Establishing an Employment Relationship

FRYE, Justice.

The sole issue on this appeal is whether the Court of Appeals correctly affirmed the trial court’s conclusion that plaintiff Shane Tucker was an employee of the defendant, A.T. Williams Oil Company. For the reasons set forth in this opinion, we conclude that the Court of Appeals was correct in so affirming.

On 1 December 1982, plaintiff Shane Tucker, then aged eight, slipped on a sidewalk on defendant’s property and fell, cutting his hand. He and his mother, plaintiff Sylvia Tucker, filed this action against defendant on 26 June 1984. In their complaint, plaintiffs alleged in essence that Shane Tucker’s injuries were proximately caused by defendant’s negligence. They sought damages for medical expenses, lost wages, and pain and suffering. R. Douglas Lemmerman was appointed guardian ad litem for the minor plaintiff Shane.

Defendant filed an answer and raised as one of its defenses lack of subject matter jurisdiction. It asserted that the child Shane was its employee as defined by the Workers’ Compensation Act and that the Industrial Commission accordingly had exclusive jurisdiction over plaintiffs’ claim. Following preliminary discovery, defendant moved to dismiss for lack of subject matter jurisdiction. Upon the parties’ stipulation that the trial judge find jurisdictional facts, Judge DeRamus made findings and concluded that Shane was an employee injured within the course and scope of his employment with defendant as defined in the Workers’ Compensation Act. The judge therefore dismissed plaintiffs’ action for lack of subject matter jurisdiction. Plaintiffs appealed to the Court of Appeals, which affirmed with a dissent by Webb, J., on the question of whether the evidence supported the conclusion that plaintiff Shane was an employee of defendant.

“By statute the Superior Court is divested of original jurisdiction of all actions which come within the provisions of the Workmen’s Compensation Act.” The Act provides that its remedies shall be an employee’s only remedies against his or her employer for claims covered by the Act. Remedies available at common law are specifically excluded. Therefore, the question of whether plaintiff Shane Tucker was defendant’s employee as defined by the Act is clearly jurisdictional. This issue is not affected by the fact that the minor may have been illegally employed because the Act specifically includes within its provisions illegally employed minors.

The trial judge made the following findings of facts pertinent to this issue:

3. Prior to the incident referred to in the complaint, Ken Schneiderman was employed as the manager of the defendant’s place of business on Wendover Avenue in Greensboro, North Carolina. As manager, Schneiderman had the authority to hire and fire such employees as he deemed necessary to assist him in the operation of the business, and all wages paid to any of the employees which he hired were deducted from the commission which he received from the defendant.

4. Ken Schneiderman employed the minor plaintiff, and paid him varying amounts to perform duties at the defendant’s service station—convenience store, including putting up cigarettes, picking up trash, stocking bottles in the cooler, and other odd jobs from time to time while the minor’s mother, Sylvia A. Tucker, worked as a cashier for the store.

EXCEPTION NO. 1

5. At the time the minor plaintiff was injured in the accident referred to in the complaint, the minor plaintiff had been performing chores of stocking cigarettes, picking up trash, and other work which was in the course of the trade or business of defendant A.T. Williams Oil Company.

EXCEPTION NO. 2

6. At the time of the incident described in the complaint, the minor plaintiff Jonathan Shane Tucker was a casual employee of defendant A.T. Williams Oil Company, and was performing duties within the course of the trade and business of A.T. Williams Oil Company in the operation of the gas station and convenience store on Wendover Avenue in Greensboro, North Carolina.

EXCEPTION NO. 3

7. Defendant A.T. Williams Oil Company employs more than four persons, and is subject to the provisions of the North Carolina Workers Compensation Act.

Our review of the record shows that there is ample evidence to support each disputed finding.

Plaintiff Shane testified at his deposition that he routinely accompanied his mother to her job as part-time cashier at defendant’s store and service station, a Wilco. According to his description, he ordinarily did his homework, ate a snack, and performed odd jobs about the station. These jobs consisted of picking up trash in the store, taking out the garbage, and stocking cigarettes and drinks. He had been doing these jobs for almost a month at the time of the accident. The child said that the jobs generally took him between half an hour and one hour to complete. In return, the store manager, Ken Schneiderman, would pay him a dollar, occasionally more depending on the amount of work he had done. A fair reading of the child’s testimony discloses that he clearly expected to be paid for his efforts.

The child also testified that on the day of the accident he had nearly finished his tasks and was on his way to ask Schneiderman if there was anything else Schneiderman wanted him to do when he slipped and fell. He said at one point that he believed that Schneiderman did later give him his dollar, although he was not clear on this point.

The child’s mother, Sylvia Tucker, corroborated Shane’s account. She testified that at the time of the accident, she was working from 4 p.m. to 7 p.m. as a part-time cashier at Wilco. Schneiderman had Shane “put up stock, straighten the shelves up and pick up trash inside the building” and occasionally outside as well. Mrs. Tucker testified that her understanding was that the child was going to be paid for what he did. Although she told Schneiderman originally that Shane would work without being paid, he rejected this offer and told both her and the child that he would pay Shane for his work. She believed that Schneiderman paid Shane a dollar a day.

Schneiderman signed an affidavit, introduced into evidence, stating that he had hired Shane Tucker for a few dollars to put up cigarettes but with no set hours or wages.

Also before the judge was plaintiffs’ verified complaint, which describes plaintiff Shane as defendant’s employee and says that he was “casually hired and paid $1.00 a day by the manager of defendant’s station, Ken Schneiderman, to put up cigarettes and to do other odd jobs on defendant’s premises whenever assistance was needed.”

We believe that this evidence amply supports the trial judge’s findings that Schneiderman, who had the authority to hire and fire employees, hired the minor plaintiff to do odd jobs as needed in defendant’s service station/convenience store business. Specifically, these tasks included stocking cigarettes and drinks, and picking up trash. At the time of the accident, Shane was engaged in doing these tasks.

We also agree with the trial judge’s conclusion that plaintiff Shane was defendant’s employee at the time of the accident. Once the underlying facts are established, the nature of the relationship is a question of law and fully reviewable on appeal. This Court has previously defined an employee as follows:

An employee is one who works for another for wages or salary, and the right to demand pay for his services from his employer would seem to be essential to his right to receive compensation under the Workmen’s Compensation Act.

The statutory definition (N.C.G.S. § 97-2(2))⊕N.C.G.S. § 97-2(2): “The term ‘employee’ means every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, including aliens, and also minors, whether lawfully or unlawfully employed, but excluding persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer.”

adds nothing to the common law definition. The trial judge found that Schneiderman had hired the child, that he had authority to hire and fire employees for defendant, and that the jobs Shane did were in the course of defendant’s business and that he was engaged in doing them when he fell. We believe these facts, taken together, will support the conclusion that the plaintiff Shane was an employee of defendant at the time of the accident.

Plaintiffs, however, contend that the evidence does not support the facts and the facts do not support the conclusion.

First, they argue that none of the parties considered Shane to be defendant’s employee. They note that Shane at one point said that his employment was “not exactly” a job. Furthermore, in his deposition testimony, Schneiderman explicitly denied hiring Shane, retracting the statement in his affidavit.

We do not find plaintiffs’ argument on this point persuasive.

Initially, we note that the parties’ own conclusion about their legal relationship is not binding on the court. Moreover, immediately after Shane said that his employment was “not exactly” a job, he described the relationship as helping in the store and getting paid for it. He repeated this description in a later portion of his testimony.

Nor do we believe that Schneiderman’s denial of hiring Shane was binding upon the trial judge. Schneiderman essentially gave inconsistent testimony. Initially, in his affidavit, he said that he had hired Shane. Later, in his deposition, he denied hiring him. His deposition testimony contradicted that of Shane and Mrs. Tucker on some points—most notably on the frequency of the child’s presence at the Wilco. The trial judge resolved these contradictions and declined to adopt Schneiderman’s version. His findings are not vitiated merely by the presence of conflicting evidence. We also note on this issue that Schneiderman repeatedly said that he could not remember details and was evasive on important points. Furthermore, at one point in his deposition, he said, “He [Shane] wasn’t an employee. Did you ever hear of child labor? You know, I’m smart enough to know that.”(n.4 in opinion) Schneiderman testified that he hired his own children to work at the Wilco and that defendant promoted this arrangement because “you could work your kids for less money.”

Moreover, we note that Mrs. Tucker was unsure of her own status. She testified that she did not know whether she herself was a “real employee.”

Second, plaintiffs argue that Shane could not have been an employee because Schneiderman did not comply with certain procedural formalities. He did not take an application from Shane or report him on the list of employees he turned into his supervisor for withholding purposes. His normal practice was to pay employees from the cash register;(n.5 in opinion) He paid their net pay out of the register and submitted their names and pay records to his supervisor for payment of payroll taxes.

he paid Shane from his pocket.

We do not believe that any of these factors is dispositive. Our Court of Appeals has held that failure to follow technical procedures such as withholding F.I.C.A. and income taxes is not controlling on the issue of whether an employer-employee relationship exists. We also do not think that Schneiderman’s method of paying Shane was as significant under the facts of this case as it might otherwise be, because all wages came out of Schneiderman’s commission. He therefore paid all of the employees at Wilco out of his own money.

Third, plaintiffs contend that Shane was not an employee but instead performed gratuitous services. In addition to Schneiderman’s testimony denying that he hired Shane, rejected by the trial judge, plaintiffs cite Mrs. Tucker’s original statement to Schneiderman that he did not have to pay the child. However, this evidence in fact supports the opposite conclusion, that Shane was an employee. Schneiderman was offered the chance to avail himself of Shane’s gratuitous services, but he specifically rejected it and said that he wanted to pay the child for his work. The evidence shows, and the judge found, that he did so.

Finally, plaintiffs contend that if Shane was an employee, he was Schneiderman’s personal employee. We disagree. Schneiderman had the authority to hire employees for defendant, and the evidence shows and the trial judge found that the tasks the child performed were in the course of defendant’s business, not Schneiderman’s personal affairs. We find the facts of this case similar to those of Michaux v. Bottling Co., 205 N.C. 786 (1934). In Michaux, defendant company gave its truck drivers permission to hire and fire helpers as needed to assist them in the distribution of defendant’s products. The drivers paid the helpers out of their own wages or commissions. Plaintiff’s intestate, a minor, was such a helper who was killed while assisting in a delivery. This Court, noting that the deceased minor’s services had been “necessary to the proper and efficient distribution” of defendant’s products, essentially found that the deceased was defendant’s employee at the time of his death.

For all of the foregoing reasons, the decision of the Court of Appeals is affirmed.

MARTIN, Justice, dissenting.

I must respectfully dissent. First, the majority opinion allows the defendant corporation to profit from its own illegal act. Here, defendant corporation claims that it hired plaintiff Shane, an eight-year-old child, as an employee. Defendant’s act would be a direct violation of N.C.G.S. § 95-25.5(d), punishable by imposition of civil penalties. This statute establishes the public policy of this state that it is unlawful for employers to employ children thirteen years of age or less.

The public policy of North Carolina also will not permit a wrongdoer to take advantage of or enrich itself as a result of its own wrong. “It is a basic principle of law and equity that no man shall be permitted to take advantage of his own wrong.” Further citation of authority is not necessary for this basic principle of law. The principle is especially applicable where, as here, the power of the parties is so disparate—an eight-year-old child versus a large corporation! The inequity of defendant’s plea in bar is thus magnified by the relationship of the parties.

Defendant corporation seeks to defeat the infant plaintiff’s cause for personal injuries resulting from the negligence of defendant by using as a shield its own unlawful act of employing the child. This case is not like McNair v. Ward, 240 N.C. 330 (1954), where plaintiff’s own evidence established that he was an employee of defendant. In McNair the defendant did not present any evidence. To the contrary, here defendant affirmatively attempted to prove that plaintiff child was its employee. Defendant’s unlawful employment of the child was one of the direct causes of his injuries, and defendant now seeks to use that unlawful employment to avoid responsibility for those injuries. This will not do, and this Court should not in all good conscience permit defendant to take advantage of its own wrongful act.

Even if this Court allows defendant to rely upon an inequitable defense, the evidence fails, in at least one respect, to support a finding that plaintiff child was defendant’s employee. We must not overlook that defendant has the burden of proof to sustain its plea in bar. As the majority states, the right to demand payment from the employer, A.T. Williams Oil Company, is an essential element of the employment status. Defendant has failed to carry its burden as to this element.

The evidence in many respects is in conflict. However, defendant has failed to produce a shred of evidence that the eight-year-old child had a right to demand payment for his services from A.T. Williams Oil Company. Also, there is no evidence that plaintiff child could have made such a demand from Schneiderman, albeit defendant argues that plaintiff was its employee and not Schneiderman’s. All of the testimony showed that the infrequent payment of amounts ranging from twenty-five cents to a dollar came out of Schneiderman’s own money, out of his own pocket. The payments were not made from the cash register, as were payments to defendant’s employees. Thus, the record is simply devoid of any evidence that the child could have demanded payment from the corporate defendant for services he rendered to Schneiderman.

On the other hand, the record is replete with evidence that plaintiff child was not an employee of defendant’s. Shane was not a listed employee for workers’ compensation purposes; his name was not reported to the defendant corporation for tax withholding purposes; Schneiderman testified explicitly that Shane was not an employee.

The majority relies upon Michaux v. Bottling Co.. The status of plaintiff as an employee was not at issue in Michaux. The Industrial Commission made no finding with respect to whether plaintiff was an employee of defendant’s, nor did this Court in its opinion. The issue decided in Michaux was whether the accident arose out of and in the course of employment, not whether plaintiff was an employee.

I submit that the more analogous case is Lucas v. Stores, 289 N.C. 212 (1976). Lucas had been discharged as an employee of defendant’s. His wife also worked for defendant on a double shift from 7:00 a.m. to 11:00 p.m. After Lucas was discharged, he would go with Mrs. Lucas to work and assist her in managing the convenience store. Defendant’s district manager knew that Lucas was at the store and told Mrs. Lucas to let Lucas run the cash register “as long as the ABC law didn’t catch him.” He also worked on the books and made bank deposits. Mrs. Lucas paid Lucas $2.00 an hour for his work out of her own paycheck. During the course of a robbery of the store, Lucas was shot and killed, and his widow brought a claim for compensation under the Act. The Industrial Commission found that he was an employee at the time in question. The Court of Appeals reversed the Commission, and this Court affirmed. The Court stated that the acts of Lucas in going with his wife to the store and helping out in the work were entirely consistent with the desire of an unemployed husband to be with his wife at her work and to assist her in the performance of her duties, especially where the work location was likely to attract armed robbers at night. This Court found no contract of employment existed.

Likewise, here defendant desired to employ Sylvia Tucker, plaintiff child’s mother, to work in the convenience store. She could not do so unless defendant agreed to let her eight-year-old son come to the store after school and remain until she completed her work. Defendant agreed to this plan. While on the premises the child from time to time performed menial tasks for Schneiderman, who sometimes would give the boy payments ranging from twenty-five cents to a dollar for his work. This is entirely consistent with the problem of a working mother who needs employment but must also supervise her young child. Shane was on the premises not as an employee of the corporate defendant, but because it was necessary in order for his mother to work. Such are the demands of our modern society. As in Lucas, plaintiff child was not an employee of defendant’s.

Assuming arguendo that defendant may rely upon its plea in bar and that there is sufficient evidence to support a finding that Shane was an employee of defendant’s, the trial court erred in sustaining defendant’s plea in bar. If it is true, as defendant insists, that there was a contract of employment between Shane and the defendant, it was a contract with an infant and voidable at the option of the infant, Shane. Upon disaffirmance of a contract by an infant, the contract is void ab initio. The status of the parties is as if there had never been a contract between them.

By bringing this common law action against defendant, the infant plaintiff has disavowed the former contract between the parties and relinquished any rights he may have had under the Workers’ Compensation Act by virtue of the contract. By disavowing the contract, he has elected to pursue his common law remedy. That Shane avoided the contract by instituting the action is of no moment; it is just as effective as writing a letter of disaffirmance to defendant prior to commencing the action. The lawsuit and the evidence and contentions by plaintiff Shane clearly notified defendant that the contract was avoided. Upon plaintiff infant’s disaffirmance of the contract, it was void ab initio and defendant could not rely upon a nonexisting contract to defeat plaintiff infant’s action.

For the above reasons I vote to allow the infant plaintiff to pursue his common law action against defendant.

GREENAWAY, JR., Circuit Judge.

This case is an appeal from a grant of summary judgment on the question of whether drivers for UberBLACK are employees or independent contractors within the meaning of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-219, and similar Pennsylvania state laws. For the following reasons, we will vacate the District Court’s grant of summary judgment and remand for further proceedings.

