Tag Archives: Fair Labor Standards Act

S.D.Fla.: Contractor Engaged in Heavy-Duty Cleaning of Airplanes Not Air-Carrier Exempt Under Railway Labor Act (RLA)

Roca v Alphatech Aviation Services, Inc.

In this case, an employee sued his employer, a company that provided heavy-duty cleaning of airplanes, alleging failure to pay overtime in violation of the Fair Labor Standards Act (FLSA). The case was before the court on the defendant cleaning company’s motion for summary judgment. Specifically, the defendant asserted that it was entitled to the air-carrier exemption under the Railway Labor Act (RLA), because its work involved cleaning airplanes pursuant to contracts with air carriers covered that were covered by the exemption. The court disagreed and denied the defendant’s motion.

Describing the facts relevant to its inquiry, the court explained:

Alphatech specializes in heavy-duty cleaning of airplanes operated by commercial and freight airlines. In addition to cleaning airplane interiors and exteriors, Alphatech personnel replace components, perform light maintenance, preventive maintenance, and carry out related servicing of the aircraft. D.E. 22–1. As explained by Plaintiff, Alphatech employees “leave the plane clean; all the bathrooms, the galleys, everything, seats, carpeting[,] …. leave like the shell of the plane.” D.E. 25–1, at 13:13–16. In other words, cleaning is performed when an aircraft’s cabin is completely disassembled. D.E. 24–1, at 24:25. This work is primarily performed at the Miami International Airport complex, in a facility owned by AAR Aircraft Services (“AAR”), though Alphatech’s administrative work is performed out of its own office space adjacent to the airport. D.E. 22–1, at 35:3–6.

Alphatech does work for various air carriers, maintaining a separate contractual relationship with each. See D.E. 26–4. The work performed for each air carrier is executed in accordance with that air carrier’s maintenance manual. D.E. 24–1, at 9:12–14. Each air carrier specifies the manner in which it desires for its planes to be cleaned. Id. at 17:17–18. Alphatech employees sometimes work on the same exact model plane for two different air carriers and nevertheless perform their assignments differently, in accordance with each air carrier’s manual for that air craft. Id. at 17:19–22. The air carriers separately contract with AAR to inspect and certify the work that Alphatech performs. Id. at 15:10–13, 16:15–19. AAR “professors” are also responsible for administering the air carrier-specific training that Alphatech personnel must receive before servicing an aircraft. The air carrier representatives “walk [through the plane], they turn around, and they leave.” D.E. 15:9–10. Defendant Brullo testified that he could not remember the names of any air carrier supervisors because they change all the time, coming and going with the particular aircrafts that Alphatech personnel service. D.E. 23–1, at 29:19–22.

Giving an overview of the air-carrier exemption, and concluding that the defendant could not satisfy its burden to demonstrate the applicability of same, the court stated:

The question presented by this Motion is whether Plaintiff is an “employee of a carrier by air” for purposes of the FLSA’s air carrier exemption. Under the FLSA, employers are required to pay their employees at overtime rates for work in excess of 40 hours per week. See
29 U.S.C. § 207. However, certain classes of employers are exempt from this overtime requirement. Thus, the air carrier exemption removes from coverage “any employee of a carrier by air subject to the provisions of Title II of the Railway Labor Act.” Id. § 213(b)(3). Title II of the Railway Labor Act (“RLA”), in turn, covers “every common carrier by air …, and every air pilot or other person who performs any work as an employee or subordinate official of such carrier or carriers, subject to its or their continuing authority to supervise and direct the manner of rendition of his service.” 45 U.S.C. § 181.

Defendants have failed to show that Plaintiff is exempt from overtime coverage. The application of an exemption under the FLSA is an affirmative defense on which the employer has the burden of proof. Corning Glass Works v. Brennan, 417 U.S. 188, 196–97, 94 S.Ct. 2223, 41 L.Ed.2d 1 (1974). The Eleventh Circuit has found that Title II of the RLA “is certainly unambiguous” in scope, Valdivieso v. Atlas Air, 305 F.3d 1283, 1287 (11th Cir.2002), yet Defendants urge the Court to find that Plaintiff qualifies as an air-carrier employee under a two-pronged conjunctive test promulgated by the National Mediation Board (“NMB”)2 in cases where the employer does not itself fly aircraft. Plaintiff no more satisfies this two-part test than she does the plain text of the subject exemption. Under the NMB’s two-pronged conjunctive test, an employee is covered by the air-carrier exemption if: (1) the nature of the work is that traditionally performed by employees of air carriers (the “function” test); and (2) the employer is directly or indirectly owned or controlled by or under common control with an air carrier (the “control” test). Verrett v. The Sabre Grp., 70 F.Supp.2d 1277, 1281 (N.D.Okla.1999). Both prongs must be satisfied in order for the RLA exemption to apply. Here, neither prong is satisfied.

Discussing each prong in more detail, and finding that defendant here could satisfy neither prong, the court reasoned:

1. Function Test

Defendants have not shown that the work performed by Alphatech employees is of the sort traditionally performed by air-carrier employees. Indeed, Defendants’ own witnesses have severely undercut their position. Mr. Pichardo testified that the air carriers hire outside contractors to perform the sort of heavy-duty cleaning work performed by Alphatech. When Alphatech works on an aircraft, it does so for an extended period of time, rather than between scheduled flights. In fact, Alphatech’s witnesses repeatedly clarified at deposition that the company’s work is not at all akin to the rapid cabin cleanup performed by air carrier personnel between flights. Indeed, Defendants have not presented any evidence tending to show that the work performed by Alphatech is ever performed by air-carrier employees, let alone that it is “traditionally” performed by those workers.

