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In a fierce legal battle that may reshape labor classification standards in the healthcare sector, the Fourth Circuit Court of Appeals on Thursday refused to overturn a $9 million judgment against Medical Staffing of America—doing business as Steadfast Medical Staffing—for misclassifying over 1,100 nurses as independent contractors.

The 2-1 decision upheld a district court’s sweeping ruling, aligning with the U.S. Department of Labor (DOL) and rejecting Steadfast’s argument that the court used improper testimony and inappropriately shifted the burden of proof.

“This is not a matter of error—this is a matter of evidence,” Judges Robert B. King and Henry F. Floyd wrote in a 103-page published opinion. “The company is merely attempting to magnify supposed flaws far beyond their true significance.”

Majority Sides with Labor Department on All Fronts

The core of the dispute lies in the economic realities test, a six-factor measure used to determine employment classification. The panel majority meticulously affirmed that the district court properly weighed each factor and justifiably concluded the nurses were indeed employees—not contractors.

The evidence painted a vivid picture: Steadfast set pay rates, dictated schedules, monitored performance, and initiated disciplinary actions. These actions, the court ruled, gave the company the operational control typical of an employer.

One of the most damning findings was Steadfast’s noncompete clause, which barred nurses from working elsewhere, a clear marker of economic dependence, the court said.

The judges also dismissed Steadfast’s claim that nurses’ personal investments—like paying for their own licenses—proved independence. “That’s a requirement of the profession, not an employer-employee litmus test,” the court noted.

Richardson’s Lone Dissent: “A Veneer of Respectability”

U.S. Circuit Judge Julius N. Richardson, however, issued a sharp dissent, accusing his colleagues of overlooking critical testimony and stretching the test’s logic “so far it could apply to almost any economic arrangement.”

“These nurses are in business for themselves,” Richardson countered. “Their pay and success were determined by their performance—evaluated by clients, not Steadfast.”

He warned that the majority’s approach stripped Steadfast of its most compelling evidence, claiming it set a dangerous precedent that blurred the lines of contractual autonomy.

Good Faith Defense Falls Flat

Steadfast had hoped a partial good faith defense—based on limited legal consultations—would reduce liability. But the court was unconvinced, highlighting that the company sought legal advice only after the DOL launched its investigation and failed to follow its attorney’s recommendations.

“A good faith defense demands serious, proactive compliance—not belated, selective listening,” the panel ruled.

Appeal History and Final Outcome

This marks the second time the case has climbed to the Fourth Circuit. Initially, in May 2023, the court vacated an injunction imposed in 2022. But after the case returned to the district court, the ruling stood firm.

In September, a permanent injunction was issued, followed by a December judgment ordering the $9 million payout after clarifying back pay disputes.

Steadfast challenged both decisions, which were consolidated for this final appeal. Thursday’s ruling closes that chapter with a gavel strike heard across the staffing industry.

Legal Teams and Silence from Both Camps

The DOL was represented in-house by Anne W. King, Rachel Goldberg, and Jennifer S. Brand, while Steadfast was represented by Abram J. Pafford of McGuireWoods LLP.

As of Friday, no comments were made by either party’s representatives. But the implications are already resonating beyond the courtroom.

This case stands as a defining moment in labor law enforcement, particularly in sectors relying on contractor models. Employers navigating worker classification would be wise to view this ruling not as a whisper—but as a roaring siren.