I. Facts

Plaintiffs Ali Razak, Kenan Sabani, and Khaldoun Cherdoud are Pennsylvania drivers who utilize Defendant Uber Technologies’ ride-sharing mobile phone application (“Driver App”). Plaintiffs bring this action on behalf of a putative class of all persons who provide limousine services, now known as UberBLACK, through Defendant’s Driver App in Philadelphia, Pennsylvania.Plaintiffs bring individual and representative claims against Uber Technologies, Inc. and its wholly-owned subsidiary, Gegen, LLC, (“Gegen,” and collectively, “Uber”) for violations of the federal minimum wage and overtime requirements under the FLSA, the Pennsylvania Minimum Wage Act (“PMWA”), and the Pennsylvania Wage Payment and Collection Law (“WPCL”).

Plaintiffs Razak, Sabani, and Cherdoud each own and operate independent transportation companies (“ITCs”) Luxe Limousine Services, Inc. (“Luxe”), Freemo Limo, LLC (“Freemo”), and Milano Limo, Inc. (“Milano”), respectively. In order for drivers to contract to drive for Uber-BLACK, they must form ITCs. Each ITC, in turn, enters into a Technology Services Agreement with Uber. The Technology Services Agreement includes a Software License and Online Services Agreement that allows UberBLACK drivers to utilize the technology service Uber provides to generate leads, as well as outlines the relationship between ITCs and Uber riders, ITCs and Uber, and ITCs and their drivers. Additionally, it describes driver requirements, vehicle requirements, financial terms, and contains an arbitration clause for dispute resolution between ITCs and Uber.

Uber also requires that drivers sign a Driver Addendum, which is a legal agreement between the ITC and the for-hire driver, before a driver can utilize the Driver App. The Driver Addendum allows a driver to receive “lead generation and related services” through Uber’s Driver App. App. 409. The Addendum also outlines driver requirements (such as maintaining a valid driver’s license), insurance requirements, dispute resolution, and the “Driver’s Relationship with Uber,” in which Uber uses clear language to attempt to establish the parameters of the Driver’s working relationship with Uber.(n.6 in opinion) Boilerplate language in the Driver Addendum to the Technology Services Agreement sets forth, among other things, that ITCs “acknowledge and agree that Uber is a technology services provider” that “does not provide transportation services, function as a transportation carrier, nor operates as a broker for transportation of passengers.” App. 13. “ITCs shall provide all necessary equipment; Uber does not direct or control ITCs or their drivers generally or in their performance.” “ITCs and their drivers retain the sole right to determine when, where, and for how long each of them will utilize the Driver App or the Uber Service, and ITCs agree to pay Uber a service fee on a per transportation services transaction basis.” ITCs must also “maintain during the term of this Agreement workers’ compensation insurance for itself and any of its subcontractors.” The Driver Addendum also sets forth and requires that the relationship between the ITCs and their drivers is “contractual or an employment arrangement.”

For UberBLACK, Uber holds a certificate of public convenience from, and is licensed by, the Philadelphia Parking Authority (“PPA”) to operate a limousine company. Transportation companies and individual transportation providers who provide Black car services in Philadelphia are required to hold a PPA certificate of public convenience or associate with an entity that holds such a certificate. Some Uber-BLACK transportation providers operate under the PPA certificate held by Uber. Luxe, an ITC owned by Razak, operates under its own PPA certificate. Additionally, approximately 75% of UberBLACK drivers use Uber’s automobile insurance.

Plaintiffs claim that they are employees, and sue Uber for violations of minimum wage and overtime requirements under federal and state laws. Under the FLSA, employers must pay employees the applicable minimum wage for each hour worked, and, if an employee works more than forty hours in a given week, the employer must pay one and a half (1½) times the regular rate for each hour subsequently worked. Plaintiffs contend that time spent online on the Uber Driver App qualifies as compensable time under the FLSA. Principal among Plaintiffs’ arguments is that Uber controls the access and use of the Driver App.

To access Uber services, drivers open the Driver App on a mobile device, log in, and tap a button to be online. Once online, a driver can choose to accept a trip, but if the driver does not accept the trip within fifteen seconds of the trip request, it is deemed rejected by the driver. The Driver App will automatically route the trip request to the next closest driver, and if no other driver accepts the trip, the trip request goes unfulfilled, as Uber cannot require any driver to accept a trip. Uber-BLACK drivers are free to reject trips for any reason, aside from unlawful discrimination. However, if a driver ignores three trip requests in a row, the Uber Driver App will automatically move the driver from online to offline, such that he cannot accept additional trip requests.

Uber sets the financial terms of all UberBLACK fares, and riders pay by having their credit cards linked to the App. After a ride is completed, Uber charges the rider’s credit card for the fare. Uber then deposits the money into the transportation company’s Uber account with a commission taken out by Uber. The transportation company then distributes the payment to the driver who provided the ride.

Uber also has regulations under which it logs off drivers for a period of six hours if the driver reaches Uber’s twelve-hour driving limit. Trip requests are generally sent to the driver closest in proximity to the requesting rider, and drivers have no way of knowing from the Uber Driver App what the demand for drivers is at any given time (and thus, how much their earnings will be based on that demand). Drivers also do not know where a rider’s final destination is prior to accepting the ride.

There is one exception affecting a driver’s ability to accept trip requests from anywhere in Philadelphia. If a driver is at one of Philadelphia’s major transportation hubs: 30th Street Train Station or Philadelphia International Airport, he must utilize a “queue” system that routes trips to the next driver in the queue, and the driver can only enter, or advance in, the queue while physically located inside a designated zone.

On appeal, Uber reasserts that Plaintiffs are not employees as a matter of law, and therefore, their putative class action should be subject to summary judgment. To support this contention, Uber portrays UberBLACK drivers as entrepreneurs who utilize Uber as a software platform to acquire trip requests. Uber asserts that Plaintiffs are not restricted from working for other companies, pay their own expenses, and on some occasions, engage workers for their own ITCs. They can use UberBLACK as little or as much as they want or choose not to work for Uber-BLACK and instead work for competitors such as Blacklane and Lyft.

Uber asserts that it places no restrictions on drivers’ ability to engage in personal activities while online. Plaintiffs in this matter engaged in a range of personal activities, including accepting rides from private clients, accepting rides from other rideshare programs, sleeping, running personal errands, smoking cigarettes, taking personal phone calls, rejecting Uber-BLACK trips because they were tired, and conducting personal business.

Alternatively, Plaintiffs claim that they are “employees” under the FLSA because they are controlled by Uber when they are online and perform an integral role for Uber’s business. The District Court agreed with Uber’s position, and granted Uber’s Motion for Summary Judgment on the question of whether Plaintiffs qualify as “employees” of Uber under the FLSA and PMWA. Plaintiffs now appeal from the summary judgment order.

III. Applicable Law: Donovan v. DialAmerica Marketing, Inc.

The minimum wage and overtime wage provisions at issue all require that Plaintiffs prove that they are “employees.” Although Plaintiffs’ case includes claims under the PMWA, Pennsylvania state courts have looked to federal law regarding the FLSA for guidance in applying the PMWA. The FLSA defines “employer” as “including any person acting directly or indirectly in the interest of an employer in relation to an employee,” and “employee” as “any individual employed by an employer.” 29 U.S.C. §§ 203(d), (e)(1). Given the circularity of the definitions, federal courts, with guidance from the Department of Labor, have established standards to determine how to define employee and employer.

The Third Circuit utilizes the test out-lined in Donovan v. DialAmerica Marketing, Inc., 757 F.2d 1376 (3d Cir. 1985), to determine employee status under the FLSA. This seminal case acknowledges that when Congress promulgated the FLSA, it intended it to have the “broadest definition of ‘employee.’” In DialAmerica, we used six factors—and indeed adopted the Ninth Circuit’s test—to determine whether a worker is an employee under the FLSA:

1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; 2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered required a special skill; 5) the degree of permanence of the working relationship; and 6) whether the service rendered is an integral part of the alleged employer’s business.

Our decision in DialAmerica is consistent with the Supreme Court’s general guidance in Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947). In Rutherford, the Supreme Court first determined “employee” status under the FLSA. And in DialAmerica, we agreed with Sureway Cleaners that “neither the presence nor absence of any particular factor is dispositive.” Therefore, “courts should examine the circumstances of the whole activity,” determining whether, “as a matter of economic reality, the individuals are dependent upon the business to which they render service.” The burden lies with Plaintiffs to prove that they are employees.

IV. The District Court Opinion

The District Court granted summary judgment to Uber ruling that drivers for UberBLACK are independent contractors within the meaning of the FLSA and similar Pennsylvania laws. The District Court, in applying the six factors, relied heavily on the analysis in DialAmerica and other cases that had examined the use of internet or app-based programs for acquiring work.

The District Court applied all six factors in DialAmerica, and on balance, found that Plaintiffs were independent contractors. There were four factors the Court applied that were interpreted in favor of independent contractor status. The District Court analyzed the employer’s right to control the manner in which the work is to be performed and noted that the written agreements entered into by the Plaintiffs and their transportation companies, in addition to the ability of Plaintiffs to hire sub-contractors and work for competing companies, point to a lack of control by Uber. Next, the District Court analyzed the alleged employees’ opportunity for profit or loss and found that this also supports independent contractor status. The District Court found that Plaintiffs can work as much or as little as they would like and choose not to accept trip requests where the opportunity for profit was greater to work for themselves or competitors. Because the “profit-loss” factor does not require that Plaintiffs be solely in control of their profits or losses, Plaintiffs were unsuccessful in convincing the District Court that they were employees despite the fact that Uber retains the right to determine how much to charge passengers and which driver receives which trip request. UberBLACK drivers must purchase or lease their own expensive vehicle to drive for UberBLACK, demonstrating independent status as well. And the “relationship permanence” can be as long or non-existent as the driver desires, again illustrating the impermanent working relationships often found with independent contractors.

The District Court determined that only two factors militated in Plaintiffs’ favor. As limousine drivers, the service they render does not really require a special skill. Second, the limousine driving service rendered to Uber by UberBLACK drivers is an essential part of Uber’s business as a transportation company. The District Court held that the movant demonstrated that there was no genuine dispute as to any material fact, and that a majority of the DialAmerica factors leaned against employment status. The District Court granted Uber’s motion for summary judgment and determined that Plaintiffs were independent contractors.

VI. Analysis

VII. Conclusion

In reviewing the District Court decision de novo, we determine summary judgment was inappropriate because genuine disputes of material facts remained. For the foregoing reasons, we will remand the matter for further proceedings.

DENNIS JACOBS, Circuit Judge.

Five participants in internship programs offered by defendant Hearst Corporation (“Hearst”) sue for minimum wage under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). At issue is whether the unpaid interns were “employees” of Hearst for the purposes of the FLSA under Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016). We affirm the judgment of the United States District Court for the Southern District of New York, for the reasons stated in Judge Oetken’s thorough opinion.

I

The question is whether Hearst furnishes bona fide for-credit internships or whether it exploits student-interns to avoid hiring and compensating entry-level employees. The factual record is voluminous and advances multiple narratives, some of them contradictory; but the following essentials are undisputed.

Hearst maintained dozens of internship programs with its various print magazines. Each of five named appellants worked at one time as interns in one of these programs. These internships were unpaid, carried no expectation of eventual full-time employment, and required intern candidates to receive prior approval for college credit to participate. No intern alleges that Hearst promised compensation or a future job.

The interns’ individual experiences varied, but there are groupings. Four of the appellants-Alexandra Rappaport, Erin Spencer, Matthew Wagster, and Sarah Wheels-were enrolled in college during their internships. Rappaport, Spencer, and Wheels completed their internships during the summer between academic years, and Wagster interned (with Esquire) during his fall semester. Lead plaintiff Xuedan Wang interned for one semester between her graduation from college and the start of her graduate program in the Fashion Marketing program at Parsons School of Design. Each intern received prior approval for college credit, although not all of them ultimately received credit from their degree-awarding institution: Wang had received permission for continuing education credit but ultimately did not pursue it, Wagster was denied credit from his institution because his internship was not applicable to his major, and Wheels received credit from a local community college.

Each student had an academic or aspiring professional connection to fashion. Wang and Spencer studied fashion in college, and Spencer’s internship satisfied a graduation requirement (the Fieldwork course) for his major; Rappaport and Wagster were majoring in the social sciences, but hoped to break into the fashion industry; Wheels was an English major who interned in the editorial department of Cosmopolitan to advance her writing career. All of them testified or declared that they performed a range of tasks related to their professional pursuits in the Hearst internship programs, and gained valuable knowledge and skills.

At the same time, the interns share common complaints. They describe many tasks in Hearst’s fashion closets as menial and repetitive. Several claim that they did not receive close supervision or guidance and that the internships offered little formal training—in contrast to their academic experiences in school. One common grievance was that the interns mastered most of their tasks within a couple weeks, but did the same work for the duration of the internship.

In February 2012, lead plaintiff Xuedan Wang filed suit alleging that she and a putative class of interns across Hearst’s magazine departments were deprived of wages in violation of the FLSA and NYLL. Seven other interns opted in after the district court granted the case collective certification. The district court’s denial of plaintiffs’ motion for partial summary judgment was vacated in this Court for reconsideration in light of Glatt v. Fox Searchlight Pictures, Inc., which was heard in tandem with Wang.

Hearst moved for summary judgment against the six remaining plaintiffs under the Glatt test. The district court granted the motion, and five plaintiffs filed a timely appeal.

II

The FLSA defines “employee” by tautology: an “individual employed by an employer.” 29 U.S.C. § 203(e)(1). The standard for “employee” is broad, but the Supreme Court has long recognized that not every individual who performs a service for an employer qualifies as an “employee” under the FLSA. “Employee” status depends upon the “economic reality” of the relationship between the putative employer and employee.

Last year in Glatt, we recognized the “primary beneficiary” test as the way to distinguish employees from bona fide interns. To guide our “flexible” analysis, we provided seven non-exhaustive considerations specific to the context of unpaid internships:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern;

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The court applies these considerations by weighing and balancing the totality of the circumstances. “No one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee.”

The totality of the circumstances should be considered in view of the “purpose of a bona fide internship to integrate classroom learning with practical skill development in a real-world setting.” In a break from previous tests, courts applying Glatt have acknowledged that the internship may provide a direct benefit to the employer so long as the intern receives identifiable educational or vocational benefits in return.

Judge Oetken analyzed each Glatt factor and determined that all of them except the sixth (displacement of paid employees) either favored Hearst to some degree or were neutral. In assessing the totality of the circumstances, the court concluded that the “Plaintiffs were interns rather than employees as a matter of law.”

III

C. Factors Three and Four

The third and fourth Glatt factors relate to the integration of the internship to the student-intern’s academic program and academic calendar, respectively. Both parties and the district court acknowledge that the interns’ experiences diverge with respect to these factors. In general, however, the internships were arranged to fit the academic calendar and required academic credit as a prerequisite.

Factor three (academic integration) clearly favors Hearst for all interns except Wagster. For some interns, the connection is straightforward. Spencer’s internship was a graduation requirement for his major. Wheels’ internship with the editorial department of a magazine meshed with her academic major in English and professional interest in writing. And while Rappaport’s internship did not “integrate” with “coursework” from her international relations major, she discussed the internship with her college faculty, wrote a paper about it, and received class credit for it: her college thus treated the internship as a course.

It is argued that “there was no connection between a formal education program and Wang’s internship” in the fashion industry. Appellants’ Br. at 37. But Wang interned between the completion of her undergraduate degree in fashion and the start of her graduate degree, also in fashion. She intentionally deferred her start date for graduate school and took a full time internship at a Hearst magazine to gain professional experience. A jury is not necessary to infer from these undisputed facts that Wang’s internship “is tied to her formal education.” That Wang did not receive credit does not undermine the connection between her formal education program and her internship; she did not receive credit because she did not pursue it. As a matter of law, the (undisputed) fact that the program required a student to earn approval from an accredited university for the “receipt of academic credit” generally is more telling than whether credit was actually awarded in that individual’s case.

For the majority of the interns here, the undisputed evidence also favors Hearst with respect to the fourth factor (academic calendar). Rappaport, Spencer, and Wheels interned during their college summer breaks in accordance with the school calendar. Wang had deferred her studies to intern between school years, and Wagster was not an active student during his internship. Hearst did not fail to accommodate their academic schedules when they had no schedules to accommodate.