The RLA’s definition of a “carrier” sheds additional light on what should be considered work traditionally performed by carrier employees. Under the RLA, the term “carrier” includes actual carriers as well as “any company … which operates any equipment or facilities or performs any service (other than trucking service) in connection with the transportation, receipt, delivery, elevation, transfer in transit, refrigeration or icing, storage, and handling of property transported.” 45 U.S.C. § 151. The focus, then, tends to be on companies performing the auxiliary functions of loading, unloading, and shipping to and from carriers’ depots and terminals for the ultimate transportation of whatever is being carried in interstate commerce.

What Defendants have presented in their defense are NMB decisions purporting to hold that aircraft cleaning is a function traditionally performed by air-carrier employees. The Court finds these non-precedential decisions to be distinguishable and otherwise unpersuasive.3 Defendants also rely on Moyano v. Professional Contractors Services, Inc., No. 1:07–cv–22411 (S.D.Fla. Mar. 7, 2008), a case involving mechanic contractors. Moyano offers little analysis under either prong, but does rely on the NMB’s analysis in In re Empire Auto Center, Inc., 33 NMB 3, 2005 WL 3089356 (Oct. 13, 2005). In that case, the employees also worked for an independent contractor and performed their tasks according to maintenance manuals provided by the air-carrier clients. 2005 WL 3089356, at *6. However, Empire’s chief financial officer testified that Empire employees performed maintenance work identical to maintenance work performed by aircraft employees employed by commercial air carriers. Alphatech’s owner, by contrast, acknowledges that the work performed by Alphatech is traditionally contracted out by the air carriers. Moreover, the nature of the work at issue in Empire does not at all appear to be similar to the work Plaintiff performed while at Alphatech. Empire’s employees all fell into one of four categories: exhibit air frame and power plant mechanic; non-destructive test technician; aircraft sheet metal technician; and aircraft avionics and electrical mechanic. Id. at 10. These maintenance and repair operations are similar to the work at issue in Moyano, but not similar to the work performed by Plaintiff. The Court finds that Defendants have failed to show that Plaintiff satisfies the function prong of the NMB test.

2. Control Test

Defendants’ argument that Alphatech’s air carrier clients indirectly control the company’s operations would convert most independent contractors into “carriers” for purposes of the RLA, so long as their clients are air carriers. But entering into a contractual relationship, while perhaps necessary, is certainly not sufficient to satisfy the control test. Courts find that carriers control a contractor’s employees “[w]here the carrier controls the details of the day-to-day process by which the contractor provides services—for example, the number of employees assigned to particular tasks, the employees’ attire, the length of their shifts, and the methods they use in their work.” Cunningham v. Elec. Data Sys. Corp., No. 06–3530, 15 Wage & Hour Cas.2d (BNA) 1891, 2010 WL 1223084, at *6 (S.D.N.Y. Mar.31, 2010) (citing In re Ogden Aviation Serv., 23 NBM 98, 104 (Feb. 5, 1996)). Defendants insist that the air carriers have ultimate control over Alphatech employees because they have an absolute say over the means by which their aircrafts are cleaned, and because individual Alphatech employees must be approved to work on each given aircraft. But Defendants’ deposition testimony establishes that the air carriers have absolutely no control over what Alphatech pays its employees, when and how they are promoted or given pay raises, which shifts they work, how many hours they work per shift, or how many employees are scheduled to work on an aircraft at once.

Meticulous work instructions and prior approval of an independent contractors’ employees will not convert those employees into a carrier’s employees for RLA purposes. See Dobbs Houses, Inc. v. N .L.R.B., 443 F.2d 1066, 1070 (6th Cir.1971). In Dobbs Houses, the court found that while an airline caterer was “engaged in a business which requires it to please some very meticulous and demanding customers, that fact alone does not establish their ‘control directly or indirectly’ of it or its employees.” Id. at 1072. In so finding, the Sixth Circuit distinguished the case of a catering company employed by a rail carrier under circumstances more indicative of “control.” It found that control was exercised in that case because: the catering company could not do any work for any other client except by the carrier’s explicit permission; the carrier reimbursed the caterer for the total cost of its workers’ wages; the carrier had the explicit right to discharge the caterer’s employees; and the catering employees were directly subject to the carrier’s supervision. Id. at 1071. None of those factors were present in the Dobbs Houses case, and none are present here.

Thus, the court held that the defendant was not an exempt air-carrier and denied the defendant’s motion for summary judgment. Subsequently, the plaintiff moved for partial summary judgment regarding the same issue, and the court granted the motion for virtually identical reasons as stated here.

Click Roca v. Alphatech Aviation Services, Inc. to read the entire Opinion and Order on [Defendant's Motion for] Summary Judgment. Click Roca v. Alphatech Aviation Services, Inc. to read the Order on [Plaintiff's Motion for Partial] Summary Judgment.

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8th Cir.: Unauthorized Aliens May Sue Under the FLSA to Recover Damages for Work Performed

Lucas v. Jerusalem Cafe, LLC

Following a jury verdict, in favor of the plaintiff-employees, the defendant-employer appealed. As discussed here, the defendant-employer contended that plaintiffs, undocumented (or “illegal”) aliens lacked standing under the FLSA to assert a claim for unpaid wages. Reasoning that unauthorized aliens fit within the definition, scope and purpose of the FLSA, the Eighth Circuit affirmed the jury’s verdict in favor of the workers, and held that undocumented aliens are entitled to the FLSA’s protections regarding work already performed.

