REINHARDT, Circuit Judge.
Sureway is engaged in the laundry and dry cleaning business. Prior to 1971, Sureway owned or leased a total of 105 retail outlets. Most of these outlets were operated by "agents" pursuant to a written agreement (the pre-judgment contract). Today Sureway owns or leases ninety-one retail outlets. Twenty-five of the outlets are company stores in which Sureway concedes the workers are employees. However, Sureway maintains that the remaining sixty-six are operated by "agents" who are independent contractors and not employees.
In 1971 the Secretary of Labor brought suit under section 17 of the FLSA
Thereafter, Sureway issued a new contract (the first post-judgment contract) in an attempt to convert its court-determined "employees" into independent contractors. Of the sixty-six retail outlets, forty now operate pursuant to the first post-judgment contract. The remaining twenty-six operate under a second post-judgment contract (a franchise agreement) which was issued after a 1975 determination by the State of California that Sureway was offering a franchise.
On September 22, 1975, the Secretary filed an application for enforcement of the 1971 injunction because Sureway had failed to pay overtime compensation to its employees. The Secretary disputed Sureway's assertion that its workers were independent contractors. Instead, the Secretary argued that they were still employees within the meaning of the Act and thus entitled to overtime compensation. The district court agreed with the Secretary and found Sureway in contempt of the 1971 injunction. The court ordered Sureway to pay its employees the withheld overtime compensation.
On appeal, Sureway argues that the post-judgment contracts with its retail outlets had substantially changed the employment relationship so as to make the employees genuine independent contractors. Alternatively, Sureway claims that even if it was properly found in contempt of the 1971 injunction, its liability for unpaid overtime compensation is limited by the statute of limitations contained in section 255(a).
I. EMPLOYEE OR INDEPENDENT CONTRACTOR
In determining whether a person is an "employee" for purposes of social legislation such as the FLSA, the courts have identified a number of factors that should be considered. Although the list is not exhaustive, the court in Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th Cir. 1979), identified the following relevant factors:
Id. at 754 (footnote omitted).
Neither the presence nor the absence of any individual factor is determinative. Whether an employer-employee relationship exists depends "upon the circumstances of the whole activity," Rutherford Food Corp. v. McComb, 331 U.S. 722, 730, 67 S.Ct. 1473, 1477, 91 L.Ed. 1772 (1947), and ultimately, whether, as a matter of economic reality, the individuals "are dependent upon the business to which they render service." Bartels v. Birmingham, 332 U.S. 126, 130, 67 S.Ct. 1547, 1550, 91 L.Ed. 1947 (1947).
The district court, after an extensive analysis of the facts, and under the factors identified in Real v. Driscoll Strawberry,
The post-judgment contracts require that all work taken in by the "agents" be performed by Sureway's plants. The "agents" therefore have no control over where to send the items they receive for cleaning or repair, and are denied the power to search out the best price. In addition, Sureway selects the location of the retail outlets, owns or leases them, supplies the fixtures, furnishes the supplies, pays all real and personal property taxes levied on the outlets, does most of the advertising,
Sureway argues that the district court failed to recognize the "extensive powers and options" exercised by several of its "agents."
Regarding the issue of control in Usery v. Pilgrim, the court there stated: "Control is only significant when it shows an individual exerts such a control over a meaningful part of the business that she stands as a separate economic entity." 527 F.2d at 1313. In the instant case, we agree with the district court's conclusion that Sureway, rather than its "agents," exercises control over the meaningful aspects of the cleaning business.
B. Risk of Profit and Loss
"Agents" make no capital investment and therefore bear no risk of a significant loss; most of the factors that determine profit (advertising, price setting, location, etc.) are controlled by Sureway. Although "agents" are responsible for bad checks, theft losses,
"Agents" make no capital investment. A new "agent" simply buys out the old "agent's" stock, and gets his or her money back when customers pick up their belongings. A similar investment plan was properly characterized by the court in Pilgrim as "nothing more than a method of settling accounts between outgoing and incoming operators" and has no relationship to the cost of setting up and operating a retail outlet. 527 F.2d at 1313-14.