IV

The facts of this case permit inferences that support Hearst with respect to certain Glatt factors, and inferences that support particular interns with respect to other factors. The interns and amici urge that such mixed inferences foreclose a ruling on summary judgment. We disagree, for the reasons explained by the district court, which weighed all factors under the totality of the circumstances, and concluded that the interns are not “employees” for the purposes of the FLSA.

As the interns observe, these cases do involve a “fact specific” and case-by-case analysis. But “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Status as an “employee” for the purposes of the FLSA is a matter of law, and under our summary judgment standard, a district court can strike a balance on the totality of the circumstances to rule for one side or the other.

There are contested issues that bear on the quality of each intern’s experience. The crucial point is that a district court may rule on summary judgment if it can weigh the Glatt factors on the basis of facts that are not in dispute. As the district court recognized, the internships “involved varying amounts of rote work and could have been more ideally structured to maximize their educational potential,” but concluded that these critiques did not give rise to a material factual dispute.

THOMAS, Judge:

We consider whether Lamar Dawson and Division I Football Bowl Subdivision (“FBS”) Football Players are employees of the National Collegiate Athletic Association (“NCAA”) and PAC-12 Conference (“PAC-12”) within the meaning of the Fair Labor Standards Act (“FLSA”) and California labor law. Because the claims fail as a matter of law, we affirm the judgment of the district court.

I

Dawson played football for the University of Southern California (“USC”), a Division I FBS member of the NCAA’s PAC-12 Conference. In this putative class action case, Dawson does not allege that he was an employee of USC, so the pure question of employment is not before us, and we need not consider whether he had employment status as a football player, nor whether USC was an employer. That question is left, if at all, for another day. Rather, the only issue before us is whether the NCAA and PAC-12 were his employers under federal and state law.

The NCAA is an “unincorporated not-for-profit educational organization” comprised of more than 1,100 colleges and universities throughout the United States. NCAA member schools are organized into three Divisions based on the number and quality of opportunities that the schools provide to participate in intercollegiate athletics. Division I consists of approximately 351 schools. Approximately 253 Division I schools have Division I football programs, of which approximately 128 fall within the FBS. The PAC-12 is an unincorporated association which operates a multi-sport collegiate athletic conference, and is a formal conference member of the NCAA Division I FBS.

NCAA member schools “agree to administer their athletics programs in accordance with the constitution, bylaws, and other legislation of the NCAA.” The NCAA’s constitution and bylaws establish academic eligibility requirements, provide guidelines and restrictions for recruitment, impose limits on the number and size of athletic scholarships, and regulate the scheduling and conditions of practice and games.

The NCAA bylaws also govern financial aid and prohibit compensation for student-athletes. Bylaw 15.1 provides that student-athletes may receive financial aid on the basis of athletic ability, but that the amount of aid must not exceed “the value of his or her cost of attendance.” Student-athletes receiving aid in excess of the cost of attendance limitation “shall not be eligible to participate in intercollegiate athletics.”

NCAA Bylaw 12.1.4 provides that financial aid is “not considered to be pay or the promise of pay for athletics skill.” Bylaw 12.1.2 further prohibits any payment to a student-athlete for athletic services. Student-athletes who accept payments may be subject to revocation of their amateur status and eligibility under seven conditions.

In his complaint, Dawson alleged that the NCAA and the PAC-12 acted as an employer of the class members by “prescribing the terms and conditions under which student-athletes perform services.” Dawson claims that the NCAA and PAC-12, as joint employers, failed to pay wages, including overtime pay, to Dawson and to class members in violation of federal and state labor laws.

The NCAA and the PAC-12 moved to dismiss Dawson’s complaint for failure to state a claim upon which relief can be granted. The district court granted the motion, and dismissed the complaint without leave to amend.

II

The district court properly concluded that Division I FBS Football Players are not employees of the NCAA or PAC-12 as a matter of federal law.

Padova, District Judge.

Plaintiffs, student athletes at five of the Defendant colleges and universities, contend that student athletes who engage in interscholastic athletic activity for their colleges and universities are employees who should be paid for the time they spend related to those athletic activities. Plaintiffs, Ralph “Trey” Johnson, Stephanie Kerkeles, Nicholas Labella, Claudia Ruiz, Jacob Willebeek-Lemair, and Alexa Cooke, assert claims on behalf of themselves, a Fair Labor Standards Act (“FLSA”) collective, and three state classes against the colleges and universities they attend (or attended) (the “Attended Schools Defendants,” or “ASD”), the National Collegiate Athletic Association (“NCAA”), twenty additional named universities that are members of the NCAA Division I (“D1”), and a putative Defendant class made up of 125 NCAA D1 colleges and universities. The First Amended Complaint (“Complaint”) asserts claims for violations of the FLSA and state law. The ASD have moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that they do not employ Plaintiffs.(n.1 in opinion) The NCAA and the other named Defendant universities have also filed a Motion to Dismiss pursuant to Rule 12(b)(6) on the ground that the Complaint does not plausibly allege that they were joint employers of Plaintiffs. That motion will be addressed separately.

For the reasons that follow, the Motion is denied.

I. Factual Background

The Complaint alleges the following facts. The NCAA is an association that regulates intercollegiate sports and has jurisdiction over approximately 1,100 schools and nearly 500,000 student athletes. The NCAA has entered into multi-year, multi-billion-dollar contracts with broadcasters ESPN, CBS, and Turner Sports to show athletic competitions between NCAA D1 member schools, and it distributes shares of those broadcasting fees to its member schools. In addition to shares of broadcasting fees, NCAA D1 member schools also receive fees from multi-year, multi-million-dollar agreements with television and radio networks that they have entered into, either individually or as part of an NCAA conference, to broadcast athletic competitions between NCAA D1 member schools.

Plaintiff Johnson was a student athlete on the Villanova University NCAA football team from June 2013 until November 18, 2017. Plaintiff Kerkeles has been a student athlete on Fordham University’s NCAA swimming and diving team since 2016. Plaintiff Labella was a student athlete on Fordham University’s NCAA baseball team during the 2018 and 2019 baseball practice and competition seasons. Plaintiff Ruiz was a student athlete on Sacred Heart University’s NCAA tennis team from 2014 to 2018. Plaintiff Willebeek-Lemair was a student athlete on Cornell University’s NCAA soccer team during the 2017 and 2018 practice and playing seasons. Plaintiff Cooke has been a student athlete on Lafayette College’s NCAA tennis team since 2017.

The Defendants are the NCAA and 25 NCAA D1 member schools (the “University Defendants”). The ASD are: Villanova University, Fordham University, Sacred Heart University, Cornell University, and Lafayette College. The remaining University Defendants, none of which were attended by the named Plaintiffs, are: Bucknell University, Drexel University, Duquesne University, Fairleigh Dickinson University, La Salle University, Lehigh University, Monmouth University, Princeton University, Rider University, Robert Morris University, Seton Hall University, Saint Francis University, Saint Joseph’s University, Saint Peter’s University, the University of Delaware, Pennsylvania State University, the University of Pennsylvania, the University of Pittsburgh, Rutgers State University of New Jersey, and Temple University. The Complaint also alleges claims against a putative Defendant class made up of the named University Defendants and 100 additional universities that are members of the NCAA D1. According to the Complaint, these Defendants jointly employed Plaintiffs and similarly situated persons who are members of the putative FLSA Collective.

Student athletes do not have the option to play NCAA sports for wages at any NCAA D1 school. All member schools in the NCAA have agreed not to pay students to participate in intercollegiate varsity sports. The NCAA’s Bylaws prohibit schools from offering wages and prohibit student athletes from accepting wages. A student athlete who participates in NCAA sports can only receive payment based on athletic performance through the U.S. Olympic Committee’s (“USOC”) Operation Gold program, which pays NCAA-eligible student athletes for winning medals. The USOC Operation Gold program also permits NCAA-eligible student athletes to receive additional pay through USA sport governing bodies and organizations, such as USA Swimming and US Wrestling.

Student athletes at NCAA D1 schools must schedule classes around their required NCAA athletic activities and cannot reschedule their NCAA athletic activities around their academic programs. As a result, Villanova University only excuses a student athlete from participating in required athletic activities if there is a conflict between practice and a mandatory core class. For example, when Plaintiff Johnson played football at Villanova University he was required to participate in NCAA athletically related activities on weekdays between 5:45 a.m. and 11:30 a.m. and could not enroll in a non-core class during that time, including classes that were prerequisites for academic degree programs. In addition, NCAA D1 member schools require student athletes to participate in Countable Athletically Related Activities (“CARA”), which are recorded on timesheets under an NCAA D1 Bylaw. NCAA Bylaws also require student athletes to participate in Required Athletically Related Activities like fundraising and community service. A student athlete who fails to attend meetings, participate in practice, or participate in scheduled competitions can be disciplined, including suspension or dismissal from the team. Because student athletes have to schedule their classes around their required athletic activities, many student athletes have reported that participation in NCAA D1 sports have prevented them from taking classes that they wanted to take. Many student athletes have also reported that their participation in NCAA D1 sports has prevented them from majoring in their preferred major. Student athletes at Villanova University are also required to participate in activities like meals, physical rehabilitation, dressing, showering, and travel that are not considered CARA. They are also encouraged to engage in additional workouts and consultations with coaches that are not counted in CARA. Student athletes have reported spending more than 30 hours per week on athletically related activities, both CARA and non-CARA, and football players who attend schools in the NCAA bowl and championship subdivisions report spending more than 40 hours per week on these activities.

At the same time, the NCAA procures substantial revenues from sports. In the 2018 fiscal year, the NCAA reported total revenues of $1,064,403,240. These revenues came from fees collected for television and marketing rights, championships, tournaments, and sales. In their 2016 fiscal year, NCAA D1 schools in the football power five subdivision had median total revenues related to NCAA sports of $97,276,000; schools in the football bowl subdivision reported median total revenues related to NCAA sports of $33,470,000; schools in the football championship subdivision had median total revenues related to NCAA sports of $17,409,000; and schools that did not have NCAA football teams reported median total revenues from NCAA sports of $16,018,000. Villanova University in particular had total revenues from NCAA sports of $48,977,278 in its 2018 fiscal year. While student athletes do not receive wages, the NCAA and Villanova University claim that they acquire intangible educational benefits from participating in NCAA sports, including “discipline, work ethic, strategic thinking, time management, leadership, goal setting, and teamwork.”

The NCAA D1 member schools exercise significant control over their student athletes. The NCAA Bylaws apply to all student athletes who participate in NCAA sports and they address “recruitment, eligibility, hours of participation, duration of eligibility and discipline.” Student athletes who participate in NCAA sports are supervised by coaching and training staff. NCAA D1 member schools are required to have adult supervisors maintain timesheets for participants. They also have handbooks that contain standards for controlling student athletes’ performance and conduct. NCAA D1 member schools impose discipline, including suspension and dismissal from a team, in instances of specified misconduct. NCAA D1 member schools also publish supplemental handbooks with standards that are used to control the performance and conduct of student athletes both on and off the field. These handbooks contain rules regarding agents, prohibiting certain categories of legal gambling, and restricting social media use, including restrictions on making derogatory comments about other teams. NCAA D1 member schools also have NCAA team policies that restrict the legal consumption of alcohol and legal use of nicotine products by student athletes.

Based upon these factual allegations, the Complaint asserts that Plaintiffs are the employees of Defendants, including the ASD, and it asserts eight claims for relief, seeking payment of wages for the time Plaintiffs spent engaged in activities connected to NCAA sports. Count I asserts claims pursuant to the FLSA on behalf of Plaintiffs and the proposed FLSA collective against all Defendants and the proposed Defendant class for failure to pay them minimum wages as employees. Plaintiffs and the members of the proposed FLSA Collective seek unpaid minimum wages, an equal amount as liquidated damages, attorneys’ fees, and costs in connection with Count I.

The Attended Schools Defendants have moved to dismiss all claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that it does not plausibly allege that Plaintiffs are their employees.

III. Discussion

The ASD argue that the Complaint fails to state any claims against them because it does not allege facts that would establish that Plaintiffs are their employees, which is a requirement for bringing a claim under the FLSA. The FLSA defines the term “employee” as “any individual employed by an employer.” The United States Court of Appeals for the Third Circuit has explained that “this statutory definition is ‘necessarily broad to effectuate the remedial purposes of the Act.’” “In accordance with this ‘expansive definition,’ courts must ‘look to the economic realities of the relationship in determining employee status under the FLSA.’” The ASD assert three reasons why Plaintiffs cannot be their employees: (1) student athletes such as Plaintiffs are amateurs; (2) the Department of Labor has determined that interscholastic athletes are not employees for purposes of the FLSA; and (3) the Complaint does not plausibly allege that Plaintiffs are employees pursuant to a multi-factor test used to determine whether individuals are employees.

A. Title VII

Title VII prohibits an “employer” from engaging in certain “unlawful employment practices.” The term “employer” means “a person engaged in an industry affecting commerce who has fifteen or more employees and any agent of such a person.”

McDonald’s argues that it is not liable because it did not employ Plaintiffs or control employment matters at the restaurant where Plaintiffs worked. McDonald’s argues that it is simply a franchisor; Franchisee controlled the conditions of Plaintiffs’ employment, not McDonald’s. Plaintiffs respond that McDonald’s is liable for two reasons: (1) it retained sufficient control over their employment conditions to qualify as a “joint employer”; and (2) McDonald’s caused Plaintiffs to believe that Franchisee was an agent of McDonald’s.

1. Joint Employer

“Under the ‘joint-employer’ theory, ‘an entity that is not the plaintiff’s formal employer may be treated under these doctrines as if it were the employer for purposes of employment laws such as Title VII.’” “Entities are joint employers if they ‘share or co-determine those matters governing essential terms and conditions of employment.’”

In determining whether an entity is the plaintiff’s joint employer, “the major factors include the ‘entity’s ability to hire, fire or discipline employees, affect their compensation and benefits, and direct and supervise their performance.’” Put simply, McDonald’s can be liable as a joint employer if it has “retained for itself sufficient control of the terms and conditions of employment of the employees who are employed by Franchisee.”

Here, a franchise agreement between McDonald’s and Michael Dickerson (the owner of MLMLM and M.A.A.K.S.) governed the relationship between McDonald’s and Franchisee. The agreement, which had a 20-year term, expressly states that “Franchisee shall have no authority, express or implied to act as an agent of McDonald’s” and that “Franchisee and McDonald’s are not and do not intend to be partners, associates, or joint employers in any way.”

More importantly, the agreement did not give McDonald’s the ability to hire, fire, discipline, or affect the compensation or benefits of Franchisee’s employees. Dickerson testified that he and Nanette Bitner, his operations manager and the senior supervisor of the Mason restaurant, had authority to hire and fire employees. No one from McDonald’s played a role in hiring, firing, promoting, disciplining, or setting wages for employees at his restaurants. Nor did they play a role in assigning individual employees to their positions or in supervising their day-to-day activities. Plaintiffs offer no evidence to the contrary.

To be sure, the Franchise Agreement requires Franchisee to abide by a particular method of operating and maintaining a restaurant, called the “McDonald’s System.” This system details

the retailing of a limited menu of uniform and quality food products, emphasizing prompt and courteous service in a clean, wholesome atmosphere which is intended to be attractive to children and families and includes proprietary rights in certain valuable trade names, service marks, and trademarks, including the trade names “McDonald’s” and “McDonald’s Hamburgers,” designs and color schemes for restaurant buildings, signs, equipment layouts, formulas and specifications for certain food products, methods of inventory and operation control, bookkeeping and accounting, and manuals covering business practices and policies.

But that system does not set the terms of the relationships between Franchisee and its employees. It is instead a set of prescriptions for branding, operations, and quality control that is common for franchise relationships.

Plaintiffs point to the requirement that Franchisee operate the restaurant in a “good, clean, wholesome manner”, but Plaintiffs do not point to any evidence that any party to the Franchise Agreement construed this requirement to mean an absence of sexual discrimination and harassment among Franchisee’s employees. And even if that is what this requirement means, there is no evidence that it gave McDonald’s the ability to do anything other than find Franchisee in breach of the Franchisee Agreement and terminate that agreement. Although such a termination would have impeded Franchisee’s ability to continue operating, control over Franchisee’s ability to continue business does not amount to control over Franchisee’s relationship with its individual employees.

Plaintiffs also rely on the fact that McDonald’s periodically assessed Franchisee according to its “National Franchising Standards” (“NFS”). McDonald’s used these assessments to “identify those franchisees with whom McDonald’s desires to grow and/or enter into new franchise relationships.” Before the term of a franchise agreement expires, McDonald’s will review the assessments to determine whether to award a new term to the franchisee. But these standards were not part of the Franchise Agreement; indeed, the standards themselves expressly state that they “do not create or modify any contract rights or obligations” and “do not necessarily address whether” the franchisee is complying with its franchise agreement. McDonald’s plays a “consulting role” with respect to its franchisee’s compliance with the standards; it cannot require the franchisee to comply with them.