Discussing judicial precedent the Eighth Circuit explained:

The only circuit court to address the question directly, see Patel v. Quality Inn S., 846 F.2d 700 (11th Cir.1988); numerous district courts, including the one in this case; and the Secretary of Labor (Secretary) all agree: employers who unlawfully hire unauthorized aliens must otherwise comply with federal employment laws. The employers’ argument to the contrary rests on a legal theory as flawed today as it was in 1931 when jurors convicted Al Capone of failing to pay taxes on illicit income. As Justice Oliver Wendell Holmes explained in United States v. Sullivan, 274 U.S. 259, 263, 47 S.Ct. 607, 71 L.Ed. 1037 (1927), there is no “reason why the fact that a business is unlawful should exempt it from paying the taxes that if lawful it would have to pay.” Here, too, there is no “reason why the fact that” the employers unlawfully hired the workers “should exempt” them “from paying the” wages “that if lawful” they “would have to pay.” Id. “Certainly there is no reason for treating” the employers “more leniently.” Rutkin v. United States, 343 U.S. 130, 137, 72 S.Ct. 571, 96 L.Ed. 833 (1952). Like the Eleventh Circuit, we hold that aliens, authorized to work or not, may recover unpaid and underpaid wages under the FLSA. See Patel, 846 F.2d at 706 (“[U]ndocumented workers are ‘employees’ within the meaning of the FLSA and … such workers can bring an action under the act for unpaid wages and liquidated damages.”).

The court then went on to analyze the plain language of the FLSA:

Because this case is one of statutory interpretation, our “starting point … is the existing statutory text.” Lamie v. U.S. Tr., 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). As to minimum wages, the text of the FLSA states “[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, wages at the [minimum wage rate].” 29 U.S.C. § 206(a) (emphasis added). The FLSA’s overtime wage scheme is more complex, but the crux is simple: “[n]o employer shall employ any of his employees … for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” Id. § 207(a)(1).

The FLSA’s sweeping definitions of “employer” and “employee” unambiguously encompass unauthorized aliens:

(d) “Employer” includes any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.

(e)(1) [With certain statutorily defined exceptions], the term “employee” means any individual employed by an employer.

….

(g) “Employ” includes to suffer or permit to work.

29 U.S.C. § 203(d), (e)(1), (g) (emphasis added). During debate over the FLSA, then-Senator Hugo Black (who, shortly before his elevation to the Supreme Court, sponsored the bill that ultimately became the FLSA) called the FLSA’s “definition of employee … the broadest definition that has ever been included in any one act.” 81 Cong. Rec. 7656–57 (1937).

Importantly, Congress showed elsewhere in the statute that it “knows how to” limit this broad definition “when it means to,” City of Milwaukee v. Illinois & Michigan, 451 U.S. 304, 329 n. 22, 101 S.Ct. 1784, 68 L.Ed.2d 114 (1981), and it did not do so with respect to unauthorized aliens. See 29 U.S.C. § 203(e). The FLSA contains detailed limitations for certain governmental employees, see id. § 203(e)(2); family members engaged in agricultural work, see id. § 203(e)(3); state, local, and interstate governmental volunteers, see id. § 203(e)(4); and “individuals who volunteer their services solely for humanitarian purposes to private non-profit food banks and who receive from the food banks groceries,” id. § 203(e)(5). Nowhere in this list do we see any indication Congress meant to exclude unauthorized aliens from the FLSA’s broad application to “any individual” whom an employer “suffer[s] or permit[s] to work.” Id. § 203(e)(1), (g).

As the Supreme Court has long emphasized, “where, as here, the statute’s language is plain, ‘the sole function of the courts is to enforce it according to its terms.’ ” United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917)). Because the FLSA by its plain terms protects aliens working without authorization, the employers’ argument must fail unless the employers can point to a different statutory basis for limiting “the broadest definition that has ever been included in any one act,” 81 Cong. Rec. at 7657.

Rejecting the defendant’s argument that the IRCA and Hoffman Plastic supported a conclusion that such workers were not entitled to the FLSA’s statutory protections, the court reasoned:

The employers point to the Supreme Court’s decision in Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002), for the proposition that the IRCA implicitly amended the FLSA to exclude unauthorized aliens. The employers misread Hoffman, ignore the relevant agency’s reasonable interpretations of the FLSA and the IRCA, and “ascribe to Congress an intent at variance with the purpose[s] of th[e] statute [s],” Wyandotte Transp. Co. v. United States, 389 U.S. 191, 200, 88 S.Ct. 379, 19 L.Ed.2d 407 (1967).

In Hoffman, the Supreme Court held that unauthorized aliens may not receive backpay after being terminated for engaging in union activities protected by the National Labor Relations Act (NLRA), 29 U.S.C. §§ 151169. See Hoffman, 535 U.S. at 151–52, 122 S.Ct. 1275. The issue in Hoffman was not, as the employers seem to think, whether the NLRA’s broad definitions of “employer” and “employee,” see 29 U.S.C. § 152, excluded unauthorized aliens from all protection by the National Labor Relations Board (NLRB). See Hoffman, 535 U.S. at 142–43, 122 S.Ct. 1275. Rather, the question in Hoffman was whether the NLRB’s remedial power extended far enough to “allow it to award backpay to an illegal alien for years of work not performed.” Id. at 149, 122 S.Ct. 1275 (emphasis added). Far from concluding the NLRA did not protect unauthorized aliens for work actually performed, the Hoffman court—after considering Congress’s intervening enactment of the IRCA—reaffirmed its earlier holding in Sure–Tan, Inc. v. NLRB, 467 U.S. 883, 104 S.Ct. 2803, 81 L.Ed.2d 732 (1984), that the NLRA applies to the actual employment of unauthorized aliens. See Hoffman, 535 U.S. at 151–52, 122 S.Ct. 1275;Sure–Tan, 467 U.S. at 893–94, 104 S.Ct. 2803.

Not only is our reading of Hoffman consistent with the overwhelming majority of post-Hoffman decisions by courts at every level, but “[n]o circuit court has reached a contrary conclusion,” Agri Processor Co. v. NLRB, 514 F.3d 1, 5–6 (D.C.Cir.2008). In Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219 (2d Cir.2006), the Second Circuit explained:

[A]n order requiring an employer to pay his undocumented workers the minimum wages prescribed by the [FLSA] for labor actually and already performed…. does not … condone that violation or continue it. It merely ensures that the employer does not take advantage of the violation by availing himself of the benefit of undocumented workers’ past labor without paying for it in accordance with minimum FLSA standards.

