffs whether they drove alone, as a team, or hired their own employees to help

haul freight. Plaintiffs could sign single-person or team leases with Pathway. Under

XPO’s Contractor Hauling Agreement, Plaintiffs could hire other drivers to help

them haul freight. And unlike XPO’s company drivers, Plaintiffs were not subject to

“forced dispatch.”

The record also shows Plaintiffs decided what loads to accept or decline, when

and where they would drive, and how much time to take off—all without having to

secure the permission of Pathway and/or XPO. For example, Plaintiff Frank Merrill

testified that Pathway did not establish a work schedule for him or require him to

drive specific routes. See R. vol. 3 at 134. Plaintiff Craig Williams testified he could

take time off when he wanted and determine if a load would be profitable enough to

take or turn down. See R. vol. 2 at 1238, vol. 3 at 517-18.

22 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 23

Finally, we reject Plaintiffs’ contention that the terms of the Equipment Lease

Agreement render the district court’s degree-of-control findings clearly erroneous.

According to Plaintiffs, the Equipment Lease Agreement “vested in Pathway” the

power to prevent Plaintiffs from driving for any carrier besides XPO. Aplts.’ Br. at

42. “Had the lower court considered the Equipment Lease Agreement,” Plaintiffs

maintain, “it could not have found that [Plaintiffs’] decision to reject assigned loads

came down to business judgment—rather than fear of negative repercussions.” Id.

We are not persuaded.

Recall, on clear-error review, “[w]e view the evidence in the light most

favorable to the district court’s ruling and must uphold any district court finding that

is permissible in light of the evidence.” Weyerhaeuser Co. v. Brantley, 510 F.3d

1256, 1262 (10th Cir. 2007) (quotation omitted). As Plaintiffs acknowledge, the

Lease Agreements permitted drivers to switch carriers. See Aplts.’ Br. at 42; see also

Supp. App. at 52; R. vol. 3 at 933. To be sure, the lease terms required Plaintiffs to

secure Pathway’s permission before making a switch. Plaintiffs argue that having to

secure permission tilts the “degree of control” factor in favor of employee status. We

disagree. “That the record supports a view of the evidence that is permissible but

contrary to the trial court’s findings is not sufficient to warrant upsetting the lower

court’s findings.” Holdeman v. Devine, 572 F.3d 1190, 1192 (10th Cir. 2009)

(citation omitted). In any event, the record shows Pathway never told any driver they

could not change carriers. Several Plaintiffs switched carriers while leasing trucks

from Pathway.

23 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 24

The trial evidence thus supports the district court’s finding that Pathway and

XPO exerted “a relatively low degree of control” over critical elements of Plaintiffs’

work. Plaintiffs have advanced no availing argument otherwise.

2. Opportunity for profit and loss

The second Baker factor focuses on the worker’s opportunity for profit and

loss, including the worker’s “control over the essential determinants of profits in a

business” and whether they have a “direct share in the success of the business.”

Baker, 137 F.3d at 1440 (quotation omitted). The district court found this factor

favored independent contractor status because “Plaintiffs’ opportunities for profit or

loss were largely within their own control.” R. vol. 2 at 1256. We discern no error.

Plaintiffs first contend the district court “applied an incorrect legal test for the

[opportunity for] profit or loss” factor. Aplts.’ Br. at 46 (emphasis omitted).

According to Plaintiffs, the sole consideration in a court’s legal analysis of the

second Baker factor is whether opportunities for profit or loss depended on the

worker’s own “managerial skill—an analysis the lower court did not perform.” Id. at

47. Plaintiffs understand “managerial skill” to mean the use of their own initiative to

realize profits from their work. Id. at 45-46. They appear to contend their jobs

required no “managerial skill” because profit and loss “was primarily determined by

their ability to drive more miles—but not too many more miles—more efficiently.”

Id. at 46.