Plaintiffs argue that the NFS gave McDonald’s substantial control because McDonald’s frequently assessed Franchisee’s compliance with the NFS and then used those assessments to determine whether to renew a franchise at the end of its term. But gathering data every few weeks or months from each restaurant for the purpose of deciding whether to continue a business relationship with Franchisee at the end of a multi-year term is a far cry from exercising day-to-day supervision and control over Franchisee’s employees. Plaintiffs do not point to any instance in which McDonald’s used its assessments to dictate the discipline, promotion, or any other change in the terms or conditions of employment for any particular employee of Franchisee. Although several Franchisee employees testified that scores on these assessments were considered by Franchisee during employee performance reviews, or were used by Franchisee as the basis for awarding employee perks or bonuses, there is no evidence that McDonald’s required Franchisee to use the assessments in this manner. The fact that Franchisee took these assessments into account when exercising its own control does not mean that McDonald’s codetermined the essential conditions of Plaintiffs’ employment. Thus, Plaintiffs have not shown that the NFS standards gave McDonald’s any significant control over Franchisee’s employees.

McDonald’s also provided an operations and training manual to its franchisees. Among other things, that manual contains a list of duties and procedures for opening the restaurant and starting a shift. The Franchise Agreement provides that Franchisee must “promptly adopt and use exclusively the formulas, methods, and policies contained in the business manuals.” However, the manual itself states that franchisees can “choose to apply or implement any portion” of it, and that franchisees are “exclusively responsible for complying with all statutes, laws, and regulations applicable to their restaurants.” A more recent version of the manual does not contain these disclaimers, but it repeatedly instructs employees to “contact your Owner/Operator for advice” about “practices at your restaurant.” Thus, the manual makes clear that practices will vary according to choices made by the franchisee. Importantly, nothing in the manual excerpts provided by the parties gave McDonald’s the ability to control the Franchisee’s relationship with its employees.

Plaintiffs also point to a variety of templates and resources that McDonald’s provided to Franchisee, including: an “Employee Resources” poster describing employee rights and a sexual harassment policy; a personality test for screening candidates; a website for job postings; job interview guidelines and application templates; software to track employee time and generate disciplinary reports; guidelines for the number and type of employees necessary to run a restaurant; and training programs for certain employees. However, there is no evidence that any of these resources or programs gave McDonald’s control over the essential terms of employment for Franchisee’s employees. To the contrary, the evidence shows that Franchisee alone possessed and exercised that control.

Plaintiffs put stock in the fact that McDonald’s purportedly required Franchisee to display the Employee Resources poster. Plaintiffs apparently argue that McDonald’s effectively required Franchisee to adopt the McDonald’s policy described on the poster for reporting sexual harassment. However, displaying a policy is one thing. Implementing it is another. There is no evidence that McDonald’s played any role in implementing or enforcing such a policy. Indeed, the poster states that any harassment is to be reported to employees of Franchisee (e.g., the “Restaurant/General Manager” or the “Owner Operator”). The poster also contains a blank space for contact information for the manager or owner of the restaurant. The poster provides no information or guidance about reporting misconduct to McDonald’s. Thus, the poster does not create a genuine issue of fact about whether McDonald’s retained sufficient control over Franchisee’s employees to qualify as a joint employer.

Finally, Plaintiffs rely on an April 14, 2021, press release by McDonald’s announcing that, “beginning in January 2022,” it would be applying “new Global Brand Standards” to all of its restaurants; these new standards will apparently “prioritize actions” in “harassment, discrimination and retaliation prevention.” According to the press release, McDonald’s intends to assess its restaurants and “hold them accountable in accordance with applicable McDonald’s market’s business evaluation processes.”

McDonald’s rightly notes that the press release has limited relevance to this case because it is forward-looking. It does not apply to the time period at issue in the complaint. Plaintiffs respond that the press release is evidence that McDonald’s has always had the right to impose personnel policies on its franchisees. But neither the details of the new policy, nor its mechanism of enforcement are laid out in the press release. Nothing in the press release itself indicates that McDonald’s has had, or will have, control over the conduct of an individual employee of a franchisee. Indeed, the references to McDonald’s “brand standards” and “business evaluation processes” suggest that McDonald’s will implement its new policies in the same manner that it implements the NFS. As discussed above, periodic assessments and the power to terminate the franchise relationship are not equivalent to day-to-day supervision and control over the working conditions of a franchisee’s employees.

In short, construing the evidence in a light most favorable to Plaintiffs, there is no genuine dispute that McDonald’s did not meaningfully participate in employment decisions or possess sufficient control over the terms of Plaintiffs’ employment to qualify as a joint employer. The control that McDonald’s did have in its relationship with Franchisee was “control over conformity to standard operational details inherent in many franchise settings” and “the power to terminate the franchises.” As other courts have concluded, that level of involvement in a franchisee’s business does not suffice to give rise to employer liability under Title VII.

Plaintiffs rely on cases in which courts denied a franchisor’s attempt to dismiss similar claims against it because the franchisor was involved in creating personnel policies or provided training to the franchisee’s employees. Those cases are distinguishable. There, courts concluded that the plaintiffs had alleged sufficient facts in their complaints to state a plausible claim against the franchisor and proceed to discovery. The question facing this Court is a different one. The Court is not assessing the allegations in Plaintiffs’ complaint. At this stage, Plaintiffs must support their allegations with evidence sufficient to demonstrate that they can proceed to trial against McDonald’s. They have not done so. They have not shown that there is a genuine dispute of fact about whether McDonald’s was a joint employer with Franchisee.

A. The NCAA as a Regulatory Body

The Moving Defendants argue that the NCAA cannot be a joint employer of Plaintiffs because it merely regulates Plaintiffs’ participation in intercollegiate athletics. The Moving Defendants rely on Dawson v. National Collegiate Athletic Association, 932 F.3d 905 (9th Cir. 2019), in which the United States Court of Appeals for the Ninth Circuit affirmed a lower court decision holding that college student athletes who play football for schools in the NCAA D1 Football Bowl Subdivision are not employees of the NCAA and the PAC-12 Conference for purposes of the FLSA and California labor law. In Dawson, the Ninth Circuit considered three factors: (1) whether the plaintiff expected to be paid by the NCAA or the PAC-12 Conference, (2) whether the NCAA and the PAC-12 Conference had the power to hire or fire the plaintiff; and (3) whether there was “evidence that an arrangement was conceived or carried out to evade the law.” The Dawson court found that the plaintiff had no expectation of a scholarship or other compensation from the NCAA or the PAC-12 Conference and that “there was no evidence that the NCAA rules were ‘conceived or carried out’ to evade the law.” The Dawson court also determined that the complaint in that case alleged that the NCAA functioned solely as a regulator and not as an employer because, while the complaint alleged that “the NCAA Bylaws pervasively regulate college athletics,” it did not allege that the NCAA hired or fired “or exercised any other analogous control, over student-athletes,” or that the NCAA “chose the players on any Division I football team,” or “engaged in the actual supervision of the players’ performance.” Rather, the complaint merely alleged that “the NCAA functions as a regulator, and that the NCAA member schools, for whom the student-athletes allegedly render services, enforce regulations.” While the Moving Defendants urge us to simply adopt and apply Dawson’s analysis and conclusion in the instant case, the complaint in Dawson is not identical to the Complaint in this case and, accordingly, we must engage in our own independent analysis of the instant Complaint.

The Moving Defendants also rely on Callahan v. City of Chicago, 813 F.3d 658 (7th Cir. 2016). The plaintiff in Callahan was a taxi driver who brought FLSA claims against the City of Chicago, under the theory “that the City’s regulations are so extensive that Chicago must be treated as her employer.” Noting that the FLSA “says that ‘employ’ includes ‘suffer or permit to work,’” the plaintiff argued that because “the City of Chicago permitted her to drive a cab, it thus became her employer.” The Seventh Circuit rejected this argument as follows:

The contention that the government permits to work, and thus employs, everyone it does not forbid to work has nothing to recommend it. The theory would produce multiple employers for every worker—for the United States, the State of Illinois, Cook County, and other governmental bodies permit taxi drivers to work in the same sense as Chicago does. The Occupational Safety and Health Administration and the National Highway Traffic Safety Administration have not adopted safety rules so onerous that the taxi business must shut down. Yet the goal of the Fair Labor Standards Act is to regulate employers, not the many governmental bodies that permit employers to operate.

However, as the Moving Defendants recognize, the NCAA, unlike the City of Chicago, is not a governmental entity. Moreover, Callahan, as a Seventh Circuit case, is not controlling authority in this district and, in any event, concerns a different set of factual allegations than are at issue in the instant case. Accordingly, instead of relying on either Dawson or Callahan, we will analyze the Complaint using the factors developed by the Third Circuit to determine whether an entity is a joint employer.

B. The Joint Employer Test

The Moving Defendants argue that the Complaint fails to plausibly allege that the NCAA and the NASD are joint employers of Plaintiffs under the four-factor test originally developed by the Ninth Circuit in Bonnette v. California Health and Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), and subsequently adopted in part by the Third Circuit in In re Enterprise Rent-A-Car, 683 F.3d 462 (3d Cir. 2012). The Third Circuit announced in Enterprise Rent-A-Car that courts should use the following four factors, referred to as the Enterprise test, when determining whether two entities are joint employers of the same individual or individuals:

1) the alleged employer’s authority to hire and fire the relevant employees; 2) the alleged employer’s authority to promulgate work rules and assignments and to set the employees’ conditions of employment: compensation, benefits, and work schedules, including the rate and method of payment; 3) the alleged employer’s involvement in day-to-day employee supervision, including employee discipline; and 4) the alleged employer’s actual control of employee records, such as payroll, insurance, or taxes.

We thus review the factual allegations in the Complaint to determine whether they satisfy these factors with respect to both the NCAA and the NASD.

1. The NCAA’s and NASD’s authority to hire and fire Plaintiffs

The Complaint alleges the following facts with respect to the NCAA’s ability to “hire and fire” Plaintiffs. The NCAA’s Bylaws restrict the means by which NCAA D1 member schools may recruit prospective athletes, including limiting face to face encounters with student athletes and their family members; limiting off-campus activities intended to assess the academic and athletic qualifications of a prospective student-athlete; limiting the number of telephone calls that can be made to a prospective student athlete during a defined period of time; and limiting contacts with student athletes to specified periods of time. NCAA Bylaws also prohibit D1 member schools from offering certain inducements to recruit student athletes. NCAA Bylaws limit the total number and value of the athletic scholarships that D1 member schools can offer to student athletes. NCAA Bylaws also make D1 member schools responsible for certifying the eligibility of student athletes before they can allow the student athletes to represent the school in intercollegiate competitions. Failure to comply with these Bylaws constitutes a Level III violation, for which NCAA Enforcement Staff could seek the following penalties: precluding recruitment of the student athlete and prohibiting the student-athlete from competing for the school until his or her eligibility is restored. Multiple violations could result in stronger penalties. In addition, the NCAA Bylaws require member schools to suspend or fire student athletes who are determined to be ineligible to play by NCAA Enforcement Staff. The Complaint thus alleges that the NCAA does more than just impose rules regarding the recruitment of intercollegiate athletes; it also investigates violations of those rules and imposes penalties, including the firing of student athletes, for those violations. We thus conclude that the Complaint plausibly alleges that the NCAA exercises significant control over the hiring and firing of student athletes, including Plaintiffs, such that the Complaint satisfies the first factor of the Enterprise test with respect to the NCAA.

The Complaint alleges the following facts with respect to the NASD’s ability to “hire and fire” Plaintiffs. NCAA D1 member schools have representatives on committees that decide what rules to adopt; the “NCAA rules apply to all Student Athletes in NCAA sports on an equal basis; and these bylaws address, among other subjects, Student Athlete recruitment, eligibility, hours of participation, duration of eligibility and discipline.” We conclude that these allegations are not sufficient to plausibly allege that the NASD exercise significant control over the hiring and firing of student athletes, including Plaintiffs. We therefore conclude that the factual allegations of the Complaint fail to satisfy the first factor of the Enterprise test with respect to the NASD.

2. The NCAA’s and NASD’s authority to promulgate work rules and set Plaintiffs’ compensation, benefits, and work schedules

The Complaint alleges the following facts with respect to the NCAA’s “authority to promulgate work rules and assignments and to set Plaintiffs’ conditions of employment: compensation, benefits, and work schedules, including the rate and method of payment.” The NCAA Bylaws govern amateurism, eligibility, awards, benefits, expenses, and each sport’s playing and practice seasons. NCAA D1 Bylaw 12 prohibits D1 member schools from paying student athletes. NCAA D1 Bylaw 16 governs permissible benefits and non-permissible benefits for student athletes, as well as mandatory benefits for the athletes. NCAA D1 Bylaw 17 lists “Required Athletically Related Activities” that student athletes must participate in, limits the number hours that student athletes may be required to participate in CARA, and requires that CARA hours be recorded by school staff. NCAA D1 Bylaw 12 limits the number of seasons a student athlete may compete for a school in a specific sport and limits the time frame in which those seasons may occur. A school’s failure to comply with these rules can constitute a Level II or III violation. The NCAA D1 Bylaws make payment to a student athlete by a coach or other school representative a Severe Breach of Conduct and a Level I violation. The Complaint thus alleges that the NCAA, through its Bylaws, issues work rules that apply to Plaintiffs and imposes conditions not only on the payment of compensation and other benefits to Plaintiffs but also on how much time Plaintiffs may spend in connection with NCAA intercollegiate athletic activities. We thus conclude that the Complaint plausibly alleges that the NCAA has the “authority to promulgate work rules and assignments and to set Plaintiffs’ conditions of employment,” such that the Complaint satisfies the second factor of the Enterprise test with respect to the NCAA.

The Complaint alleges the following facts with respect to the NASD’s “authority to promulgate work rules and assignments and to set Plaintiffs’ conditions of employment: compensation, benefits, and work schedules, including the rate and method of payment.” The Complaint alleges that the NCAA D1 council has 40 members, including one from each conference, and the Board of Directors has 24 members, made up of one member from each Football Bowl Subdivision conference and 10 seats that rotate among the remaining conferences. Each active D1 member has voting privileges in the NCAA. The Complaint also alleges that “All schools in the NCAA have mutually agreed not to offer wages for participation in intercollegiate Varsity sports, and they have adopted bylaws prohibiting schools from offering wages and Student Athletes from accepting wages.” All schools in the NCAA have also adopted bylaws with sanctions for infractions of the rules prohibiting schools from paying student athletes. The NCAA Enforcement Staff investigates potential NCAA violations and brings charges. The NCAA D1 Committee on Infractions decides cases brought by the Enforcement Staff. The NCAA D1 Committee on Infractions is composed of as many as 24 representatives from members schools, conferences, and the public. The D1 Infractions Appeal Committee is composed of five representatives from member schools, conferences, and the public. NCAA member schools have “‘Shared Responsibility’” to report possible violations regarding student athletes and to cooperate in the investigation of student athletes. Failure to cooperate in an NCAA enforcement investigation is a “Severe Breach of Conduct” that can result in post-season bans, financial penalties, scholarship reductions, recruiting restrictions, and head coach restrictions. While the Complaint alleges that some colleges and universities have representatives on NCAA committees that create rules with respect to student athletes, and impose discipline on student athletes, the Complaint does not allege that any of the NASD have representatives that sit on any of these committees. We conclude that these allegations, which pertain solely to the agreement of the NCAA member schools not to pay wages to student athletes, those schools’ obligations with respect to the enforcement of that agreement, and the possibility that a school could be involved in investigating and imposing discipline with respect to the violation of that agreement and other infractions of the D1 Bylaws, are not sufficient to plausibly allege that the NASD themselves promulgate work rules and assignments and/or set the conditions of participation for student athletes in NCAA intercollegiate athletics. We therefore conclude that the Complaint fails to satisfy the second factor of the Enterprise test with respect to the NASD.

3. The NCAA’s and NASD’s involvement in the day-to-day supervision of Plaintiffs

The Complaint alleges the following facts regarding the NCAA’s involvement in the day-to-day supervision, including discipline, of student athletes who participate in NCAA sports. The NCAA Bylaws control the ability of the D1 member schools to discipline their student athletes as follows:

(i) by restricting the grounds for a school to reduce or cancel an athletic scholarship during the period of its award to only disciplinary reasons;

(ii) by requiring suspension or firing of a Student Athlete if s/he has violated any bylaw related to eligibility; and

(iii) by subjecting a school’s “home team” Student Athletes to discipline meted out by NCAA Enforcement Staff and/or panels of the peer-review NCAA D1 Committees on Infractions and Infractions Appeals composed of representatives from competing schools.