Id. at 243. Interpreting an analogous definition of “employee” in Agri Processor, the D.C. Circuit found “absolutely no evidence that in passing IRCA Congress intended to repeal the NLRA to the extent its definition of ‘employee’ include[d] undocumented aliens.” Agri Processor, 514 F.3d at 5.

The court also noted that the Eleventh Circuit had recently reiterated the undocumented aliens were protected by the FLSA, further supporting its conclusion regarding same:

Shortly after our court heard argument in this case, the Eleventh Circuit reaffirmed its decision in Patel “that undocumented aliens may recover their unpaid wages under the FLSA.” Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1306 (11th Cir.2013). Rejecting arguments similar to those advanced by the employers here, the Eleventh Circuit concluded “the IRCA does not express Congress’s clear and manifest intent to exclude undocumented aliens from the protection of the FLSA.” Id. at 1308.

The court found further support in the fact that the DOL has long taken the position that undocumented aliens are covered under the FLSA:

As the Secretary explains, there is no conflict between the FLSA and the IRCA. Both statutes work in tandem to discourage employers from hiring unauthorized workers by “assur[ing] that the wages and employment of lawful residents are not adversely affected by the competition of illegal alien employees who are not subject to the standard terms of employment,” Sure–Tan, 467 U.S. at 893, 104 S.Ct. 2803.

The Department of Labor’s position that the FLSA applies to aliens without employment authorization is longstanding and consistent. In 1942, just four years after the FLSA’s passage, the Department of Labor’s “Wage and Hour Administrator opined that alien prisoners of war were covered by the [FLSA] and therefore were entitled to be paid the minimum wage.” Patel, 846 F.2d at 703. Since then, in case after case, the Department of Labor has taken the same position it takes here.

In the Secretary’s amicus brief filed in this case, the Secretary explains that applying the FLSA to unauthorized aliens “is essential to achieving the purposes of the FLSA to protect workers from substandard working conditions, to reduce unfair competition for law-abiding employers, and to spread work and thereby reduce unemployment by requiring employers to pay overtime compensation.” Given the Department’s decades-long consistency and the Secretary’s “specialized experience and broader investigations and information” in these matters, we think the Secretary’s position is persuasive and merits Skidmore deference—to the extent there is any statutory ambiguity. Skidmore v. Swift & Co., 323 U.S. 134, 139, 65 S.Ct. 161, 89 L.Ed. 124 (1944); see also Godinez–Arroyo v. Mukasey, 540 F.3d 848, 850 (8th Cir.2008).

Finally the court recognized Congressional intent also supported its conclusion:

We agree with the Secretary’s position, independent of any deference to the Department of Labor’s expertise, because Congress’s purposes in enacting the FLSA and the IRCA are in harmony. The IRCA unambiguously prohibits hiring unauthorized aliens, and the FLSA unambiguously requires that any unauthorized aliens—hired in violation of federal immigration law—be paid minimum and overtime wages. The IRCA and FLSA together promote dignified employment conditions for those working in this country, regardless of immigration status, while firmly discouraging the employment of individuals who lack work authorization. “If an employer realizes that there will be no advantage under the” FLSA “in preferring [unauthorized] aliens to legal resident workers, any incentive to hire such … aliens is correspondingly lessened.” Sure–Tan, 467 U.S. at 893, 104 S.Ct. 2803. Exempting unauthorized aliens from the FLSA would frustrate the purposes of the IRCA, for unauthorized workers’ “acceptance … of jobs on substandard terms as to wages and working conditions can seriously depress wage scales and working conditions of citizens and legally admitted aliens.” De Canas v. Bica, 424 U.S. 351, 356–57, 96 S.Ct. 933, 47 L.Ed.2d 43 (1976).

Holding employers who violate federal immigration law and federal employment law liable for both violations advances the purpose of federal immigration policy by “offset[ting] what is perhaps the most attractive feature of [unauthorized] workers—their willingness to work for less than the minimum wage.” Patel, 846 F.2d at 704. For this reason, prohibiting employers from hiring unauthorized aliens is in harmony with requiring employers—including those who break immigration laws by hiring unauthorized workers—to provide fair working conditions and wages. Both (1) the legislative history of the IRCA, which we reference “for those who find legislative history useful,” United States v. Tinklenberg, 563 U.S. ––––, ––––, 131 S.Ct. 2007, 2015, 179 L.Ed.2d 1080 (2011), and (2) “our steadfast canons of statutory construction,” United States v. Johnson, 703 F.3d 464, 468 (8th Cir.2013), confirm this point.

First, the House Committee on Education and Labor’s report on the IRCA explained Congress did

not intend that any provision of [the IRCA] would limit the powers of State or Federal labor standards agencies such as … the Wage and Hour Division of the Department of Labor … to remedy unfair practices committed against undocumented employees for exercising their rights before such agencies or for engaging in activities protected by these agencies. To do otherwise would be counter-productive of our intent to limit the hiring of undocumented employees and the depressing effect on working conditions caused by their employment.

H.R.Rep. No. 99–682(II), at 1 (1986), reprinted in 1986 U.S.C.C.A.N. 5757, 5758 (emphasis added). When Congress passed the IRCA, at least the authors of this report expected the FLSA would continue to protect unauthorized aliens from substandard working conditions and wages.

Second, § 111(d) of the IRCA “authorized to be appropriated, … such sums as may be necessary to the Department of Labor for enforcement activities of the Wage and Hour Division … in order to deter the employment of unauthorized aliens and remove the economic incentive for employers to exploit and use such aliens.Pub.L. No. 99–603, § 111(d), 100 Stat. 3359, 3381 (1986). Presuming, as the employers do, that the IRCA impliedly exempts unauthorized aliens from the protections of the FLSA would render this section “mere surplusage,” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 174, 2 L.Ed. 60 (1803). No “sums” would “be necessary” to enforce the FLSA as to unauthorized aliens if the FLSA did not apply to their employment. § 111(d), 100 Stat. at 3381. A reading that turns an entire subsection into a meaningless aside “is inadmissible, unless the words require it.” Marbury, 5 U.S. (1 Cranch) at 174. The IRCA’s words do not require it, so “the presumption against surplusage [is] decisive.” Johnson, 703 F.3d at 468.