24 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 25

Pathway argues this legal argument has been forfeited because Pathway failed

to raise it before the district court. Aplees.’ Br. at 37. We agree.10 Even if preserved,

the argument is unavailing. As Pathway correctly observes, our precedent “does not

demand a singular focus on managerial skills to the exclusion of all other

considerations in assessing the opportunity for profit and loss.” Id. (citations

omitted). For instance, in analyzing the “opportunity for profit and loss” factor, a

district court may consider—as the district court properly did here—whether workers

“have [an] opportunity to experience a loss on the job.” Baker, 137 F.3d at 1441; see

also id. (concluding district court’s factual finding that workers were employees was

not clearly erroneous in part because “there is absolutely no risk of loss on plaintiffs’

part”); Johnson v. Unified Gov’t of Wyandotte Cnty., 371 F.3d 723, 730 (10th Cir.

2004) (“Did the plaintiffs have the opportunity for profit or loss? The plaintiffs could

10 According to Pathway, Plaintiffs did not argue below that the “sole relevant consideration” under this Baker factor is “whether the worker needed managerial skill.” Aplees.’ Br. at 37. In contesting forfeiture, Plaintiffs point to their post-trial Revised Proposed Findings of Fact and Conclusions of Law, see Reply Br. at 22, where they asserted: “Plaintiffs’ opportunity for profit and loss was not dictated by their own initiative and work ethic, but rather, [by XPO’s] dispatch schedule . . . and how much Pathway [was] deducting from Plaintiffs’ pay,” R. vol. 2 at 931. We agree with Pathway that Plaintiffs have not preserved their appellate argument that, as a legal matter, our precedent requires a district court to consider “whether realizing profit [for purposes of the Baker analysis] involved managerial skill.” Aplts.’ Br. at 47 (emphasis removed); see also Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1128 (10th Cir. 2011) (“[I]f the [legal] theory simply wasn’t raised before the district court, we usually hold it forfeited.”) (citations omitted)). And we will not entertain Plaintiffs’ forfeited argument because, as Pathway also observes, Plaintiffs have not attempted to show plain error on appeal. See id. (“[W]e will reverse on the basis of a legal theory not previously presented to the district court . . . . [but] requir[e] a litigant to show the four elements of plain error.” (citations omitted)). 25 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 26

not have lost money from their efforts for the Housing Authority. Certainly, then,

their circumstances differed from those of some independent contractors.”).

To the extent Plaintiffs contend the district court’s factual findings on the

“opportunity for profit and loss” factor are clearly erroneous, we are not persuaded.

Plaintiffs maintain they did not depend on their “managerial skills” to realize profits,

and their success depended on what loads XPO offered them. Aplts.’ Br. at 44-45.

However, as Pathway observes, the district court found Plaintiffs, unlike XPO’s

company drivers, were exposed to a risk of monetary loss based on the fuel efficiency

of their loads. Rates of pay differed between company drivers and owner-operators,

and Plaintiffs were responsible for their own trucks’ maintenance to turn profits.

Their decisions whether to drive in teams, and what routes to take when driving, also

factored into whether they profited as owner-operators. And Plaintiffs who completed

their leases “could earn substantially more” than their peers. R. vol. 2 at 1255. At

bottom, ample record evidence supports the district court’s finding that the

“opportunity for profit and loss” factor favored independent contractor status.

Plaintiffs have not established clear error.

3. Investment in the business

The third Baker factor considers the worker’s investment in the business.

Baker, 137 F.3d at 1440. The district court found this “investment in the business”

factor supported independent contractor status because Plaintiffs “substantially

invested in their chosen business” of long-haul trucking. R. vol. 2 at 1256.

26 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 27

Plaintiffs urge reversal, contending the district court erred by looking at

Plaintiffs’ “investments in a vacuum, not in comparison to Pathway’s own

investments.” Aplts.’ Br. at 48 (citation omitted). Pathway argues Plaintiffs also have

forfeited this legal argument by failing to raise it below. Aplees.’ Br. at 40. Again,

we agree with Pathway.