The NCAA, through its Bylaws, also prohibits NCAA D1 member schools from “reducing or canceling an athletic scholarship during the period of its award on the basis of the Student Athlete’s athletic ability, performance or contribution to a team’s success.” If NCAA Enforcement Staff find that a student athlete is ineligible, the attended school is required to suspend or terminate that athlete. Viewing the allegations of the Complaint in the light most favorable to Plaintiffs, the Complaint alleges that the NCAA promulgates rules used in disciplining student athletes, has some involvement in the discipline of student athletes, can instigate investigations that result in discipline, and has some control over what discipline is issued to student athletes. We conclude, accordingly, that the Complaint plausibly alleges that the NCAA is involved in the day-to-day supervision, including discipline, of student athletes who participate in NCAA sports, including Plaintiffs. We further conclude that the factual allegations of the Complaint satisfy the third factor of the Enterprise test with respect to the NCAA.

The Complaint alleges the following facts with respect to the NASD’s involvement in the day-to-day supervision, including discipline, of student athletes who participate in NCAA sports. The NCAA D1 Committee on Infractions, which can impose discipline on student athletes, is made up of as many as 24 representatives from member schools, conferences, and the public. The D1 Infractions Appeal Committee is composed of five representatives from member schools, conferences, and the public. All of the D1 member schools have a “‘Shared Responsibility’ to report all potential violations regarding any Student Athlete.” Failure to cooperate in an NCAA enforcement investigation is a Level I Violation which could result in postseason bans, financial penalties, scholarship reductions, head coach restrictions, and recruiting restrictions. However, the Complaint does not allege that representatives of any of the NASD are members of the Committee on Infractions or of the Infractions Appeal Committee. We conclude that these allegations, which pertain to the participation of some NCAA D1 member schools in the NCAA D1 Committee on Infractions and the D1 Infractions Appeal Committee, and the obligation of D1 member schools to cooperate in NCAA enforcement investigations, are not sufficient to plausibly allege that the NASD are involved in the day-to-day supervision, including discipline, of student athletes, including Plaintiffs, who participate in NCAA sports. We thus conclude that the factual allegations of the Complaint fail to satisfy the third factor of the Enterprise test with respect to the NASD.

4. The NCAA’s and NASD’s control of Plaintiffs’ records

The Complaint alleges the following facts regarding the NCAA’s control of the records of student athletes who participate in NCAA sports. “The NCAA Eligibility Center maintains all records related to the initial determination of Student Athlete eligibility,” and D1 member schools are required to provide the Eligibility Center with additional information if they “have cause to believe that a prospective student-athlete’s amateur status has been jeopardized” and to report any discrepancies to the Eligibility Center. The NCAA also receives and maintains records regarding student athletes’ injuries, illnesses and medical treatment in connection with their training for and participation in NCAA sports. D1 member schools are also required to make each student athlete’s statement, drug testing consent form, and squad list available to the NCAA. D1 member schools are also required to produce student athletes’ records to the NCAA upon request in connection with investigations conducted by the NCAA Enforcement Staff or the NCAA Committee on Infractions. We conclude, accordingly, that the Complaint plausibly alleges that the NCAA controls records of student athletes involved in NCAA sports, including Plaintiffs, such that the factual allegations of the Complaint satisfy the fourth factor of the Enterprise test with respect to the NCAA.

The Amended Complaint does not allege that the NASD individually maintain any records of student athletes that do not attend their schools. Moreover, Plaintiffs do not argue that the Complaint satisfies the fourth factor of the Enterprise test with respect to the NASD. We conclude, accordingly, that the Complaint fails to satisfy the fourth factor of the Enterprise test with respect to the NASD.

As we have concluded that the facts alleged in the Complaint satisfy all four factors of the Enterprise test as to the NCAA, we further conclude that the Complaint plausibly alleges that the NCAA is a joint employer of Plaintiffs for purposes of the FLSA and, accordingly, that Plaintiffs have standing to sue the NCAA. Therefore, we deny the Motion to Dismiss as to the NCAA.

In contrast, we have concluded that the facts alleged in the Complaint do not satisfy any of the four factors of the Enterprise test as to the NASD. Accordingly, application of that test does not support a conclusion that the NASD are joint employers of Plaintiffs. Plaintiffs also argue, however, that the Complaint plausibly alleges that the NASD are joint employers of Plaintiffs under a “Sports League Joint Employment” theory that was developed and applied by the United States Court of Appeals for the Fifth Circuit in North American Soccer League v. NLRB, 613 F.2d 1379 (5th Cir. 1980). We will therefore consider whether the NASD can be considered joint employers under this alternative theory.

C. The Sports League Joint Employment Theory

In North American Soccer League, the Fifth Circuit examined whether the North American Soccer League (the “League”) and all of its member clubs were joint employers of all of the soccer players who played for clubs in the League in order to determine the “correct collective bargaining unit for the players in the League.” The National Labor Relations Board (“NLRB”) had concluded that the League and its member clubs were joint employers of the players and the Fifth Circuit determined that the record contained sufficient evidence to support that conclusion. The Fifth Circuit began its analysis with the proposition that “the existence of a joint employer relationship depends on the control which one employer exercises, or potentially exercises, over the labor relations policy of the other.” The Fifth Circuit based its determination that the NLRB had properly deemed the League and the clubs to be joint employers on the following facts: (1) the League exercised “a significant degree of control over essential aspects of the clubs’ labor relations, including but not limited to the selection, retention, and termination of the players, the terms of individual player contracts, dispute resolution and player discipline;” (2) “each club granted the League authority over not only its own labor relations but also, on its behalf, authority over the labor relations of the other member clubs;” (3) the clubs’ activities were governed by the League’s constitution and regulations, the commissioner was selected and compensated by the clubs, and the League’s board of directors was made up of one representative of each club; (4) the League’s regulations governed interclub trades and allowed the commissioner “to void trades not deemed to be in the best interest of the League;” (5) the League’s regulations governed the termination of player contracts; (6) all player contracts were submitted to the League and the commissioner could “disapprove a contract deemed not in the best interest of the League;” (7) “disputes between a club and a player were required to be submitted to the commissioner for final and binding arbitration;” and (8) “control over player discipline was divided between the League and the clubs.”

Plaintiffs argue that the Complaint alleges that the NCAA and its member schools operate sufficiently similarly to the League and its member clubs that it plausibly alleges that the NASD are joint employers of Plaintiffs. They argue that the Complaint alleges that NCAA D1 member schools grant enforcement authority to the NCAA over a wide range of subjects that directly impact student athletes’ working conditions and that active D1 member schools have voting privileges to make the NCAA’s rules. Plaintiffs also assert that the NCAA’s Bylaws address “recruitment, eligibility, hours of participation, duration of eligibility and discipline.” Plaintiffs also rely on the allegations that as many as 24 NCAA D1 member schools may have representatives on the D1 Committee on Infractions and that five D1 member schools may have representatives on the D1 Infractions Appeal Committee (along with members of the public and representatives from conferences).

The district court rejected a similar argument in Livers v. National Collegiate Athletic Association, (E.D. Pa. May 17, 2018). The plaintiff in Livers contended that the NCAA, Villanova University (for which he played football), “and dozens of other NCAA member schools, violated his right to be paid as an employee of the Defendants, acting jointly, for his participation on the Villanova football team as a Scholarship Athlete.” The Livers court granted a motion to dismiss brought by the NCAA member schools that were not attended by the Plaintiff. While the complaint in Livers, like the Complaint in the instant proceeding, alleged that the NCAA member schools had agreed to impose restrictions on student athlete recruitment, eligibility, compensation, and the number of hours that student athletes could spend in connection with NCAA intercollegiate athletics, and to subject student athletes to discipline by the NCAA Committee on Infractions, the Livers court concluded that the complaint in that case did not plausibly allege that the NCAA member schools that Livers did not attend were his joint employers under either the Enterprise test or North American Soccer League. After first noting that the Fifth’s Circuit’s decision in North American Soccer League is not controlling in the Eastern District of Pennsylvania, the Livers court rejected the plaintiff’s argument that North American Soccer League demanded a conclusion that the NCAA member schools that he did not attend were his joint employers, observing that North American Soccer League was not an FLSA case, did not involve student athletes, and, most importantly, involved facts that “demonstrated a more significant management role for each individual soccer team in the management of the League as a whole, by virtue of their membership in the League, than Plaintiff alleges with respect to NCAA member schools.”

We conclude that the same is true in the case before us. In North American Soccer League, the commissioner was selected and compensated by the clubs, and the League’s board of directors was made up of one representative of each club. In contrast, the Complaint in this case does not allege that the president of the NCAA is selected by and paid by the member schools, that any of the NASD are members of the NCAA D1 Committee on Infractions or the D1 Infractions Appeal Committee, or that any of the NASD are involved in day-to-day decision making in the NCAA D1. We conclude, accordingly, that the Complaint does not plausibly allege that the NASD are joint employers of Plaintiffs under the “Sports League Joint Employment Theory” described in North American Soccer League. Based on this conclusion and our prior analysis under the Enterprise test, we further conclude that the Complaint does not plausibly allege that the NASD are joint employers of Plaintiffs and, accordingly, that Plaintiffs lack standing to sue the NASD for violations of the FLSA. We thus grant the instant Motion to Dismiss as to Plaintiffs’ FLSA claim in Count I of the Complaint as against the NASD.

NINA Y. WANG, District Judge.

This matter is before the Court on Aeva Specialty Pharmacy’s Motion for Summary Judgment. For the reasons set forth below, the Motion for Summary Judgment is respectfully DENIED.

Background

Plaintiff Khanh Pham (“Plaintiff” or “Mr. Pham”) alleges that in 2020, he applied for an open pharmacist employment position at Aeva Specialty Pharmacy (“Defendant” or “Aeva”), and received a conditional offer of employment. According to Plaintiff, Aeva submitted Plaintiff’s information to Clear Screening Technologies LLC (“Clear Screening”), a former defendant in this case, for a routine background check. Mr. Pham asserts that the background screening report erroneously reported that he had been charged with a federal crime in 2018, though he had never been charged with a federal crime. He also alleges that as a result of the incorrect Clear Screening report, Aeva revoked its conditional offer of employment.

Mr. Pham initiated this civil action on March 9, 2021, raising three claims under the Fair Credit Reporting Act (“FCRA”): two claims against Clear Screening for negligent and willful violations, respectively, of the FCRA, and one claim against Aeva for willful violations of the FCRA. Mr. Pham voluntarily dismissed his claims against Clear Screening with prejudice on August 5, 2021.

Aeva filed the instant Motion for Summary Judgment on February 10, 2022, seeking judgment in its favor on Plaintiff’s FCRA claim.

Undisputed Material Facts

The below material facts are drawn from the Parties’ briefing and are undisputed unless otherwise noted.

1. Mr. Pham is a licensed pharmacist.

2. In 2020, Mr. Pham applied for employment as a pharmacist with Aeva.

3. Prior to interviewing with Aeva, Mr. Pham worked for CVS Pharmacy. Mr. Pham’s employment with CVS ended in September 2019.

4. Mr. Pham “interacted with” Brooke Pendergrass, Aeva’s Manager of Human Resources, during the process of interviewing with Aeva.

5. After Mr. Pham’s interview with Aeva, Ms. Pendergrass presented Mr. Pham with a verbal conditional offer of employment.

6. Mr. Pham did not receive a written offer of employment from Aeva.

7. At some point after Mr. Pham submitted to a background check, Aeva decided not to hire Mr. Pham.

Analysis

The Fair Credit Reporting Act was enacted “to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.” 15 U.S.C. § 1681(b). The FCRA “enables consumers to protect their reputations, and to protect themselves against the dissemination of false or misleading credit information.” “The FCRA places distinct obligations on three types of entities: (1) consumer reporting agencies; (2) users of consumer reports; and (3) furnishers of information.”

Under the FCRA, users of consumer reports—like Aeva—must, “in using a consumer report for employment purposes,” and “before taking any adverse action based in whole or in part on the report, provide to the consumer to whom the report relates (i) a copy of the report; and (ii) a description in writing of the rights of the consumer under this subchapter.” “Congress intended applicants to have a real opportunity to contest an adverse employment decision based on a consumer report,” and an applicant “must have enough time between the notice and the final decision to meaningfully contest or explain the contents of the report.”

I. The Applicability of the FCRA

In its Motion for Summary Judgment, Aeva first argues that the FCRA is not applicable to this case because its decision to not hire Plaintiff was unrelated to and did not rely upon Plaintiff’s background check. Aeva states that it is undisputed that “at no time was Mr. Pham told he was not hired based on the background report’s improper red flag regarding a felony criminal case on an interim background check.” Instead, Aeva asserts, Mr. Pham testified that he has “no evidence” that Aeva made its hiring decision based on the background report. Aeva supports its position by citing evidence to Ms. Deinet’s deposition testimony, wherein Ms. Deinet testified that the decision to not hire Plaintiff was unrelated to the background report and that Ms. Deinet, “who made the hiring decision,” never saw the background report until this lawsuit was filed.

But Mr. Pham has submitted evidence, in the form of his own testimony, that Ms. Pendergrass called him to revoke his conditional offer of employment and informed him at the time that the revocation was based on the background check results. While Defendant implicitly asks the Court to accept its employees’ testimony as true and to discredit Plaintiff’s testimony as untrue, the Court cannot make credibility determinations in ruling on a motion for summary judgment.

The fact that Mr. Pham testified that he has “no evidence” that the hiring decision was based on his background check does not change the Court’s conclusion. Mr. Pham, a non-lawyer, simply could have meant that he has no tangible evidence of the reasoning for the decision, i.e., a recording of the telephone call with Ms. Pendergrass. But Mr. Pham’s testimony is evidence, and the Court must draw all reasonable inferences from that evidence in Mr. Pham’s favor. Because a reasonable jury could conclude, based on Mr. Pham’s testimony, that Aeva’s decision to not hire Mr. Pham was based on the results of the background check, genuine issues of material fact preclude summary judgment on this basis.

II. Actual Damages

In the alternative, Aeva argues that Plaintiff cannot establish that he was actually damaged by Aeva’s actions, which necessitates summary judgment in its favor. The FCRA establishes separate categories of damages for willful and negligent violations of the FCRA. A company that willfully fails to comply with FCRA requirements may be held liable for “any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000,” as well as punitive damages and attorney’s fees and costs. Therefore, a “consumer need not prove actual damages if the FCRA violation is willful, but may recover punitive damages and statutory damages ranging from $100 to $1,000.” Meanwhile, an employer who negligently fails to comply with the FCRA may be liable for “any actual damages sustained by the consumer as a result of the failure” and fees and costs. Mr. Pham seeks “actual damages, statutory damages, costs, and attorney’s fees,” as well as punitive damages, pursuant to 15 U.S.C. § 1681n.

Aeva argues that Mr. Pham has failed to submit any evidence of actual damages suffered by him as a result of Aeva’s purported FCRA violations. In addition, it argues that because Mr. Pham “admitted” a lack of actual damages, this “mandatees dismissal of” Plaintiff’s claim. In support of its argument, Aeva cites to deposition testimony wherein Mr. Pham was asked to explain “whether or not he had been harmed by Aeva Pharmacy and whether he had lost money.” Plaintiff responded, “No, I have not been harmed.” On this basis, Aeva asserts that “Plaintiff has failed to demonstrate that the alleged adverse credit action caused any damages.” Aeva further asserts that Mr. Pham was hired by a different employer within 20 days of his interview with Aeva and that Plaintiff “received a settlement from the dismissed co-Defendant in this case of around $20,000,” which “negates any possible FCRA claim as Mr. Pham made more money through the settlement than he would have if he had been employed by Aeva.”

Aeva’s arguments are insufficient to warrant summary judgment in its favor. First, Aeva did not mention Mr. Pham’s new employment or the settlement in its Statement of Undisputed Facts, and thus, Mr. Pham was not required to rebut these assertions with record evidence. If Defendant intended to rely on these material assertions in arguing that it is entitled to judgment in its favor, it was required to include them in its Statement of Undisputed Facts. The Court thus cannot conclude that these assertions are undisputed for purposes of the pending Motion.

