The U.S. Court of Appeals for the Fourth Circuit recently upheld a $9.3 million judgment against Medical Staffing of America, LLC, doing business as Steadfast Medical Staffing, in a Department of Labor (DOL) enforcement action under the Fair Labor Standards Act (FLSA). The case—Chavez-DeRemer v. Medical Staffing of America, LLC—serves as a clear warning for staffing agencies and healthcare providers about the risks of misclassifying workers as independent contractors.

Steadfast’s Business Model
Steadfast maintained a registry of licensed nurses, connecting them with client healthcare facilities. Nurses completed an “application for employment” naming Steadfast as the “employer” and nurses “employees,” passed pre-hire screenings, and then signed an “independent contractor” agreement containing a 12-month non-compete clause post-termination.

Nurses could accept or reject shift offers, but Steadfast set non-negotiable pay rates, scheduled shifts, and disciplined nurses for policy violations or complaints—tasks client facilities were barred from handling directly. Clients seeking to hire Steadfast nurses had to pay a buyout fee.

DOL Investigation and Trial
A 2017 DOL investigation found Steadfast had misclassified roughly 1,100 nurses, paid straight-time for overtime hours, and failed to keep proper records. In 2018, the DOL advised reclassification, but Steadfast did not comply. After a bench trial, the court ruled the nurses were employees, awarding $5 million in back wages and an equal amount in liquidated damages, finding the company’s “good faith” defense weak and its classification “objectively unreasonable.”

Fourth Circuit Decision
A divided appellate panel affirmed the ruling, applying the six-factor “economic realities” test and finding:

1. Control: Steadfast dictated pay, scheduling, and discipline.
2. Profit or Loss: Nurses could only increase earnings by working more hours.
3. Investment: Nurses had minimal financial investment.
4. Skill: Nursing skill did not outweigh other factors.
5. Permanence: Ongoing relationships and non-compete terms indicated permanence.
6. Integral Work: Nursing was central to Steadfast’s business.

The court upheld the liquidated damages award.

Key Takeaways for Employers

• Labels don’t decide status: Courts focus on actual work conditions, not contract language.
• Non-compete clauses can imply employment: Restrictions on outside work weigh toward employee classification.
• Good faith requires diligence: Legal advice must be sought early, with full disclosure and follow-through.
• Clients should be cautious: Healthcare providers using staffing agencies should ensure contracts and practices are compliant to avoid potential joint-employer liability.

Healthcare staffing agencies and their clients should review classification practices, independent contractor agreements, and operational controls to ensure compliance and reduce risk.