The district court further found that while the "agents" pay more rent under the post-judgment contracts, they also get more return on the first $100 of cleaning. The end result of these contractual changes is that the latter change offsets the former.
Neither long training nor highly developed skills are required to run a retail outlet. A new "agent" can be completely trained in five days. Notwithstanding this, Sureway maintains that the profitability of the various outlets depends upon the initiative and business acumen of each "agent." Sureway apparently overlooks the fact that all major aspects of the business open to initiative — advertising, price setting, power to choose cleaning plants and thereby get the best price — are controlled by Sureway. Consequently, the only skills required are those minor ones that Sureway initially teaches its "agents."
Whereas true independent contractors have a fixed employment period and generally offer their services to different employers, the district court found that Sureway's "agents" do not transfer from one place to another as particular jobs are offered to them. In addition, the "agents" have generally worked continuously for Sureway for long periods of time. Thus, the district court properly concluded that these "agents" have nothing to transfer but their own labor, and are dependent upon Sureway's continued employment.
F. Integral Economic Relationship
Finally, the district court determined that Sureway's cleaning plants and its "agent"-run outlet pickup stations function as interdependent economic units. "Agents" do the same work as those individuals explicitly hired as employees, with the outlets serving as neighborhood collection points. Thus, the "agents" are an essential part of Sureway's operation. Hodgson v. Ellis Transportation Co., 456 F.2d 937, 940 (9th Cir. 1972).
From the foregoing analysis, we are convinced that as a matter of economic reality the "agents" are dependent upon the business to which they render service and therefore are employees within the meaning
336 U.S. 187, 192, 69 S.Ct. 497, 500, 93 L.Ed. 599 (1949).
We therefore agree with the lower court's determination that Sureway is in contempt of the 1971 injunction and is thus liable for unpaid overtime compensation.
II. STATUTE OF LIMITATION
Sureway argues that even if it is liable for unpaid overtime compensation, the extent of its liability is limited by section 255(a), 29 U.S.C. § 255(a),
If section 255(a) applies to contempt proceedings, then Sureway's liability would be limited to the period commencing on (1) September 22, 1973, two years before the date of filing of the civil contempt application, or (2) September 22, 1972, three years before that date. If a contempt proceeding is not an independent action, then Sureway's liability would commence on October 29, 1971. We would not have thought this issue worthy of serious discussion but for the fact that the Fifth and Sixth Circuits have considered the question and have come to different conclusions.
The better reasoned opinion is the Fifth Circuit's decision in Wirtz v. Ocala Gas Co., 336 F.2d 236 (1964). The court in Ocala Gas held that the limitation provision of section 255(a) does not apply to civil contempt proceedings for violations of FLSA injunctions. The court noted that the filing of a civil contempt petition is not the commencement of an independent cause of action, as is contemplated by the language of section 255(a), but rather is a part of the original cause of action. See Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 452, 52 S.Ct. 238, 240, 76 L.Ed. 389 (1932); Gompers
The contrary decision of the Sixth Circuit, Wirtz v. Chase, 400 F.2d 665 (6th Cir. 1968), came after that court had earlier affirmed a district court decision, Tobin v. Frost-Arnett Co., 34 Lab. Cas. ¶ 71,220 (W.D. Tenn.1958), aff'd per curiam, 264 F.2d 246 (6th Cir. 1959), where the district court had faced the same issue we face regarding the application of section 255(a) to contempt proceedings. The district court in Frost-Arnett had unequivocally held section 255(a) inapplicable:
Frost-Arnett, 34 Lab. Cas. at ¶ 71,220, quoted in Chase, 400 F.2d at 668. In attempting to explain its apparent about-face in its ruling in Chase, the Sixth Circuit explained that a 1961 amendment to section 17 had "evidenced a purpose to limit the recovery allowable in proceedings brought by the Secretary, including those for civil contempt, by the statute of limitations contained in § 255." 400 F.2d at 668.
