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Mays v. Midnite Dreams, Inc.

Supreme Court of Nebraska

July 13, 2018

Elizabeth Mays, and All Others Similarly Situated, Appellee,
v.
Midnite Dreams, Inc., doing business as Shaker's, and Daniel Robinson, appellants.

         1. Contracts: Statutes: Appeal and Error. The construction of a contract and the meaning of a statute are questions of law which an appellate court reviews de novo.

         2. Contracts: Public Policy. The determination of whether a contract violates public policy presents a question of law.

         3. Judgments: Appeal and Error. An appellate court independently reviews questions of law decided by a lower court.

         4. Employer and Employee: Independent Contractor: Master and Servant. Ordinarily, a party's status as an employee or an independent contractor is a question of fact. However, where the facts are not in dispute and where the inference is clear that there is, or is not, a master and servant relationship, the matter is a question of law.

         5. Judgments: Appeal and Error. In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict, and an appellate court will not disturb those findings unless they are clearly erroneous.

         6. __: __ . In reviewing a judgment awarded in a bench trial of a law action, an appellate court does not reweigh evidence, but considers the evidence in the light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence.

         7. Appeal and Error: Words and Phrases. Plain error exists where there is an error, plainly evident from the record but not complained of at trial, which prejudicially affects a substantial right of a litigant and is of such a nature that to leave it uncorrected would cause a miscarriage of justice or result in damage to the integrity, reputation, and fairness of the judicial process.

         [300 Neb. 486] 8. Contracts: Wages. The policy statement in Neb. Rev. Stat. § 48-1201 (Reissue 2010) precludes parties from avoiding the protections of the Wage and Hour Act, Neb. Rev. Stat. § 48-1201 et seq. (Reissue 2010 & Cum. Supp. 2016), by contractual agreement.

         9. Statutes: Legislature: Public Policy. It is the function of the Legislature, through the enactment of statutes, to declare what is the law and public policy of this state.

         10. Contracts: Public Policy. A contract which is clearly contrary to public policy is void.

         11. Constitutional Law: Rules of the Supreme Court: Notice: Statutes: Appeal and Error. Strict compliance with Neb. Ct. R. App. P. § 2-109(E) (rev. 2014) is required in order for an appellate court to consider a challenge to the constitutionality of a statute.

         12. Estoppel. The doctrine of equitable estoppel is based upon the principle that one who has previously taken a position with reference to a transaction and thereby obtained a benefit from the other party cannot thereafter take an inconsistent position which would result in prejudice to the party who relied on the original position.

         13. Appeal and Error. On appeal, an appellate court will consider only arguments that were both specifically assigned and specifically argued in the appellate brief.

         14. Employer and Employee: Independent Contractor. No single test exists for determining whether one performs services for another as an employee or as an independent contractor, and the following factors must be considered: (1) the extent of control which, by the agreement, the employer may exercise over the details of the work; (2) whether the one employed is engaged in a distinct occupation or business; (3) the type of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision; (4) the skill required in the particular occupation; (5) whether the employer or the one employed supplies the instrumentalities, tools, and the place of work for the person doing the work; (6) the length of time for which the one employed is engaged; (7) the method of payment, whether by the time or by the job; (8) whether the work is part of the regular business of the employer; (9) whether the parties believe they are creating an agency relationship; and (10) whether the employer is or is not in business.

         15. __: __ . The right of control is the chief factor distinguishing an employment relationship from that of an independent contractor.

         16. Federal Acts: Employer and Employee: Wages. The Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), requires employers subject to its provisions to pay each employee engaged [300 Neb. 487] in commerce or in the production of goods for commerce, or who is employed in an enterprise which is engaged in commerce or in the production of goods for commerce, specified wages for all hours worked, certain of which are to be compensated at overtime rates.

         17. Federal Acts: Employer and Employee: Words and Phrases. Commerce as used in the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), means interstate commerce.

         18. Federal Acts: Employer and Employee: Proof. One of the basic elements necessary to showing an entitlement to relief under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), is that the work involved interstate activity.

         19.__:__:__. Under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), the burden is on the employee to prove a sufficient nexus to interstate commerce as an essential element of the claim.

         20. __:__:__. Without at least some minimal showing as to the parties' relationship to interstate commerce, the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), cannot be said to apply as a matter of law.