Second, Aeva has not cited any legal authority suggesting that a settlement with a former party to this lawsuit can “negate” any claim for damages asserted by Plaintiff as to Aeva. Through its independent research, the Court could find no support for Defendant’s position. The Court declines to hold that Mr. Pham’s settlement with Clear Screening “negates” any claim for damages against Aeva, as such a holding would disincentivize settlement of disputes.

Third, while Defendant suggests that Mr. Pham cannot demonstrate actual damages because he obtained alternative employment within 20 days of his interview with Aeva, the Court respectfully disagrees. Mr. Pham argues in his Response that he can establish actual damages because he “was unable to earn wages that he otherwise would have earned had he been permitted to begin working at Aeva.” Indeed, Mr. Pham confirmed at his deposition that he “did not receive wages that he otherwise would have earned had he been offered employment with Aeva and begun working for Aeva.” Although Plaintiff testified that he “had not been harmed” by Aeva’s actions, which may contradict his statement, credibility determinations and resolution of conflicts in the evidence are issues reserved for the jury. Lost income is one type of actual damages available under the FCRA, and because Mr. Pham has produced evidence that of potentially lost income, the jury must assess its strength. But as Mr. Pham has already adduced evidence of actual damages, the Court is unpersuaded by Defendant’s argument that Mr. Pham can produce no such evidence.

III. Willful Violation of the FCRA

Finally, Aeva argues that Plaintiff’s request for statutory or punitive damages fails as a matter of law because he has presented no evidence that Aeva acted willfully or with reckless disregard in its purported FCRA violations. For this reason, it asserts that it is entitled to judgment in its favor on Plaintiff’s FCRA claim.

“A showing of malice or evil motive is not required to prove willfulness under the FCRA.” Instead, a willful violation of the FCRA is “either an intentional violation or a violation committed by an entity in reckless disregard of its duties under the FCRA.” “Recklessness is measured by ‘an objective standard: action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known.’” “A company subject to FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” “Willfulness under the FCRA is generally a question of fact for the jury.”

Aeva contends that “at most, Plaintiff believes, without the provision of one scintilla of corroborating evidence, that he was not hired because of an alleged felony conviction on an interim background check. However, Plaintiff’s belief is simply inaccurate and wholly unsupported by the evidence — most importantly, his own testimony.” Aeva defends its conduct related to the background check as “objectively reasonable” and reiterates its position that it declined to hire Mr. Pham for reasons outside of the background check report.

In his Response, Mr. Pham directs the Court to evidence that Aeva orders a background check for “every person it hires,” and has requested “hundreds” of background checks. Aeva was on notice that it must comply with the FCRA when using background check reports for employment purposes. But despite its regular use of background checks, Aeva does not have any internal policies or procedures regarding the use of background reports for employment purposes, and it does not train its employees on FCRA compliance or on how to use background check reports. Mr. Pham argues that “by failing to take any steps to avoid violating the FCRA, Aeva acted with reckless disregard of its statutory duties” under the law.

Insofar as Defendant bases its argument on its position that there is no dispute that Aeva did not rely on the background check report in revoking the conditional offer of employment, the Court has already rejected this argument, having concluded that genuine disputes of fact exist as to Aeva’s underlying purpose for revoking the conditional employment offer. In the alternative, Defendant asserts that Mr. Pham has presented “no evidence” that Aeva acted willfully or with reckless disregard in failing to comply with the FCRA. The Court disagrees. Mr. Pham has produced evidence demonstrating that although Aeva was on notice of its obligation to comply with the FCRA it had no policies or procedures governing FCRA compliance and that it did not train its employees on FCRA compliance. This is sufficient to create a genuine dispute of fact as to whether Aeva acted in reckless disregard of its FCRA obligations in its interactions with Plaintiff.

Aeva asserts in its Reply that Aeva’s policies, or lack thereof, “have no relation to this lawsuit” because “Plaintiff failed to establish that the FCRA requirements were even the responsibility of Aeva.” It states that “Aeva hired Clear Screening to run the background check,” but Plaintiff “never inquired as to which party had the responsibility to send an adverse notice if the report were relied upon.” Insofar as Defendant suggests a missing evidentiary link in this case between the FCRA and Aeva’s duties thereunder, the Court is unpersuaded. First, Defendant failed to raise any argument in its Motion for Summary Judgment that it was Clear Screening, and not Aeva, that had a duty to disclose the background report results to Plaintiff; this argument was undoubtedly available to Defendant at the time it filed its Motion, and its failure to raise the argument renders it waived. Furthermore, Aeva has cited no legal authority demonstrating that, by hiring a third party to conduct a background check, a user of credit reports transfers its disclosure obligations under the FCRA to that third party. Inadequately supported arguments need not be considered by the Court. And in any event, the Court is unpersuaded by Defendant’s argument. The FCRA provides that the duty to furnish a background report on a prospective employee lies with the party using the consumer report for employment purposes and intending to take an adverse action based on that report. By submitting evidence suggesting that Aeva purportedly rescinded Plaintiff’s conditional offer based on the background report, Plaintiff has submitted sufficient evidence to establish a disclosure duty on the part of Aeva. For all of these reasons, the willfulness or recklessness of Aeva’s actions must be assessed by the jury.

In sum, Mr. Pham has established genuine disputes of material fact concerning (1) whether Aeva rescinded his conditional offer of employment due to the background check results; (2) whether Mr. Pham was actually damaged by Aeva’s actions; and (3) whether Aeva acted willfully or recklessly. Summary judgment is thus not appropriate at this juncture, and Defendant’s Motion will be denied.

KATHERINE POLK FAILLA, District Judge.

Plaintiff Henry Franklin, on behalf of himself and a putative class of similarly situated job applicants, has sued Defendants Vertex Global Solutions, Inc. (“Vertex”) and Fresh Direct, LLC (“Fresh Direct,” and collectively, “Defendants”) for their alleged use of a pre-employment screening policy that discriminates against job applicants with criminal histories in violation of the New York City Human Rights Law (the “NYCHRL”), N.Y.C. Admin. Code §§ 8-101 to 8-131, as amended by the Fair Chance Act (the “FCA”), N.Y.C. Local Law 63 (2015). Vertex and Fresh Direct have each moved to dismiss Plaintiff’s claims, contending that their hiring practices comply with New York City law and do not discriminate against individuals with criminal histories. Fresh Direct additionally argues that Plaintiff’s claims should fail because he has not alleged Fresh Direct’s participation in any facet of Plaintiff’s employment application with Vertex. For the reasons outlined in the remainder of this Opinion, the Court denies Defendants’ motions in full.

Background

A. Factual Background

1. The Parties

Plaintiff Henry Franklin is a citizen of New York and a man with a criminal record. Defendant Vertex Global Solutions is a staffing agency headquartered in New York. Defendant Fresh Direct is a Delaware corporation specializing in direct-to-consumer food delivery, with its principal place of business in New York.

2. Defendants’ Hiring Process

On December 6, 2018, Plaintiff arrived at a Fresh Direct facility in the Bronx to participate in a job recruiting program with the company. Upon arriving at the facility that morning, Plaintiff received a nametag that contained his first and last name, the date, and the name “Samantha” clustered below the phrase “freshdirect Vertex.” Plaintiff was then directed to a waiting area where dozens of other applicants were seated. After sitting in the waiting area for approximately forty-five minutes, the group of applicants was guided to another room, where a speaker gave a presentation about working for Fresh Direct. Following the presentation, and with no questions asked of them, the applicants in the room each received a document purporting to be a conditional offer of employment that they were told to sign. The Offer Form recited that Vertex was “pleased to offer you a conditional offer of employment,” and provided that the applicant’s hourly salary would be $13.00. (Offer Form). The form further explained that the employment offer was “contingent upon a satisfactory outcome of the pre-employment screening process, which includes but is not necessarily limited to a review of past employment, education records, verification of ability to work in the United States, history background check and in some cases a drug screen.” Plaintiff signed and dated the Offer Form and noted that the time was 11:40 a.m.

Shortly after signing the Offer Form, at 11:46 a.m., Plaintiff received and signed another form, this time a release authorizing a background check. The release included the question “have you ever been convicted of a crime?” to which Plaintiff responded by checking the box that indicated “no.” (Background Check Release). A banner at the top of the release read: “New York City, New York Applicants: DO NOT RESPOND TO THE QUESTIONS SEEKING CRIMINAL RECORD INFORMATION AT THIS TIME. You will only have to answer criminal history questions after you receive a conditional offer of employment. At that time, you will not have to identify arrests or criminal accusations that did not result in a conviction (unless the arrest or criminal accusation is pending).” The Background Check Release makes no specific reference to the Offer Form that Plaintiff and the other applicants in the room had signed just moments earlier.

Once Plaintiff signed the Background Check Release, he was told that the recruiting process was complete and that he was free to leave the facility. Within approximately one to two weeks, Plaintiff received a letter from Vertex, notifying him that his background check had disclosed a criminal record. Plaintiff never heard from Defendants again. Following the rejection of his application, Plaintiff claims that the entire hiring process was “a transparent ruse” and that the “sole purpose of gathering at the Fresh Direct facility was to initiate background checks that would weed out applicants with conviction histories.”

3. The Relationship Between Vertex and Fresh Direct

Plaintiff alleges that his employment application was for a job with both Vertex and Fresh Direct, even though he formally applied for a job only with Vertex. Plaintiff asserts that both Defendants participated in the hiring of Fresh Direct employees, as evidenced by the fact that Vertex held its recruiting event on Fresh Direct’s premises. Moreover, applicants who were hired by Vertex to provide services to Fresh Direct would be formally employed by Vertex for the first few months, after which Fresh Direct would have the option to hire them directly. Even during the initial period where an individual was formally employed by Vertex, all workers providing services to Fresh Direct through Vertex were subject to Fresh Direct’s control and supervision. In his Amended Complaint, Plaintiff includes several images of anonymous employee reviews of Vertex from the website Indeed.com; one of these reviews characterizes Vertex as a “temp agency that provides Full Time Job Opportunities.” Another review describes working for Vertex as actually “a position for freshdirect” and explains that “if you do well you start working for freshdirect.”

As further evidence of the symbiotic relationship between Defendants, Plaintiff contends that Vertex touts that it offers customized services tailored to the specific requirements of individual employers like Fresh Direct. According to its website, Vertex advertises to prospective employer-clients that it “strives to understand your business, culture, and needs, to ensure we deliver candidates that fit your unique requirements.” Vertex describes the value it adds to its clients’ hiring process by characterizing itself as “a partner and an extension of your Human Resources Department.” Notably, Vertex regularly conducted interviews for prospective Fresh Direct employees on-site at a Fresh Direct facility, as evidenced by an online job posting and Plaintiff’s personal experience.

Discussion

TERENCE T. EVANS, Circuit Judge.

To prove their worth prior to the annual college draft, NFL teams test aspiring professional football players’ ability to run, catch, and throw. But that’s not all. In addition to the physical tests, a draft prospect also takes up to 15 personality and knowledge tests, answering questions such as:

Assume the first two statements are true.

The boy plays football. All football players wear helmets. The boy wears a helmet.

Is the final statement:

“True?

“False?

“Not certain

They are also asked questions like “What is the ninth month of the year?” See Richard Hoffer, “Get Smart!”, Sports Illustrated (Sept. 5, 1994).

This case involves a battery of nonphysical tests similar to some of those given by NFL teams, though the employees here applied for less glamorous, and far less well-paying, positions. Steven, Michael, and Christopher Karraker are brothers who worked for Rent-A-Center (RAC), a chain of stores that offer appliances, furniture, and other household goods on a rent-to-own basis. During the relevant time, each RAC store had a store manager, several middle managers, and entry-level account managers. Most new employees start as account managers and can progress to upper-level positions. In order to secure a promotion, however, an employee was required to take the APT Management Trainee-Executive Profile, which was made up of nine tests designed to measure math and language skills as well as interests and personality traits.

As part of the APT Test, the Karrakers and others were asked 502 questions from the Minnesota Multiphasic Personality Inventory (MMPI), a test RAC said it used to measure personality traits. But the MMPI does not simply measure such potentially relevant traits as whether someone works well in groups or is comfortable in a fast-paced office. Instead, the MMPI considers where an applicant falls on scales measuring traits such as depression, hypochondriasis, hysteria, paranoia, and mania. In fact, elevated scores on certain scales of the MMPI can be used in diagnoses of certain psychiatric disorders.

All parts of the APT Test were scored together, and any applicant who had more than 12 “weighted deviations” was not considered for promotion. Thus, an applicant could be denied any chance for advancement simply because of his or her score on the MMPI. The Karrakers, who all had more than 12 deviations on the APT, sued on behalf of the employees at 106 Illinois RAC stores, claiming RAC’s use of the MMPI as part of its testing program violated the Americans With Disabilities Act of 1990 (ADA). They also claimed that RAC failed to protect the confidentiality of the test results in violation of Illinois tort law.

The district court first granted RAC’s motion for partial summary judgment on Steven Karraker’s failure to promote claim, finding that he did not file his charge of discrimination with the EEOC within 300 days of any alleged discrimination. The court also granted the Karrakers’ motion for class certification on the ADA and public disclosure of private facts claims.

The district court later granted RAC’s motion for summary judgment and denied the Karrakers’ motion for summary judgment on the outstanding claims with the exception of Steven Karraker’s wrongful termination claim. The Karrakers stipulated to the dismissal of that claim to allow this appeal to go forward. Here, they challenge the district court’s decision that the use of the MMPI did not violate the ADA, the dismissal of Steven Karraker’s failure to promote claim, and the dismissal of the Karrakers’ claim of public disclosure of private facts.

Americans with disabilities often faced barriers to joining and succeeding in the workforce. These barriers were not limited to inaccessible physical structures. They also included attitudinal barriers resulting from unfounded stereotypes and prejudice. People with psychiatric disabilities have suffered as a result of such attitudinal barriers, with an employment rate dramatically lower than people without disabilities and far lower than people with other types of disabilities.

Congress enacted the ADA to “provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.” Congress recognized that “the Nation’s proper goals regarding individuals with disabilities are to assure equality of opportunity, full participation, independent living, and economic self-sufficiency for such individuals.” The ADA’s definition of disability is not limited to physical impairments, but also includes mental impairments. Title I of the ADA is devoted to eliminating employment discrimination based on actual or perceived disabilities.

Congress enacted three provisions in Title I which explicitly limit the ability of employers to use “medical examinations and inquiries” as a condition of employment: a prohibition against using pre-employment medical tests; a prohibition against the use of medical tests that lack job-relatedness and business necessity; and a prohibition against the use of tests which screen out (or tend to screen out) people with disabilities.

At its heart, the issue in this case is whether the MMPI fits the ADA’s definition of a “medical examination.” In that regard, we note the parties’ agreement that, although the Karrakers were already employed by RAC, the tests here were administered “pre-employment” for ADA purposes because they were required for those seeking new positions within RAC. This agreement means we need not determine whether the Karrakers should be considered to be in the preemployment offer category. Plaintiffs have argued only that the MMPI is a medical examination. RAC could have argued not only that the MMPI is not a medical examination, but also that even if it is, it is “job-related and consistent with business necessity.” By prevailing on the latter, defendants could claim that the test is permissible during employment, even if impermissible pre-offer. By not arguing that the test is “job-related and consistent with business necessity,” RAC seeks a clear finding that the MMPI is not a medical examination and thus not regulated at all by the ADA.

The EEOC defines “medical examination” as “a procedure or test that seeks information about an individual’s physical or mental impairments or health.” See “ADA Enforcement Guidance: Preemployment Disability-Related Questions and Medical Examinations” (1995). According to the EEOC, factors to consider in determining whether a particular test is a “medical examination” include:

(1) whether the test is administered by a health care professional;

(2) whether the test is interpreted by a health care professional;

(3) whether the test is designed to reveal an impairment of physical or mental health;

(4) whether the test is invasive;

(5) whether the test measures an employee’s performance of a task or measures his/her physiological responses to performing the task;

(6) whether the test normally is given in a medical setting; and

(7) whether medical equipment is used.

“One factor may be enough to determine that a procedure or test is medical.” Psychological tests that are “designed to identify a mental disorder or impairment” qualify as medical examinations, but psychological tests “that measure personality traits such as honesty, preferences, and habits” do not.