As such, the court held that “unauthorized aliens may sue under the FLSA, 29 U.S.C. §§ 206(a), 207(a), 216(b), to recover statutory damages for work actually performed.”

Click Lucas v. Jerusalem Cafe, LLC to read the entire opinion.  Click DOL Amicus Brief to read the Secretary of Labor’s Amicus Curiae Brief, submitted in support of the Plaintiffs-Appellees.

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DOL Announces Final Rule Extending Minimum Wage and Overtime Pay to Home Health Workers

In an announcement that has long been awaited by workers advocates and those in the home health industry as well, today the United States Department of Labor (DOL) announced a final rule, to go into effect on January 1, 2015, which extends the FLSA’s minimum wage and overtime protections to home health aides that perform typical CNA tasks in the homes of the aged and infirm.  In an email blast, the DOL reported:

The U.S. Department of Labor’s Wage and Hour Division announced a final rule today extending the Fair Labor Standards Act’s minimum wage and overtime protections to most of the nation’s direct care workers who provide essential home care assistance to elderly people and people with illnesses, injuries, or disabilities. This change, effective January 1, 2015, ensures that nearly two million workers – such as home health aides, personal care aides, and certified nursing assistants – will have the same basic protections already provided to most U.S. workers. It will help ensure that individuals and families who rely on the assistance of direct care workers have access to consistent and high quality care from a stable and increasingly professional workforce.

Among other things, the final rule overrules the 2007 holding of the Supreme Court in Long Island Care at Home, Ltd. v. Coke, and requires 3rd party employers such as staffing agencies to pay companions and home health workers overtime under the FLSA when they work in excess of 40 hours per week.

The New York Times provides a pretty good synopsis of the changes to the Companionship Exemption, provided by the final rule:

Under the new rule, any home care aides hired through home care companies or other third-party agencies cannot be exempt from minimum wage and overtime coverage. The exemptions for aides who mainly provide “companionship services” — defined as fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance — are limited to the individual, family or household using the services.

If an aide or companion provides “care” that exceeds 20 percent of the total hours she works each week, then the worker is to receive minimum wage and overtime protections.

The new rule defines care as assisting with the activities of daily living, like dressing, grooming, feeding or bathing, and assisting with “instrumental activities of daily living,” like meal preparation, driving, light housework, managing finances and assisting with the physical taking of medications.

The companionship exemption will not apply if the aide or companion provides medically related services that are typically performed by trained personnel, like nurses or certified nursing assistants.

Live-in domestic service workers who reside in the employer’s home and are employed by an individual, family or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked.

Click Final Rule to read the published rule, or U.S. News and Report to read an article discussing the announcement.

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What Defines Commercial Motor Vehicles (CMVs) for Application of MCA Exemption Under Technical Corrections Act (TCA)? Courts Disagree

Two recent cases—one from the Eighth Circuit and one from a District court within the Ninth Circuit—continue to demonstrate that when it comes to application of the Motor Carrier Act’s exemption to the FLSA, for employees who drive commercial motor vehicles (CMVs) in interstate commerce, courts continue to be confused. Within days of the Eighth Circuit’s holding that it is the Gross Vehicle Weight Rating (GVWR) dictates whether a motor vehicle weighs 10,000 pounds or more, and thus reaches the threshold to be considered a CMV, a court in the District of Idaho held that the actual weight when loaded and not the GVWR dictates the weight for purposes of application of the MCA under the Technical Corrections Act (TCA). Both cases are discussed below.

8th Cir.: GVWR, Not Actual Weight, Is the Appropriate Criterion for Determining if the TCA Applies

McCall v. Disabled American Veterans

Initially, the Eighth Circuit discussed the historical background of the TCA, with respect to the MCA and SAFETEA-LU, the amendment that preceded the TCA:

Under the FLSA, “[e]mployees engaged in interstate commerce” are to be paid “one and one-half times” their regular salary rates for all work performed in excess of 40 hours per week. 29 U.S.C. § 207(a)(1). However, under the MCAE, the overtime-pay provision of § 207 does not apply to “any employee with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of Title 49.” 29 U.S.C. § 213(b)(1). “The Secretary of Transportation may prescribe … maximum hours of service of employees of … motor carrier[s] and … motor private carrier[s].” 49 U.S.C. § 31502(b)(1) and (2). As relevant here, “motor private carrier” is a person “transporting property by motor vehicle when … the property is being transported for sale, lease, rent, or bailment or to further a commercial enterprise .” 49 U.S.C. § 13102(15)(C).

In 2005, the SAFETEA–LU amended the definition of “motor private carrier” to mean “a person, other than a motor carrier, transporting property by commercial motor vehicle (as defined in section 31132).” 49 U.S.C. § 13102(15) (2005) (emphasis added). Section 31132 defines a “commercial motor vehicle” as one which “has a gross vehicle weight rating or gross vehicle weight of at least 10,001 pounds, whichever is greater.” 49 U.S.C. § 31132(1). Therefore, following enactment of the SAFETEA–LU, the overtime-pay provision of § 207 began to apply to drivers of vehicles with a GVWR less than 10,001 pounds.