Prior to 1961, the Secretary was empowered to bring suits for prospective relief under section 17 of the Act. That section, however, permitted the Secretary to seek only prospective relief, and expressly barred restitutionary injunctions. Section 17 contained the following proviso:
63 Stat. 920 (1949). In 1961 Congress amended section 17, deleted the proviso, and substituted therefor the present statutory language, which affords the district courts the power to grant restitutionary injunctions in cases involving violations of the minimum wage or overtime provisions of the Act:
29 U.S.C. § 217 (emphasis added to language of 1961 amendment).
As the Sixth Circuit apparently concedes, prior to 1961 the Secretary was not limited by the limitations period contained in section 255(a) when seeking back compensation as relief in a contempt proceeding for violation of a prospective injunction. When, in 1961, the Secretary was granted the power to seek restitutionary injunctions, the enabling amendment included a parenthetical reference to section 255, stating that the back compensation to be obtained under that amendment was limited to the same
The purpose of the 1961 amendment was to broaden, not to limit, the Secretary's authority. There is no reason in policy, logic, or in tents of grammatical construction to deduce that the parenthetical reference to section 255 was intended to limit the Secretary's preexisting authority to seek back compensation in connection with contempt proceedings for violations of prospective injunctions. Nevertheless, the court in Chase concluded that Congress intended to do so, notwithstanding the absence of any legislative history supporting that result.
We are persuaded not to follow the decision in Chase for several reasons. First, section 255 was adopted in 1947 to protect employers from incurring "wholly unexpected liabilities" which "would bring about financial ruin." 29 U.S.C. § 251(a). At the time that congressional declaration of policy was made, the district courts had authority to grant only prospective injunctive relief, and section 17 consequently contained no reference to any limitations period. When Congress amended section 17 to allow restitutionary relief, it limited that relief, and only that relief, by the parenthetical subordinate clause referring to section 255. Such would appear consistent with the policy stated in section 251(a) to avoid "wholly unexpected liabilities," as a suit by the Secretary under section 17 is a new action raising claims of which an employer would not have been previously aware. Once a prospective injunction has been issued against an employer, however, the employer is put on notice that future violations will result in civil contempt proceedings to enforce the injunction. Under these circumstances the employer would not incur any "wholly unexpected liabilities." Thus, applying section 255(a) to contempt proceedings would not only be contrary to the purpose of the statute, it would also reward a wrongful employer who violated an injunction and escaped detection by the Secretary for a period of two or three years.
A second reason not to follow the Chase decision was expressed by the court in Ocala Gas. Section 255(a) applies to an "action commenced ... to enforce any cause of action ...." The Supreme Court has stated that because a contempt proceeding is merely a court's way of enforcing its prior determination, Jacksonville Paper, 336 U.S. at 193-94, 69 S.Ct. at 500-01, it is not to be regarded as an independent action but as part of the original cause of action. Gompers, 221 U.S. at 444-45, 31 S.Ct. at 499. Because of the plain meaning of the statute, then, we are persuaded that section 255(a) cannot reasonably be found to apply to contempt proceedings.
Finally, to hold that section 255(a) applies to a contempt proceeding would limit the effectiveness of an injunction as a means of providing prospective relief. As recently noted by this court in Marshall v. Chala Enterprises, Inc., 645 F.2d 799, 803-04 (9th Cir. 1981), prospective injunctions are essential in effectuating the policy of the FLSA because they place the risk of non-compliance squarely on the employer. See also S.Rep.No.145, 87th Cong., 1st Sess. 40, reprinted in  U.S.Code Cong. & Adm.News 1620, 1658. In quoting from Mitchell v. Pidcock, 299 F.2d 281, 287 (5th Cir. 1962), the court in Chala stated that "`the manifest
If section 255(a) applied to contempt proceedings, the Secretary would be required, in order to assure continuing compliance, to investigate, every two or three years, each employer that was subject to such an injunction. As the district court in the present case pointed out, "[t]he injunction would thus not save the expense of repeated investigations nor would it eliminate the need for bringing such offenders to court every few years." We might add that it would subject the rights of employees under the Act to the vicissitudes of the resources and inclination of the Secretary to conduct such investigations. That result would be contrary to the remedial purpose of the Fair Labor Standards Act.
We therefore affirm the district court's determination that section 255(a) does not apply to a contempt proceeding brought to enforce a prospective injunction. We hold that Sureway is liable for overtime compensation for the time period commencing on October 29, 1971.