On appeal, Plaintiffs correctly explain that, in evaluating the “investment in

the business” factor, courts compare an employer’s investments with the worker’s

investments. Aplts.’ Br. at 48; see also Acosta, 884 F.3d at 1236 (“To analyze this

factor, we compare the investments of the worker and the alleged employer.” (citing

Baker, 137 F.3d at 1442)). In making this evaluation, a trial court must consider a

worker’s “large capital expenditures.” Acosta, 884 F.3d at 1236 (quotation omitted).11

But in the district court, Plaintiffs did not argue, as they do now, that the district

court had to compare Plaintiffs’ investments in the business to Pathway’s investments

in its business. Aplts.’ Br. at 48-50. But see R. vol. 2 at 932. Plaintiffs have therefore

failed to preserve their appellate argument. See Richison, 634 F.3d at 1128.

Even if preserved, the argument is unavailing. According to Plaintiffs,

Pathway’s investments in its fleet of trucks, employees’ salaries, and leased office

space—Pathway’s overall business—were comparatively greater than Plaintiffs’

investments in their trucks. See Aplts.’ Br. at 49-50. Even if we assume Pathway

incurred expenses beyond those related to leasing trucks, a comparison of these

11 Plaintiffs do not argue the district court erred in finding their leases and work-related expenses were relevant investments under this factor. 27 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 28

investments to Plaintiffs’ investments does not tip the scale in favor of employee

status.

The district court found Plaintiffs not only incurred lease and truck

maintenance expenses but also paid business-related taxes. Some Plaintiffs

established their own companies. Indeed, Plaintiff Merrill’s lease term extended for

40 months with a monthly rental rate of $2,250.00, a total of $90,000, and included

an advance rental payment along with security deposit fees. Supp. App. at 51. Other

Plaintiffs paid over $90,000 to Pathway during their lease terms. R. vol. 3 at 774,

840. The record supports the district court’s finding that Plaintiffs made significant

personal investments in their trucks and truck repair and maintenance. See Sanchez v.

State of Colorado, 97 F.3d 1303, 1309 (10th Cir. 1996) (“[W]e shall not disturb [a

factual] finding unless there is no evidence in the record to support it.”). And, as the

district court found, Plaintiffs’ non-negligible investments in their businesses and

payment of related expenses indicate they were “in business for themselves.” Baker,

137 F.3d at 1443 (citations omitted).

4. Permanency of working relationship

The fourth Baker factor considers the permanence of the working relationship.

Baker, 137 F.3d at 1440. This factor favors employee status where “characteristics of

[workers’] employment are clearly due to the intrinsic nature of [their] work rather

than any choice or decision on the part of [the workers].” Id. at 1442 (emphasis

added). The district court found that the “permanence of the working relationship”

28 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 29

factor “weighs slightly in favor of a finding of independent contractor status.” R. vol.

2 at 1257.

Plaintiffs do not seem to challenge the district court’s permanency findings as

clearly erroneous. Rather, they argue the permanency factor favors employee status

because some Plaintiffs were indebted to Pathway after taking out loans documented

by Pathway’s promissory notes. The indebtedness created by these loans, Plaintiffs

insist, demonstrates permanency in their working relationship with Pathway. Aplts.’

Br. at 52-53. Even if we found Plaintiffs’ contention persuasive, that would not be a

legitimate basis for reversal. See Anderson, 470 U.S. at 573-74 (“If the district

court’s account of the evidence is plausible in light of the record viewed in its

entirety, the court of appeals may not reverse it even though convinced that had it

been sitting as the trier of fact, it would have weighed the evidence differently.”).

In any event, Plaintiffs’ position is not supported by the record. The district

court found Pathway offered Plaintiffs loans to cover repair costs for which Plaintiffs

“had responsibility under [their] leases.” R. vol. 2 at 1251. Pathway issued

promissory notes to Plaintiffs for any necessary truck repairs. Many drivers received

little take-home pay after securing loans from Pathway and making payments on their

promissory notes. Even so, the record makes clear Plaintiffs’ indebtedness resulted

from their contractual lease obligations to maintain their trucks, and was not “due to

the intrinsic nature” of long-haul truck driving. Baker, 137 F.3d at 1442. We thus

discern no clear error in the district court’s findings that, given the impermanence of

the working relationship, this factor did not support employee status.