Reasoning that the TCA did not do away with SAFETEA-LU’s measure of 10,000 pounds by using the GVWR, the court explained:

In 2008, the TCA deleted the § 13102(15) reference to a “commercial motor vehicle (as defined in section 31132)” and inserted the more generic language “motor vehicle,” which is its current form. 49 U.S.C. § 13102(15) (2008). Section 306 of the TCA also extended FLSA overtime protections to “covered employees,” defined as individuals who are employed as motor private carriers, “who perform[ ] duties on motor vehicles weighing 10,000 pounds or less.” (Emphasis added). Pub.L. 110–244, Title III, § 306, 122 Stat. 1572, 1621 (2008). In the Bulletin, the Department of Labor’s Wage and Hour Division stated that it “will continue to use the gross vehicle weight rating2 (GVWR) or gross combined vehicle weight rating in the event that the vehicle is pulling a trailer” to determine if a vehicle is one “weighing 10,000 pounds” or less. Therefore, the overtime-pay provision of § 207 applies to vehicles with a GVWR of 10,000 pounds or less. We accord appropriate deference to this interpretation of the FLSA by the Secretary of Labor. See Donovan v. Bereuter’s, Inc., 704 F.2d 1034, 1036 (8th Cir.1983) ( “[T]he Secretary[ of Labor]‘s interpretations are entitled to considerable weight.”).

McCall argues that he was a covered employee with overtime rights under the FLSA because the trucks that he operated actually weighed less than 10,000 pounds despite having GVWRs greater than 10,000 pounds. Upon review, we agree with the district court that GVWR, not actual weight, is the appropriate criterion for determining if the TCA applies to place a driver’s wage regulation under the FSLA rather than the Transportation Secretary. McCall operated trucks with GVWRs in excess of 10,000 pounds. He is not entitled to overtime under the FSLA.

Click McCall v. Disabled American Veterans to read the entire Opinion.

D.Idaho: Actual Weight, Not GVWR Determinative of Whether Vehicle Qualifies as CMV Under TCA

Garcia v. Western Waste Services, Inc.

In the second case, a court within the District of Idaho examined the identical issue and reached the opposite conclusion. That is the Idaho court held that the same regulation relied upon by the Eighth Circuit was not entitled to deference, because the statute at issue, the TCA, unambiguously eliminated SAFETEA-LU’s prior definition of a CMV (utilizing the GVWR) for vehicles not pulling a trailer. As such, the Garcia court held that the actual weight of the vehicle and not the GVWR dictates whether a vehicle is a CMV within the jurisdiction of the Secretary of Transportation (and whether the MCA applies).

Framing the issue, the court explained:

Garcia asserts that he is a “covered employee” under the TCA small vehicle exception due to his work as a mechanic and/or driver. To qualify for overtime pay as a mechanic, Garcia must show that: (1) he was a mechanic for a DOT-regulated motor carrier, (2) his work affected, in part, the safety of vehicles weighing 10,000 pounds or less, and (3) that the vehicles were in transportation in interstate commerce. Pub.L. No. 110–244, § 306(c). It is undisputed that Garcia worked as a mechanic for Western Waste, and that Western Waste is a DOT-regulated motor carrier. It is also clear that Garcia’s work affected the safety of all of Western Waste’s vehicles, which all travel in interstate commerce. Molitor Aff., ¶¶ 13–16, Dkt. 33–4. The main questions at issue are whether any of Western Waste’s vehicles weigh 10,000 pounds or less, and whether Garcia’s work on any such vehicles is sufficient to qualify him for the TCA exception.

Reasoning that the actual weight of the vehicle and not the hypothetical GVWR governs whether a vehicle meets the definition of a CMV under the TCA, the court explained:

(1) Vehicle Weight

The issue is how do you weigh a truck? Garcia asserts that Western Waste’s fleet has a number of service vehicles that weigh less than 10,000 pounds. Western Waste has 5 service vehicles that are used to transport portable toilets, run errands, and do service on other trucks and equipment. When the parties weighed three of Western Waste’s service vehicles on June 13, 2012, the actual weight of each vehicle, without a trailer, was less than 10,000 pounds. Thorne Aff., Dkt. 37–2. However, Western Waste argues that actual weight is not the appropriate measure of vehicle weight under the TCA. Instead, the GVWR or GCWR should be used. Western Waste points out that all of its service vehicles are equipped to pull, and regularly pull, a 5,740 pound trailer. Additionally, Western Waste states that there are several other trailers of unknown weight that the service vehicles regularly pull. Accordingly, Western Waste argues that all of its service vehicles have GCWRs that exceed 10,000 pounds.

The TCA does not specify how vehicle weight is to be determined. As mentioned above, SAFETEA–LU specifically provided that the GVWR or GCWR was used to determine vehicle weight. 49 C.F.R. § 390.5. The TCA dropped any reference to GVWR or GCWR, and simply refers to “motor vehicles weighing 10,000 pounds or less.” Thus, Congress appears to have abandoned the GVWR and GCWR standard for determining availability of the exemption.

After Congress passed the TCA, the Department of Labor (“DOL”) issued Field Assistance Bulletin No.2010–2 (“the Bulletin”) to explain its interpretation of the TCA. Specifically, the Bulletin announced that the Wage and Hour Division “will continue to use the [GVWR] or [GCWR] in the event that the vehicle is pulling a trailer” to determine vehicle weight. Id. This raises the question of whether the Bulletin’s interpretation of the TCA is entitled to deference.

After a discussion of the types of deference that a court owes to administrative regulations of that administrations own regulations, the court rejected DOL’s interpretation of the TCA, and held that the regulation at issue (defining the weight of a CMV) was unambiguous:

Under these standards, the Court concludes’ that the DOL’s interpretation of the TCA is not entitled to deference. It is not an attempt to interpret its own ambiguous regulation, and therefore is not entitled to deference under Auer. Additionally, it is not entitled to Chevron deference. When Congress enacted the TCA, it had the language of the SAFETEA–LU before it, and chose not to rely upon GVWR or GCWR to measure a vehicle’s weight for purposes of the TCA exception. In the Court’s view, the language in the TCA is not ambiguous. Therefore, the DOL’s interpretation, which is contrary to the plain language of the statute, is not warranted.