         21. Federal Acts: Employer and Employee. The question whether an employee is engaged in commerce within the meaning of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), is determined by practical considerations, not by technical conceptions. The test is whether the work is so directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated local activity.

         22. __: __ . Work that is purely local in nature does not meet the requirements of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), but any regular contact with commerce, no matter how small, will result in coverage.

         23. __:__. For an employee to be "engaged in commerce" under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), the employee must be directly participating in the actual movement of persons or things in interstate commerce by (1) working for an instrumentality of interstate commerce, e.g., transportation or communication industry employees, or (2) by regularly using the instrumentalities of interstate commerce in his or her work, e.g., regular and recurrent use of interstate telephone, telegraph, mails, or travel.

         24. Federal Acts: Employer and Employee: Sales: Proof. To succeed on a Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (2012 & Supp. IV 2016), claim alleging enterprise coverage, an employee must elicit [300 Neb. 488] evidence to prove that his or her employer's sales were high enough to trigger coverage under the act.

         25. Employer and Employee: Wages. Under Neb. Rev. Stat. § 48-1203(2) (Cum. Supp. 2016), an employee is considered to be a tipped employee if the employer proves the employee received tips sufficient to compensate the employee at a rate greater than or equal to the minimum wage.

         26. Statutes: Appeal and Error. Statutory language is to be given its plain and ordinary meaning, and an appellate court will not resort to interpretation to ascertain the meaning of statutory words which are plain, direct, and unambiguous.

         27. Actions: Employer and Employee: Wages. The Nebraska Wage Payment and Collection Act, Neb. Rev. Stat. § 48-1228 et seq. (Reissue 2010 & Cum. Supp. 2016), does not grant a cause of action to an employee in a case where no regular payday has been established and he or she has never received payment from his or her employer.

         28. Appeal and Error. An appellate court is not obligated to engage in an analysis that is not necessary to adjudicate the case and controversy before it.

          Appeal from the District Court for Lancaster County: Susan I. Strong, Judge. Affirmed in part, and in part reversed and remanded with direction.

          Robert B. Creager, of Anderson, Creager & Wittstruck, PC, L.L.O., for appellants.

          Kathleen M. Neary, of Powers Law, for appellee.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, and Papik, JJ., and Daugherty, District Judge.

          Funke, J.

         This appeal concerns an order from the Lancaster County District Court which found that Elizabeth Mays, an exotic dancer with Midnite Dreams, Inc., doing business as Shaker's, was an employee entitled to compensation under the federal Fair Labor Standards Act[1] (FLSA) and the Wage and Hour [300 Neb. 489] Act[2] (WHA). The district court then awarded damages and attorney fees and costs under the FLSA and the Nebraska Wage Payment and Collection Act[3] (NWPCA). While the court's ruling that Mays was an employee under the WHA was not clearly erroneous, the court erred in granting Mays relief under the FLSA and the NWPCA. Therefore, we affirm in part, and in part reverse and remand with direction to award damages and attorney fees and costs, calculated consistently with the WHA.

         I. BACKGROUND

         Shaker's, a juice bar featuring all-nude dancers, is owned by Midnite Dreams and located near Waverly, Nebraska. Shaker's operates as a "leased" club, meaning it contracts with dancers to lease them the use of its facilities and the dancers receive compensation only from customer tips. Shaker's also directly employs a doorman, wait staff, a bartender, and a disk jockey. Daniel Robinson, one of the appellants, manages Shaker's and is the principal owner and sole corporate officer of Midnite Dreams.

         From 2012 to 2014, Mays danced at Shaker's, under two 1-year "Independent Artist Lease Agreements" with Midnite Dreams. Under the agreements, Mays paid a flat nightly fee for the use of Shaker's stage and dressing room, with additional fees for each use of the "VIP" or private rooms. The agreements did not provide that Shaker's would compensate Mays for any service and did not contain any schedule or minimum work requirements. The appellants never provided any compensation to Mays.

         While dancing at Shaker's, Mays was informed of over 50 additional "house rules," posted at the facility and orally communicated to the dancers, concerning the dancers' conduct and the use of Shaker's facility. Robinson provided inconsistent [300 Neb. 490] testimony as to whether these rules were mandatory or merely "suggestions." However, Mays testified that the house rules were enforced by Robinson and his employees and that failure to follow the house rules would result in discipline through belligerent reprimands, impositions of fines, and threats to terminate the agreements, which were terminable at will.