Therefore, this case largely turns on whether the MMPI test is designed to reveal a mental impairment. RAC argues that, as it used the MMPI, the test only measured personality traits. For example, RAC argues in its brief that the MMPI does not test whether an applicant is clinically depressed, only “the extent to which the test subject is experiencing the kinds of feelings of ‘depression’ that everyone feels from time to time (e.g., when their favorite team loses the World Series).” Although that particular example seems odd to us (can an Illinois chain really fill its management positions if it won’t promote disgruntled Cubs fans?), the logic behind it doesn’t seem to add up, either. Repeating the claim at oral argument, RAC argued that the MMPI merely tested a “state of mood” and suggested that an applicant might, for example, score high on the depression scale because he lost his keys that morning. But why would RAC care if an applicant lost his keys the morning of the MMPI or took the test the day after another Cubs loss? Would RAC really want to exclude an employee from consideration for a promotion because he happened to feel sad on the wrong day? We see two possibilities: either the MMPI was a very poor predictor of an applicant’s potential as a manager (which might be one reason it is no longer used by RAC), or it actually was designed to measure more than just an applicant’s mood on a given day.

To help us sort out which of these possibilities is more likely, the EEOC guidelines offer three examples of tests given pre-employment:

Example: A psychological test is designed to reveal mental illness, but a particular employer says it does not give the test to disclose mental illness (for example, the employer says it uses the test to disclose just tastes and habits). But, the test also is interpreted by a psychologist, and is routinely used in a clinical setting to provide evidence that would lead to a diagnosis of a mental disorder or impairment (for example, whether an applicant has paranoid tendencies, or is depressed). Under these facts, this test is a medical examination.

Example: An employer gives applicants the RUOK Test (hypothetical), an examination which reflects whether applicants have characteristics that lead to identifying whether the individual has excessive anxiety, depression, and certain compulsive disorders (DSM-listed conditions). This test is medical.

Example: An employer gives the IFIB Personality Test (hypothetical), an examination designed and used to reflect only whether an applicant is likely to lie. This test, as used by the employer, is not a medical examination.

RAC’s use of the MMPI almost fits the first example in that it is a psychological test that is designed, at least in part, to reveal mental illness. And RAC claims it uses the test only to measure personality traits, not to disclose mental illness. The parallel falls apart, however, because the test was not interpreted by a psychologist, a difference that led the district court to conclude that it is not a medical examination. In doing so, the district court relied on the deposition testimony of Colin Koransky, a clinical psychologist. Koransky described various scoring methods for the MMPI, explaining that a clinical protocol could be used for medical purposes while a vocational scoring protocol would focus more on personality traits of potential employees. The district court found that, because RAC used the vocational protocol to score the test, RAC used the MMPI “solely for the purposes of discerning personality traits.”

The mere fact that a psychologist did not interpret the MMPI is not, however, dispositive. The problem with the district court’s analysis is that the practical effect of the use of the MMPI is similar no matter how the test is used or scored — that is, whether or not RAC used the test to weed out applicants with certain disorders, its use of the MMPI likely had the effect of excluding employees with disorders from promotions.

Dr. Koransky claims, for example, that the Pa scale “does not diagnose or detect any psychological disorders,” but that “an elevated score on the Pa scale is one of several symptoms which may contribute” to a diagnosis of paranoid personality disorder. We accept Dr. Koransky’s contention that a high score on the Pa scale does not necessarily mean that the person has paranoid personality disorder. But it also seems likely that a person who does, in fact, have paranoid personality disorder, and is therefore protected under the ADA, would register a high score on the Pa scale. And that high score could end up costing the applicant any chance of a promotion. Because it is designed, at least in part, to reveal mental illness and has the effect of hurting the employment prospects of one with a mental disability, we think the MMPI is best categorized as a medical examination. And even though the MMPI was only a part (albeit a significant part) of a battery of tests administered to employees looking to advance, its use, we conclude, violated the ADA.

BARRINGER, Justice.

Employers are in no way general insurers of acts committed by their employees, but as recognized by our precedent, an employer may owe a duty of care to a victim of an employee’s intentional tort when there is a nexus between the employment relationship and the injury. Here, when the evidence is viewed in the light most favorable to the plaintiffs, plaintiffs, who are an elderly infirm couple that contracted with a company to provide them a personal care aide in their home, have shown a nexus between their injury and the employment relationship. The employee was inadequately screened and supervised, being placed in a position of opportunity to commit crimes against vulnerable plaintiffs after her employer suspected her of stealing from plaintiffs. Therefore, we conclude that the Court of Appeals erred by reversing the judgment in favor of plaintiffs and by remanding for entry of a judgment notwithstanding the verdict in favor of defendant. Further, the Court of Appeals misinterpreted North Carolina precedent, and thus erred by holding the trial court erred by denying defendant’s requested instructions.

I. Background

On 29 September 2016, plaintiffs Thomas and Teresa Keith (Mr. and Mrs. Keith), an elderly married couple with health and mobility issues, were the victims of a home invasion and armed robbery orchestrated by a personal care aide working for defendant Health-Pro Home Care Services, Inc. (Health-Pro). The aide, Deitra Clark, was assigned to assist the Keiths in their home. Clark subsequently pleaded guilty to first-degree burglary and second-degree kidnapping for her conduct.

In December 2016, the Keiths sued Health-Pro for negligence and punitive damages. The Keiths alleged that they hired Health-Pro as their in-home health care provider and “despite Deitra Clark’s criminal record, lack of a driver’s license, and history of prior incidents of suspected prior thefts from the Keiths’ home, Health-Pro negligently allowed Deitra Clark to provide in-home care to the Keiths, and Health-Pro’s conduct in assigning Deitra Clark to these responsibilities, as opposed to some other position in the company, was a proximate cause of the robbery of the Keiths and the consequent injuries sustained by them.”

The case proceeded to trial and was tried before a jury at the 19 March 2018 session of superior court in Pitt County. At the conclusion of the Keiths’ presentation of evidence, Health-Pro moved for directed verdict on the negligence claim pursuant to North Carolina Rule of Civil Procedure 50. Health-Pro argued that:

As far as negligence, your Honor, we would contend there has been no evidence to meet the Plaintiffs’ burden of proof. My understanding from the proposed jury instructions that the Plaintiffs have passed up is they treat this as an ordinary negligence case. The Defense contends this is negligence sic hiring retention and supervision case, which is part of our proposed instructions. That’s very similar to what the Plaintiffs have pled. That type of case is what has essentially been argued to this jury and that’s what the evidence has revealed. In order to succeed on that case and even in an ordinary negligence case the Plaintiffs have to show that the events of September 29th, 2016, and Deitra Clarks’ unfitness and participation in those events were foreseeable to my clients. Those are the events that have caused the Plaintiffs the only injury they complain of. And there is nothing in the record that suggests that it was foreseeable.

The trial court denied the motion for a directed verdict.

The jury returned a verdict in favor of the Keiths. The jury answered in the affirmative that both Mr. and Mrs. Keith were injured by the negligence of Health-Pro. The jury found Mr. Keith entitled to recover $500,000 in damages from Health-Pro for his personal injuries and found Mrs. Keith entitled to recover $250,000 in damages from Health-Pro for her personal injuries. The trial court then entered judgment to this effect on 11 April 2018.

Health-Pro subsequently moved for judgment notwithstanding the verdict and, in the alternative, for a new trial . The trial court denied these post-trial motions . Health-Pro appealed .

On appeal, a divided panel of the Court of Appeals reversed the judgment and remanded for entry of a judgment notwithstanding the verdict in Health-Pro’s favor.

To address Health-Pro’s appeal of the trial court’s denial of its motions for directed verdict and motion for judgment notwithstanding the verdict, the Court of Appeals determined that it “must first decide whether the Keiths’ case was appropriately presented to the jury as an ‘ordinary’ negligence claim instead of an action for negligent hiring.” The Court of Appeals considered the allegations in the Keiths’ complaint and the evidence presented at trial “within the context of precedent governing both ordinary negligence and negligent hiring.” The Court of Appeals ultimately indicated that it agreed with Health-Pro that the Keiths’ “allegations and the facts of this case constituted a claim for negligent hiring,” obligating the Keiths to prosecute their claim as one for negligent hiring. The Court of Appeals explained as follows:

All of Plaintiffs’ relevant allegations and evidence directly challenge whether Defendant should have hired Ms. Clark as an in-home aide; whether Defendant acted appropriately in response to hearing from Plaintiffs that money had been taken from their home on two occasions—which would have involved either greater supervision of—such as moving Ms. Clark to a no-client-contact position, as suggested by Plaintiffs—or a decision regarding whether to retain her in Defendant’s employ at all. Plaintiffs have cited no binding authority for the proposition that an action brought on allegations, and tried on facts, that clearly fall within the scope of a negligent hiring claim may avoid the heightened burden of proving all the elements of negligent hiring by simply designating the action as one in ordinary negligence, and we find none.

As such, the Court of Appeals held that the trial court erred by denying Health-Pro’s motions for directed verdict and judgment notwithstanding the verdict “with respect to ordinary negligence, as that claim was not properly before the trial court, and no evidence could support it.”

The Court of Appeals then considered whether the Keiths’ evidence was sufficient to survive a motion for judgment notwithstanding the verdict “based upon the theory of negligent hiring.” It began by discussing the Court of Appeals’ case Little v. Omega Meats I, Inc., 171 N.C. App. 583 (2005), which this Court affirmed per curiam without written opinion.

The Court of Appeals concluded that according to Little, “three specific elements must be proven by a plaintiff in order to show that an employer had a duty to protect a third party from its employee’s negligent or intentional acts committed out-side of the scope of the employment.” Specifically,

(1) the employee and the plaintiff must have been in places where each had a right to be when the wrongful act occurred; (2) the plaintiff must have met the employee, when the wrongful act occurred, as a direct result of the employment; and (3) the employer must have received some benefit, even if only potential or indirect, from the meeting of the employee and the plaintiff that resulted in the plaintiff’s injury.

The Court of Appeals held that there was no evidence to support any of the three elements in this case.

Next, the Court of Appeals concluded that even if the requirements of Little are not applicable to this case, the trial court still erred by denying Health-Pro’s motion for judgment notwithstanding the verdict based on a theory of negligent hiring. Specifically, the Court of Appeals held that Health-Pro had no duty to protect the Keiths’ from Clark’s criminal acts on 29 September 2016, and the Keiths’ “evidence was insufficient to demonstrate proximate cause.

The dissent disagreed with the majority’s holding that the judgment in favor of the Keiths must be reversed and that Health-Pro was entitled to judgment as a matter of law. The dissent contended that although the Keiths alleged that Health-Pro was negligent in hiring Clark, the evidence of negligent hiring “is merely a means by which a plaintiff proves ordinary negligence.” “Negligent hiring (like any other ordinary negligence claim) requires a plaintiff to show that the defendant owed a duty, that the defendant breached that duty, and that the plaintiff suffered an injury proximately caused by the breach.”

Further, the dissent argued that when viewed in the light most favorable to the Keiths, the evidence was sufficient to make out an ordinary negligence claim based on their evidence of Health-Pro’s negligent hiring of a dishonest employee. Unlike the majority, the dissent concluded that the Keiths did not have to prove that the robbery occurred while Clark was on duty. The evidence was sufficient for a negligence claim because when viewed in the light most favorable to the Keiths, Health-Pro’s “dishonest employee used ‘intel’ learned while on duty to facilitate a theft.”

The dissent asserted its view that the majority misread Little, and analyzed how the evidence when viewed in the light most favorable to the Keiths, as the non-moving party, is sufficient for each element, rendering denial of the motions for directed verdict and judgment notwithstanding the verdict proper.

The dissent acknowledged that reasonable minds may reach different conclusions concerning Health-Pro’s liability for the criminal conduct of Clark in this case, but that decision was for the jury, and the jury has spoken in this case in favor of liability.

The Keiths appealed based on the dissent .

III. Analysis

IV. Conclusion

We agree with the Court of Appeals that plaintiffs’ negligence claim was dependent on a theory of negligent hiring, which is commonly plead as a negligent hiring claim. However, the evidence, taken in the light most favorable to plaintiffs, was sufficient as a matter of law to be presented to the jury. There was evidence to support each element of the claim, the Medlin elements, and the Little nexus requirement. Therefore, the Court of Appeals erred by reversing the judgment in favor of plaintiffs and by remanding to the trial court for entry of an order granting defendant’s motion for judgment notwithstanding the verdict. Further, the Court of Appeals misinterpreted precedent from Little, and under a proper reading of that case and other precedent, the jury instruction requested by defendant was not an accurate statement of the law. Therefore, the Court of Appeals also erred by holding that the trial court erred by denying defendant’s requested instruction. Accordingly, we reverse the Court of Appeals’ decision.

David J. Hale, Judge.

Plaintiffs alleged that their former employer, Charter Communications, LLC, falsely accused them of theft after their employment was terminated. Following a weeklong trial, a jury agreed, finding Charter liable for defamation per se. Charter has moved for judgment as a matter of law or a new trial. In the alternative, it seeks reduction of the damage award. For the reasons explained below, the Court will reduce the punitive damages and deny Charter’s motion in all other respects.

I. BACKGROUND

The Court previously summarized the facts of this case as follows:

Plaintiffs worked at Charter’s call center in Louisville, Kentucky, in various capacities. Each was given a Hewlett-Packard (HP) computer printer by Linda Showalter, an administrative assistant at Charter. Plaintiffs maintain that they believed Showalter’s distribution of printers was authorized by management. Charter, however, considered Plaintiffs’ acceptance of the printers to be a violation of its policy against removing company property without authorization, and it terminated most of the employees involved.

Approximately one month after Plaintiffs were fired, Charter Human Resources Manager Rodger Simms gave a PowerPoint presentation during a Charter leadership conference. On a slide with the heading “Leadership and Judgment,” Simms referred to “‘Operation’ Green-light, Buzz-kill, Printer-gate.” He encouraged employees to “act with Integrity and Character.” The notes for Simms’s oral presentation accompanying the slide state: “Let’s get the elephant in the room out in the open, how many of you have heard of Operation codes for things that weren’t right! All examples of poor judgment. Not bad people, people we know and love but they made the wrong choices.” Simms emphasized the importance of “integrity,” “character,” and having “the courage to do the right thing.” He also warned that “knowing something isn’t right and allowing it to continue is the same as you doing it!” “Green-light” referred to an incident in which a Charter employee used a company credit card for personal benefit and was terminated as a result. “Buzz-kill” involved the sale of illegal drugs on Charter property by Charter employees; those employees were also terminated.

Plaintiffs sued Charter for defamation on the ground that “Charter made false statements alleging misconduct on the part of the Plaintiffs relating to the distribution of Hewlett-Packard ink jet printers, including but not limited to the PowerPoint presentation.” They contend that the use of the term “Printer-gate,” particularly in conjunction with references to employee theft and drug-dealing, implied that their actions were criminal.

The case was tried solely on a theory of defamation per se. At the close of Plaintiffs’ case, Charter moved for judgment as a matter of law, arguing that “Printer-gate” could not constitute defamation per se because it had no “objectively understood definition” and was not defamatory on its face; that Plaintiffs had no proof of damages to support a claim of defamation per quod; and that any inference arising from “Printer-gate” was true because the term referred to “an incident involving the unauthorized removal of company printers from Charter’s premises.” The Court denied that motion and later granted Plaintiffs’ motion for judgment as a matter of law on Charter’s truth defense, concluding that there was insufficient evidence from which a reasonable jury could find that Plaintiffs’ actions constituted criminal theft. The jury ultimately found Charter liable, awarding each plaintiff $350,000 in compensatory damages and $1 million in punitive damages. The Court entered judgment for Plaintiffs in accordance with the jury’s verdict, and Charter timely sought relief under Rules 50 and 59 of the Federal Rules of Civil Procedure.

II. ANALYSIS

Charter renews its motion for judgment as a matter of law on the issue of whether the term “Printer-gate” can constitute defamation per se. It further argues that it is entitled to a new trial on the grounds that it should have been allowed to present the defenses of truth and qualified privilege; that James Eversole’s testimony was admitted in error; and that the jury was required to find malice by clear and convincing evidence in order to award punitive damages.

Robert J. Conrad, Jr., United States District Judge

I. BACKGROUND

III. DISCUSSION

In the Motion to Dismiss, Wells Fargo argues (1) it is immune from civil liability; and (4) Plaintiff did not meet the heightened pleading standard for a negligent misrepresentation claim.

WYNN, Judge.

Plaintiff Patricia W. Friel was employed as a secretary by defendant company Angell Care Incorporated (“Angell Care”) from July 1982 until 17 April 1987. She held several positions within the company before being assigned to be the personal secretary to Bruce Smith, a new vice-president of the company. On or about 18 March 1987, plaintiff alleged that Smith had sexually harassed her. On 17 April 1987, plaintiff entered into a settlement agreement signed by Angell Care’s president, Dennis Young, on behalf of Angell Care. Under the terms of the agreement, plaintiff would leave the company and would not discuss the terms and contents of the agreement. Angell Care would pay plaintiff $9566.63; would not discuss the terms or contents of the agreement with plaintiff’s prospective employers; and would provide her prospective employers with neutral employment references.