Moreover, the DOL Bulletin is not persuasive and runs afoul of the charge that the TCA exception be construed broadly. The DOL offers no explanation as to why it will continue to use GVWR or GCWR, despite the clear language of the statute not adopting that standard. Furthermore, using GVWR or GCWR narrows the number of employees covered by the TCA exception. Such a reading does not allow the Court to construe the TCA exception “to apply to the furthest reaches consistent with Congressional direction.” Klem, 208 F.3d at 1089. Therefore, in absence of any guidance from Congress and “a specific definition in the TCA, the ordinary meaning of ‘weight’ controls.” Glanville v. Dupar, Inc., CIV.A. H–08–2537, 2009 WL 3255292, *8 (S.D.Tex. Sept. 25, 2009).

Even under the ordinary meaning of weight, however, the weights of a truck and trailer which are commonly used together should be combined. Id. (holding that because the plaintiffs “operated vehicles, truck and trailer combined, with an actual weight of greater than 10,000 pounds,” the TCA was inapplicable). When Western Waste’s service vehicles are combined with the trailer, they exceed 10,000 pounds. However, there are unresolved factual questions as to whether all of the service trucks actually pull the trailer. Garcia contends that only one of the service trucks pulled the trailer during his employment. Garcia Decl., ¶ 4, Dkt. 37–1. Garcia’s allegations raise doubt as to whether all of the trucks should have a weight rating combined with the trailer. If vehicles # 25 and # 27 do not pull the trailer, as Garcia asserts, then they will have an actual weight and GVWR under 10,000 pounds. Thus disputed issues of fact remain.

Click Garcia v. Western Waste Services, Inc. to read the entire Memorandum Decision and Order.

Although not discussed here, the courts also fell on opposite sides of the “mixed fleet” question. For anyone facing this issue—whether an employee who drives both CMVs and non-CMVs for his or her employer within the same week—you would be well-advised to read these opinions on that issue as well.

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D.Mass.: Where 10% of Business Comprised of Sales of Automobiles, Defendant Not “Primarily Engaged in the Business of Selling Such Vehicles”

Carroca v. All Star Enterprises and Collision Center Inc.

Although not often the subject of litigation, pursuant to 29 U.S.C. § 213(10)(a), certain employees of automobile dealerships are exempt from the FLSA’s overtime requirements. Specifically, that statute exempts from overtime:

any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers…

In this case, the court was called upon, in part, to decide whether defendant—90% of its business was the repair of automobiles, with the remaining 10% of the business comprised of the sale of automobiles—qualified as such an automobile dealership. The court held, as a matter of law, that such a business does not qualify for the exemption.

The court reasoned:

All Star admits that Carroca was employed as an auto body repairman. D. 19 ¶ 5; D. 23 ¶ 5. Assuming without deciding that an auto body repairman is a “salesman, partsman, or mechanic,” the next question, which the parties dispute, is whether Carroca was “employed by a nonmanufacturing establishment primarily engaged in the business of selling [automobiles, trucks, or farm implements] to ultimate purchasers.” The Department of Labor has issued 29 C.F.R. § 779.372, which defines what it means to be “primarily engaged” in said business. According to the regulation, “[a]s applied to the establishment, primarily engaged means that over half of the establishments [sic] annual dollar volume of sales made or business done must come from sales of the enumerated vehicles.” Id.; see Donovan v. Bereuter’s, Inc., 704 F.2d 1034, 1036–37 (8th Cir.1983) (construing “the legislative history as indicating that Congress intended the exemption to be narrowly applied and was not designed to exempt those dealers who engage in the retail sales of automobiles to a limited degree”).

Here, as All Star acknowledges, D. 22 at 2, All Star has the burden of proof with respect to the applicability of the exemption. Hines v. State Room Inc., 665 F.3d 235, 240 (1st Cir.2011). Here, All Star has not met that burden where All Star admits that only “approximately ten percent” of All Star’s business constitutes automobile sales. Pl. Stmt. of Facts, D. 19 ¶ 2; Def. Resp., D. 23 ¶ 2; see Def. Resp. to Interrog. ¶ 5 (stating that “vehicle sales constitute approximately 10% of the business of Allstar; approximately 90% of the business consists of vehicle repair”). Thus, All Star is incorrect that it falls within the FLSA overtime exemption under 29 U.S.C. § 213. Accordingly, the exemption does not apply to All Star and it is bound by the overtime provisions under 29 U.S.C. § 207.

Click Carroca v. All Star Enterprises and Collision Center Inc. to read the entire Memorandum and Order.

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6th Cir.: Employment Contract That Purported to Shorten FLSA Statute of Limitations to 6 Months Invalid

Boaz v. FedEx Customer Information Services Inc.

Employers continue to include language in employment contracts which purports to shorten the statute of limitations applicable to FLSA claims. By law, the statute of limitations is 2 years on such claims if the employee is unable to show the employers violations are willful, and 3 years if the employee can make such a showing. Recently, the Sixth Circuit reviewed FedEx’s contract that purported to reduce that time to 6 months.  As discussed below, it struck down the employers’ attempts to shorten the statute of limitations. Reasoning that same was an impermissible waiver of rights under the FLSA, the court agreed that such a limitation was unenforceable. In so doing, the Sixth Circuit reversed the trial court, which had held that such an abridgement of FLSA rights was permissible.

Initially the court briefly reiterated longstanding black-letter law regarding the non-waivable nature of FLSA rights:

Shortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights under the Act. See Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697, 706–10, 65 S.Ct. 895, 89 L.Ed. 1296 (1945). Such waivers, according to the Court, would “nullify” the Act’s purpose of “achiev[ing] a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.” Jewell Ridge Coal Corp. v. Local No. 6167, United Mine Workers of Am., 325 U.S. 161, 167, 65 S.Ct. 1063, 89 L.Ed. 1534 (1945); see also O’Neil, 324 U.S. at 707. The Court therefore held that employees may not, either prospectively or retrospectively, waive their FLSA rights to minimum wages, overtime, or liquidated damages. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114, 66 S.Ct. 925, 90 L.Ed. 1114 (1946); O’Neil, 324 U.S. at 707; see also Runyan v. Nat’l Cash Register Corp., 787 F.2d 1039, 1041–42 (6th Cir.1986) (en banc).