         The "house rules" concerned the dancers' shift arrival times; hair, makeup, lotion, and dress requirements for the dancers; the number and order of sets the dancers performed during a shift; the method of payment the dancers could accept from customers; cleaning duties; the price the dancers could charge for private and "VIP" room dances; off-stage dancer conduct; and conduct during onstage performances, specifying clothing items the dancers were expected to remove during certain sets.

         Mays prepared a spreadsheet of the dates and hours she performed at Shaker's from various documents and recollections. She also calculated her average compensation from customer tips, after lease fees, while working at Shaker's as $44 per hour.

         Mays filed a complaint and an amended complaint against the appellants seeking unpaid wages, liquidated damages, and attorney fees and costs under the FLSA and Nebraska law. Though Mays' amended complaint alleged that the appellants violated the FLSA and Nebraska law, it contained no allegations concerning whether Mays had engaged in commerce or whether Midnite Dreams was an enterprise engaged in commerce.

         The court determined Mays was an "employee" entitled to minimum wage compensation under the FLSA and Nebraska law, applying the "ABC test" under § 48-1229(1)(a) through (c) and the 10-factor test under § 48-1202(3). The court concluded that by instituting and enforcing the house rules, the appellants transformed Mays into an employee and themselves into employers. The court also ruled Mays was not estopped from claiming she was an employee.

         [300 Neb. 491] The court determined Mays was entitled to a full minimum wage rate because, unlike Nebraska Law, the FLSA required specific notice requirements to count a "tip credit" against minimum wage requirements. Further, it ruled the FLSA entitled Mays to overtime compensation and liquidated damages. The court ruled the appellants were jointly and severally liable for $7, 586.78 in damages for unpaid wages, $27, 945 in attorney fees, and $504.70 in costs. The appellants filed a motion for new trial, which was denied.

         The appellants perfected a timely appeal. We moved the case to our docket on our own motion pursuant to our authority to regulate the caseloads of the Nebraska Court of Appeals and this court.[4]

         II. ASSIGNMENTS OF ERROR

         The appellants assign, restated and reordered, error to the court for (1) concluding that a written lease agreement between the parties created an employment relationship, (2) applying the FLSA and the WHA policy statements to change the parties' contractual relationship, (3) failing to find Mays was estopped from arguing she was an employee, (4) finding Mays was an employee of the appellants, (5) finding Mays was entitled to minimum wage compensation, (6) failing to conclude Mays was a tipped employee, and (7) awarding excessive and unreasonable attorney fees.

         III. STANDARD OF REVIEW

         The construction of a contract and the meaning of a statute are questions of law which an appellate court reviews de novo.[5] The determination of whether a contract violates public policy presents a question of law.[6] An appellate [300 Neb. 492] court independently reviews questions of law decided by a lower court.[7]

         Ordinarily, a party's status as an employee or an independent contractor is a question of fact. However, where the facts are not in dispute and where the inference is clear that there is, or is not, a master and servant relationship, the matter is a question of law.[8]

         In a bench trial of a law action, the trial court's factual findings have the effect of a jury verdict, and we will not disturb those findings unless they are clearly erroneous.[9] In reviewing a judgment awarded in a bench trial of a law action, an appellate court does not reweigh evidence, but considers the evidence in the light most favorable to the successful party and resolves evidentiary conflicts in favor of the successful party, who is entitled to every reasonable inference deducible from the evidence.[10]

         Plain error exists where there is an error, plainly evident from the record but not complained of at trial, which prejudicially affects a substantial right of a litigant and is of such a nature that to leave it uncorrected would cause a miscarriage of justice or result in damage to the integrity, reputation, and fairness of the judicial process.[11] An appellate court may, at its option, notice plain error.[12]

         IV. ANALYSIS

         The appellants' arguments on appeal can be consolidated into the following four issues: (1) Did the court err as a matter [300 Neb. 493] of law in considering whether Mays was an "employee" when the agreements stated the parties had a lessee/lessor relationship? (2) Did the court err in ruling Mays was an "employee"? (3) Did the court err in ruling Mays was entitled to full minimum wage compensation? (4) Was the amount of attorney fees awarded to Mays excessive and unreasonable?

         1. Mays Was Employee Entitled to Compensation

         (a) Agreements Neither Waived Protections Afforded to Mays by WHA nor Estopped ...


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