29 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 30

5. Degree of skill required to perform the work

The fifth Baker factor considers the degree of skill required to perform the

work. See Baker, 137 F.3d at 1440. The district court found this “degree of skill”

factor “weigh[ed] slightly in favor of a finding of independent contractor status”

because “certain additional skills were required to perform Plaintiffs’ work, as

compared to the skills required for company drivers.” R. vol. 2 at 1258-59.

According to the district court, “Many of the work duties performed by owner-

operators were the same as those performed by company drivers.” Id. at 1258.

Pathway concedes as much. See Aplees.’ Br. at 44. However, the district court found,

“in addition to the required skills both company drivers and owner-operators

possessed [for] driving commercial trucks,” Plaintiffs also needed skills like

“business acumen and financial proficiency to be profitable” as owner-operators. R.

vol. 2 at 1258.

On appeal, Plaintiffs contend the district court committed legal error by

focusing on “the degree of skill required to profit from the job” as owner-operators

when the proper focus should have been on “the degree of skill required to perform

the job” of long-haul truck driving. Aplts.’ Br. at 53. We agree.

Baker teaches that district courts must examine what, if any, specialized skills

are required to perform the work for the employer—and not, as the district court did

here, the skills needed for the worker to independently profit from the work. See

Baker, 137 F.3d at 1443 (determining district court’s finding that the “degree of

skill” factor favored employee status was not clearly erroneous because “plaintiffs

30 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 31

are highly skilled but they did not exercise those skills in any independent fashion in

their employment with [defendant-appellant].” (emphasis added)); see also Acosta,

884 F.3d at 1237 (finding fifth Baker factor favored employee status where worker

provided testimony about his job duties and his employer “d[id] not identify any

specialized skills needed for the[] tasks”); Doty v. Elias, 733 F.2d 720, 723 (10th Cir.

1984) (affirming district court’s conclusion that waiters and waitresses were

employees when the job of waiting tables “did not require any specialized skills”);

Johnson, 371 F.3d at 730 (“As to the degree of skill involved in the actual labors, the

officers who served as security guards had been trained by the police department and

did not need further training.” (emphasis added)).

Here, the fifth Baker factor looks to what specialized skills Plaintiffs needed to

perform the work of long-haul commercial truck driving for Pathway and/or XPO.

See Baker, 137 F.3d at 1443; see also Acosta, 884 F.3d at 1237. The district court

found Plaintiffs, as owner-operators, required the same skills to haul freight as XPO’s

company drivers. The district court’s finding that Plaintiffs needed “additional skills .

. . to perform [their] work,” R. vol. 2 at 1529, was based on a mistaken impression of

applicable legal principles and therefore is “not entitled to the protection of the

clearly erroneous standard,” In re Kretzinger, 103 F.3d at 946 (quotation omitted);

see also Sanchez, 97 F.3d at 1309 (“However formidable a standard, [clear error] is

not insurmountable . . . for it ‘does not inhibit an appellate court’s power to correct

errors of law, including those that may infect a so-called mixed finding of law and

31 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 32

fact, or a finding of fact that is predicated on a misunderstanding of the governing

rule of law.’” (quotation and internal citation omitted)).

However, “[n]one of the [Baker] factors alone is dispositive” because the

district court must employ “a totality-of-the-circumstances approach” in resolving the

ultimate classification issue. Baker, 137 F.3d at 1441 (citation omitted). We thus

proceed in our review of the district court’s findings under the final Baker factor.

6. Integral part of the business

The sixth Baker factor considers the extent to which an individual’s work is

integral to the putative employer’s business. See Baker, 137 F.3d at 1440. This

“integral to the business” factor “turns ‘on whether workers’ services are a necessary

component of the [putative employer’s] business.’” Acosta, 884 F.3d at 1237

(quoting Baker, 137 F.3d at 1443). The district court found the factor was “neutral”

because “[n]either party presented adequate evidence regarding this factor.” R. vol. 2

at 1259. The district court reasoned, “On the one hand, it [was] obvious that

Defendant Pathway could not remain in business without Plaintiffs performing the

hauling work for which trucks are required.” Id. The district court continued: “On the

other hand, the actual freight hauling done by Plaintiffs was performed for XPO, and

no work was performed directly for Pathway beyond the requirements necessary [for

Plaintiffs] to fulfill [their] lease obligations.” Id.