After leaving Angell Care, plaintiff stayed home with her children, intermittently caring for other children in her home.

During the week of 23 May 1988, plaintiff testified against Angell Group Inc., a company related to Angell Care, pursuant to a subpoena in the case of Angell Group, Inc., et al. v. Bowling Green Health Care Center, Inc., et al., in Forsyth County Superior Court.

In approximately June or July 1990, plaintiff applied for several secretarial positions. She contacted a local attorney, Meyressa Schoonmaker, for employment, either with Schoonmaker’s law practice or with the North Carolina Center for Laws Affecting Women (“NCLAW”), an organization of which Schoonmaker was the president and legal director. Plaintiff submitted an application to Schoonmaker, listing her last employer as Angell Care and giving the names of Don Angell and Stewart Swain. Schoonmaker asked a NCLAW employee, Linda Parker, to contact Angell and Swain. Parker contacted Angell. She asked him if he would rehire plaintiff. When he said he would not, Parker asked why. Parker’s and Angell’s accounts of his response differ. Angell testified that he said, “there was an unproven sexual harassment charge when she left,” and that he “was not aware of the details.” Parker’s written notes of the conversation state, “Angell said that plaintiff left under adverse (?) circumstances, and he really could not discuss the circumstances.” Plaintiff was not offered either position with Schoonmaker.

In August 1990, plaintiff asked Sherrill Horton, a friend who worked for a law firm, if she knew anyone who needed a secretary. Horton said that she did not know if the firm had any openings, but one of the attorneys was unhappy with his current secretary. Plaintiff asked Horton to call Don Angell for a reference, because she wanted to know why Angell Care would not rehire her. Horton called Don Angell, indicating that she was calling him on behalf of her firm because plaintiff had listed him as a reference in applying for a job there, even though plaintiff had not actually submitted an application. Horton testified, and Angell confirmed, that she asked if the company would rehire plaintiff; he said it would not; and he said plaintiff had accused a male employee of sexual harassment, but the charge was never proven. Horton further testified that Angell said that plaintiff left the company under adverse circumstances and that she was difficult to work with.

On 19 October 1990, plaintiff sued Angell Care and Don Angell for compensatory and punitive damages. Plaintiff alleged that Angell and Angell Care had breached the settlement contract; committed slander per se; maliciously interfered with her contractual rights; and blacklisted her in violation of N.C.Gen.Stat. § 14-355.

Defendants moved for summary judgment on all the claims. The motion was heard on 16 July 1992. By written order and judgment entered 23 July 1992, the court granted summary judgment for defendants on the slander, malicious interference with contractual rights, and blacklisting claims. On 21 July 1992, plaintiff filed a voluntary dismissal without prejudice of her breach of contract claim.

Plaintiff appealed the claims of slander per se, malicious interference with contractual rights, and blacklisting, as to both defendants.

I.

Plaintiff contends that Angell’s statements to Parker and Horton were slander per se because they impeached her in her profession.

Initially, we uphold summary judgment on the portion of the slander action that is based on Angell’s statements to Horton. All the evidence indicates that the conversation between Angell and Horton took place at the request and direction of the plaintiff. A communication to the plaintiff, or to a person acting at the plaintiff’s request, cannot form the basis for a libel or slander claim. In this case, Horton contacted Angell because plaintiff had asked her to “check out (her) references,” not because Horton’s employer had independently wished to contact Angell. Under these circumstances, plaintiff has no claim for defamation based on any statement made to Horton.

This leaves us with the statements made to Linda Parker. A claim of slander per se has three essential elements:

To establish a claim for slander per se, a plaintiff must prove: (1) defendant spoke base or defamatory words which tended to prejudice him in his reputation, office, trade, business or means of livelihood or hold him up to disgrace, ridicule or contempt; (2) the statement was false; and (3) the statement was published or communicated to and understood by a third person.

We find that plaintiff has not met the second element of this cause of action. Plaintiff never established that Angell’s statements to Parker were false. Angell said that he would not rehire plaintiff; there was an unproven sexual harassment charge when she left the company; and, viewing the evidence in the best light for plaintiff, that plaintiff left the company under adverse circumstances. All the evidence suggests that the statements were in fact true. Plaintiff left the employment of defendant pursuant to a negotiated settlement after making a claim of sexual harassment which was not proven. A description of this situation as “adverse circumstances” does not seem inaccurate.

We note that defendant’s statements to Parker and Horton may well have been in breach of the settlement agreement between plaintiff and defendant Angell Care, Inc. However, because plaintiff voluntarily dismissed her claim for breach of contract, issues relating to performance of that contract are not before us today.

II.

Plaintiff next contends that defendant maliciously interfered with her right to enter into an employment contract with Meyressa Schoonmaker and the North Carolina Center for Laws Affecting Women. In order to state a claim for malicious interference with contract, plaintiff must establish that the defendant’s actions were malicious in the legal sense. To establish legal malice, a plaintiff must show that defendant interfered “with design of injury to plaintiff or gaining some advantage at his expense.” Plaintiff never established that defendant intended to injure her or gain some advantage at her expense. The only evidence of malice plaintiff put forth is her belief that Angell felt ill will toward her because after she testified adversely to defendants in the Bowling Green Health Care case, Angell raised his voice and exhibited anger toward the other party (not toward her). Plaintiff’s speculation, without any facts to support it, is clearly insufficient to meet her burden of proof. A party cannot prevail against a motion for summary judgment by relying on “conclusory allegations, unsupported by facts.” We affirm summary judgment for defendant on the malicious interference with contract claim.

III.

Plaintiff’s third claim is that defendant Angell’s conversations with Parker and Horton violated N.C.Gen.Stat. § 14-355, which prohibits blacklisting employees. Under this statute, an employer may be liable if, after discharging someone from employment, it prevents or attempts to prevent that person from obtaining employment:

If any person, agent, company or corporation, after having discharged any employee from his or its service, shall prevent or attempt to prevent, by word or writing of any kind, such discharged employee from obtaining employment with any other person, company or corporation, such person, agent or corporation shall be guilty of a misdemeanor and shall be liable in penal damages to such discharged person, to be recovered by civil action. This section shall not be construed as prohibiting any person from furnishing in writing, upon request, any other person, company or corporation to whom such discharged person has applied for employment, a truthful statement of the reason for such discharge.

However, statements made about a former employee in response to a request from a prospective employer are privileged under § 14-355. For the statute to be violated, the statements to the prospective employer would have had to have been unsolicited. Plaintiff admits here that Don Angell’s statements came only upon inquiry from people he believed to be prospective employers of his former employee. We therefore hold that N.C.Gen.Stat. § 14-355 does not apply as a matter of law and uphold summary judgment for defendants.

REAVLEY, Circuit Judge:

Kadlec Medical Center and its insurer, Western Professional Insurance Company, filed this diversity action in Louisiana district court against Louisiana Anesthesia Associates (LAA), its shareholders, and Lakeview Regional Medical Center (Lakeview Medical). The LAA shareholders worked with Dr. Robert Berry — an anesthesiologist and former LAA shareholder — at Lakeview Medical, where the defendants discovered his on-duty use of narcotics. In referral letters written by the defendants and relied on by Kadlec, his future employer, the defendants did not disclose Dr. Berry’s drug use.

While under the influence of Demerol at Kadlec, Dr. Berry’s negligent performance led to the near-death of a patient, resulting in a lawsuit against Kadlec. Plaintiffs claim here that the defendants’ misleading referral letters were a legal cause of plaintiffs’ financial injury, i.e., having to pay over $8 million to defend and settle the lawsuit. The jury found in favor of the plaintiffs and judgment followed. We reverse the judgment against Lakeview Medical, vacate the remainder of the judgment, and remand.

I. Factual Background

Dr. Berry was a licensed anesthesiologist in Louisiana and practiced with Drs. William Preau, Mark Dennis, David Baldone, and Allan Parr at LAA. From November 2000 until his termination on March 13, 2001, Dr. Berry was a shareholder of LAA, the exclusive provider of anesthesia services to Lakeview Medical (a Louisiana hospital).

In November 2000, a small management team at Lakeview Medical investigated Dr. Berry after nurses expressed concern about his undocumented and suspicious withdrawals of Demerol. The investigative team found excessive Demerol withdrawals by Dr. Berry and a lack of documentation for the withdrawals.

Lakeview Medical CEO Max Lauderdale discussed the team’s findings with Dr. Berry and Dr. Dennis. Dr. Dennis then discussed Dr. Berry’s situation with his partners. They all agreed that Dr. Berry’s use of Demerol had to be controlled and monitored. But Dr. Berry did not follow the agreement or account for his continued Demerol withdrawals. Three months later, Dr. Berry failed to answer a page while on-duty at Lakeview Medical. He was discovered in the call-room, asleep, groggy, and unfit to work. Personnel immediately called Dr. Dennis, who found Dr. Berry not communicating well and unable to work. Dr. Dennis had Dr. Berry taken away after Dr. Berry said that he had taken prescription medications.

Lauderdale, Lakeview Medical’s CEO, decided that it was in the best interest of patient safety that Dr. Berry not practice at the hospital. Dr. Dennis and his three partners at LAA fired Dr. Berry and signed his termination letter on March 27, 2001, which explained that he was fired “for cause”:

You have been fired for cause because you have reported to work in an impaired physical, mental, and emotional state. Your impaired condition has prevented you from properly performing your duties and puts our patients at significant risk. Please consider your termination effective March 13, 2001.

At Lakeview Medical, Lauderdale ordered the Chief Nursing Officer to notify the administration if Dr. Berry returned.

Despite recognizing Dr. Berry’s drug problem and the danger he posed to patients, neither Dr. Dennis nor Lauderdale reported Dr. Berry’s impairment to the hospital’s Medical Executive Committee, eventually noting only that Dr. Berry was “no longer employed by LAA.” Neither one reported Dr. Berry’s impairment to Lakeview Medical’s Board of Trustees, and no one on behalf of Lakeview Medical reported Dr. Berry’s impairment or discipline to the Louisiana Board of Medical Examiners or to the National Practitioner’s Data Bank. In fact, at some point Lauderdale took the unusual step of locking away in his office all files, audits, plans, and notes concerning Dr. Berry and the investigation.

After leaving LAA and Lakeview Medical, Dr. Berry briefly obtained work as a locum tenens (traveling physician) at a hospital in Shreveport, Louisiana. In October 2001, he applied through Staff Care, a leading locum tenens staffing firm, for locum tenens privileges at Kadlec Medical Center in Washington State. After receiving his application, Kadlec began its credentialing process. Kadlec examined a variety of materials, including referral letters from LAA and Lakeview Medical.

LAA’s Dr. Preau and Dr. Dennis, two months after firing Dr. Berry for his on-the-job drug use, submitted referral letters for Dr. Berry to Staff Care, with the intention that they be provided to future employers. The letter from Dr. Dennis stated that he had worked with Dr. Berry for four years, that he was an excellent clinician, and that he would be an asset to any anesthesia service. Dr. Preau’s letter said that he worked with Berry at Lakeview Medical and that he recommended him highly as an anesthesiologist. Dr. Preau’s and Dr. Dennis’s letters were submitted on June 3, 2001, only sixty-eight days after they fired him for using narcotics while on-duty and stating in his termination letter that Dr. Berry’s behavior put “patients at significant risk.”

On October 17, 2001, Kadlec sent Lakeview Medical a request for credentialing information about Berry. The request included a detailed confidential questionnaire, a delineation of privileges, and a signed consent for release of information. The interrogatories on the questionnaire asked whether “Dr. Berry has been subject to any disciplinary action,” if “Dr. Berry has the ability (health status) to perform the privileges requested,” whether “Dr. Berry has shown any signs of behavior/personality problems or impairments,” and whether Dr. Berry has satisfactory “judgement.”

Nine days later, Lakeview Medical responded to the requests for credentialing information about fourteen different physicians. In thirteen cases, it responded fully and completely to the request, filling out forms with all the information asked for by the requesting health care provider. The fourteenth request, from Kadlec concerning Berry, was handled differently. Instead of completing the multi-part forms, Lakeview Medical staff drafted a short letter. In its entirety, it read:

This letter is written in response to your inquiry regarding Dr. Berry. Due to the large volume of inquiries received in this office, the following information is provided.

Our records indicate that Dr. Robert L. Berry was on the Active Medical Staff of Lakeview Regional Medical Center in the field of Anesthesiology from March 04, 1997 through September 04, 2001.

If I can be of further assistance, you may contact me at (504) 867-4076.

The letter did not disclose LAA’s termination of Dr. Berry; his on-duty drug use; the investigation into Dr. Berry’s undocumented and suspicious withdrawals of Demerol that “violated the standard of care”; or any other negative information. The employee who drafted the letter said at trial that she just followed a form letter, which is one of many that Lakeview Medical used.

Kadlec then credentialed Dr. Berry, and he began working there. After working at Kadlec without incident for a number of months, he moved temporarily to Montana where he worked at Benefis Hospital. During his stay in Montana, he was in a car accident and suffered a back injury. Kadlec’s head of anesthesiology and the credentialing department all knew of Dr. Berry’s accident and back injury, but they did not investigate whether it would impair his work.

After Dr. Berry returned to Kadlec, some nurses thought that he appeared sick and exhibited mood swings. One nurse thought that Dr. Berry’s entire demeanor had changed and that he should be watched closely. In mid-September 2002, Dr. Berry gave a patient too much morphine during surgery, and she had to be revived using Narcan. The neurosurgeon was irate about the incident.

On November 12, 2002, Dr. Berry was assigned to the operating room beginning at 6:30 a.m. He worked with three different surgeons and multiple nurses well into the afternoon. According to one nurse, Dr. Berry was “screwing up all day” and several of his patients suffered adverse affects from not being properly anesthetized. He had a hacking cough and multiple nurses thought he looked sick. During one procedure, he apparently almost passed out.

Kimberley Jones was Dr. Berry’s fifth patient that morning. She was in for what should have been a routine, fifteen minute tubal ligation. When they moved her into the recovery room, one nurse noticed that her fingernails were blue, and she was not breathing. Dr. Berry failed to resuscitate her, and she is now in a permanent vegetative state.

Dr. Berry’s nurse went directly to her supervisor the next morning and expressed concern that Dr. Berry had a narcotics problem. Dr. Berry later admitted to Kadlec staff that he had been diverting and using Demerol since his June car accident in Montana and that he had become addicted to Demerol. Dr. Berry wrote a confession, and he immediately admitted himself into a drug rehabilitation program.

Jones’s family sued Dr. Berry and Kadlec in Washington. Dr. Berry’s insurer settled the claim against him. After the Washington court ruled that Kadlec would be responsible for Dr. Berry’s conduct under respondeat superior, Western, Kadlec’s insurer, settled the claim against Kadlec.

II. Procedural History

Kadlec and Western filed this suit in Louisiana district court against LAA, Dr. Dennis, Dr. Preau, Dr. Baldone, Dr. Parr, and Lakeview Medical, asserting Louisiana state law claims for intentional misrepresentation, negligent misrepresentation, strict responsibility misrepresentation, and general negligence. Plaintiffs alleged that defendants’ tortious activity led to Kadlec’s hiring of Dr. Berry and the resulting millions of dollars it had to expend settling the Jones lawsuit. Plaintiffs’ claim against LAA for negligence, based on a negligent monitoring and investigation theory, was dismissed before trial.

Plaintiffs’ surviving claims for intentional and negligent misrepresentation arise out of the alleged misrepresentations in, and omissions from, the defendants’ referral letters for Dr. Berry. These claims were tried to a jury, which returned a verdict in favor of the plaintiffs on both claims. The jury awarded plaintiffs $8.24 million, which is approximately equivalent to the amount Western spent settling the Jones lawsuit ($7.5 million) plus the amount it spent on attorneys fees, costs, and expenses (approximately $744,000) associated with the Jones lawsuit. The jury also found Kadlec and Dr. Berry negligent. The jury apportioned fault as follows: Dr. Dennis 20%; Dr. Preau 5%; Lakeview Medical 25%; Kadlec 17%; and Dr. Berry 33%. The judgments against Dr. Dennis and Dr. Preau were in solido with LAA. Because defendants were found liable for intentional misrepresentation, plaintiffs’ recovery was not reduced by the percentage of fault ascribed to Kadlec. But the amount was reduced to $5.52 million to account for Dr. Berry’s 33% of the fault. The district court entered judgment against Lakeview Medical and LAA.

III. Discussion