Recall, Plaintiffs contend that by skipping the joint employment analysis under

Hall-Salinas, the district court gave insufficient attention to the relationship between

Pathway and XPO in analyzing this Baker factor. Had the district court “conducted

32 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 33

the joint employer test first,” Plaintiffs contend, then the court “would have

recognized that Pathway and XPO’s combined business, truck leasing and freight

hauling, could not exist without [Plaintiffs].” Id. (emphasis added). Plaintiffs’ point

is well taken.

That the district court found the “integral to the business” factor neutral

suggests it may have considered Pathway individually, and not Pathway and XPO

collectively, as the putative employer when assessing whether Plaintiffs’ services

were a “necessary component” of the business. As to Pathway alone, we discern no

clear error in the district court’s factual finding. See Hayes v. SkyWest Airlines, Inc.,

12 F.4th 1186, 1194 (10th Cir. 2021) (“A fact finding is clearly erroneous only where

it wholly lacks support in the record.” (citing Foreclosure Connection, 903 F.3d at

1134)).

But because the district court assumed a joint employment relationship at the

outset, it had to consider, for purposes of the classification analysis, whether

Plaintiffs’ work was integral to the business of the combined entity. The trial

evidence showed XPO is a freight hauling business. As Plaintiffs properly assert, and

Pathway does not seriously dispute, when XPO is added to the mix as a joint

employer, Plaintiffs’ work—long-haul truck driving—was integral to the business of

Pathway and XPO.12 Therefore, the district court’s finding that, as to the combined

12 Notably, in the district court, Pathway conceded this factor favored employee status, and on appeal, Pathway acknowledges that “[f]actoring in [P]laintiffs’ relationship with XPO improves [Plaintiffs’] position slightly.” Aplees.’ Br. at 46. 33 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 34

entity, the “integral to the business” factor is merely “neutral” is not “permissible in

light of the evidence.” Weyerhaeuser Co., 510 F.3d at 1262 (quotation omitted).

Even assuming the “integral to the business” factor is not neutral, but favors

employee status when joint employment is assumed, we will not reverse the district

court’s ultimate classification decision unless it fails to withstand scrutiny under de

novo review. Here, we discern no reversible error.

***

Baker requires the district court to assess classification under the FLSA by

considering the six-factor “economic realities” test under the totality of the

circumstances. Baker, 137 F.3d at 1440-41. We review this ultimate classification

decision de novo. Id. at 1441 (citation omitted). The district court entered the

classification inquiry assuming Pathway and XPO were Plaintiffs’ joint employers.

“Considering the totality of the circumstances,” the district court found Plaintiffs

“acted with a ‘degree of independence’ which ‘set them apart from what one would

consider normal employee status.’” R. vol. 2 at 1259-60 (alteration omitted) (quoting

Baker, 137 F.3d at 1441). The district court concluded “Plaintiffs were ‘in business

for [themselves],’” and therefore they were independent contractors, not employees,

which “preclude[d] them from coverage under the FLSA.” Id. at 1260 (alteration in

original) (quoting Baker, 137 F.3d at 1443).

Pathway urges affirmance, contending the district court’s ultimate legal

conclusion that Plaintiffs were independent contractors “flowed naturally” from its

factual findings. Aplees.’ Br. at 47 (citing R. vol. 2 at 1260). We agree.

34 Appellate Case: 21-1295 Document: 010110730376 Date Filed: 08/26/2022 Page: 35

Notwithstanding the district court’s legal error in analyzing the “degree of skill”

factor and its failure to consider Pathway and XPO collectively when analyzing the

“integral to the business” factor, we conclude the district court properly determined,

based on the totality of the circumstances, that Plaintiffs were independent

contractors “in business for themselves.” Baker, 137 F.3d at 1443 (citations omitted).

CONCLUSION The district court’s judgment is AFFIRMED.

Entered for the Court

Veronica S. Rossman Circuit Judge