The court then struck the contract clause at issue reasoning:

The issue here is whether Boaz’s employment agreement operates as a waiver of her rights under the FLSA. Boaz accrued a FLSA claim every time that FedEx issued her an allegedly illegal paycheck. See Hughes v. Region VII Area Agency on Aging, 542 F.3d 169, 187 (6th Cir.2008). She filed suit more than six months, but less than three years, after her last such paycheck—putting her outside the contractual limitations period, but within the statutory one.

An employment agreement “cannot be utilized to deprive employees of their statutory [FLSA] rights.” Jewell Ridge, 325 U.S. at 167 (quotation omitted). That is precisely the effect that Boaz’s agreement has here. Thus, as applied to Boaz’s claim under the FLSA, the six-month limitations period in her employment agreement is invalid.

In so doing, the court rejected FedEx’s reliance on what it deemed inapposite case law:

FedEx (along with its amicus, Quicken Loans) responds that courts have enforced agreements that shorten an employee’s limitations period for claims arising under statutes other than the FLSA—such as Title VII. And FedEx argues that the discrimination barred by Title VII (i.e., racial discrimination) is just as bad as the discrimination barred by the FLSA, and hence that, if an employee can shorten her Title VII limitations period, she should be able to shorten her FLSA limitations period too. But that argument is meritless for two reasons. First, employees can waive their claims under Title VII. See, e.g., Alexander v. Gardner–Denver Co., 415 U.S. 36, 52, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974). Second—and relatedly—an employer that pays an employee less than minimum wage arguably gains a competitive advantage by doing so. See Citicorp Indus. Credit, Inc. v. Brock, 483 U.S. 27, 36, 107 S.Ct. 2694, 97 L.Ed.2d 23 (1987). An employer who refuses to hire African–Americans or some other racial group does not. The Court’s rationale for prohibiting waiver of FLSA claims is therefore not present for Title VII claims.

FedEx also relies on Floss v. Ryan’s Family Steak Houses, Inc., 211 F.3d 306 (6th Cir.2000). There, we held that an employee asserting an FLSA claim can waive her right to a judicial forum, and instead arbitrate the claim. Id. at 313, 316. From that holding FedEx extrapolates that employees can waive their “procedural” rights under the FLSA even if they cannot waive their “substantive” ones. But the FLSA caselaw does not recognize any such distinction. That is not surprising, given that the distinction between procedural and substantive rights is notoriously elusive. See Sun Oil Co. v. Wortman, 486 U.S. 717, 726, 108 S.Ct. 2117, 100 L.Ed.2d 743 (1988). More to the point, Floss itself said that an employee can waive his right to a judicial forum only if the alternative forum “allow[s] for the effective vindication of [the employee's] claim.” 211 F.3d at 313. The provision at issue here does the opposite.

The limitations provision in Boaz’s employment agreement operates as a waiver of her FLSA claim. As applied to that claim, therefore, the provision is invalid.

Click Boaz v. FedEx Customer Information Services Inc. to read the entire Opinion. Click DOL Amicus Brief, to read the amicus brief submitted by the Department of Labor in support of the Plaintiff-Appellant.

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D.Nev.: Statute of Limitations Tolled for Employees Who Opted Into First-Filed Case Where Conditional Certification Was Denied (and Their Consents Were Dismissed)

Orduna v. Champion Drywall, Inc.

This case was before the court on multiple motions, including plaintiff’s motion for tolling the statute of limitations. As discussed here, the precise issue before the court was what effect, if any, a plaintiff’s consent to join—filed in a prior lawsuit where conditional certification was ultimately denied, and such consent was dismissed—has on such opt-in’s statute of limitations. Electing to treat the motion as one for equitable tolling, the court held that such circumstances amounted to “extraordinary circumstances” such that equitable tolling was warranted. However, the court tolling the statute of limitations only for such time that the consent to join was filed with the court in the prior case, prior to dismissal.

The court reasoned, in part:

Plaintiffs assert that because they filed their consents to sue in a timely manner in Champion I, the statute of limitations for those claims should be equitably tolled to the date on which each plaintiff filed his or her consent. Defendants argue that plaintiffs’ motion should be denied or, in the alternative, tolling should only apply from the date that each plaintiff filed his or her consent until the date of the court’s denial of certification in Champion I on March 27, 2012. The court agrees with defendants’ latter position…

Upon decertification of the collective [action], therefore, it is critical to preserve opt-in plaintiffs’ ability to timely file individual actions.” Sliger v. Prospect Mortgage, LLC, 2012 WL 6005711 (E.D.Cal. Nov.30, 2012).

The Ninth Circuit has recognized the doctrine of equitable tolling of an FLSA claim. Partlow v. Lewis Orphans’ Home, Inc., 645 F.2d 757, 760 (9th Cir.1981), abrogated on other grounds, Hoffman–La Roche Inc. v. Sperling, 493 U.S. 165, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). Such tolling “applies when the plaintiff is prevented from asserting a claim by wrongful conduct on the part of the defendant, or when extraordinary circumstances beyond the plaintiff’s control made it impossible to file a claim on time.” Id. at 60. The doctrine of equitable tolling preserves a plaintiff’s claims when strict application of the statue of limitations would be inequitable. See United States v. Patterson, 211 F.3d 927, 930 (5th Cir.2000). Equitable tolling applies only in “rare and exceptional circumstances,” Teemac v. Henderson, 298 F.3d 452, 457 (5th Cir.2002), and should be applied sparingly. Steed v. Head, 219 F.3d 1298, 1300 (11th Cir.2000).

Applying this reasoning, the court granted the plaintiffs’ motion.  However, it limited tolling to the period of time in during which the opt-ins’ consents had been filed in the prior case:

Here, plaintiffs have not shown that the statute of limitations should be equitably tolled past the court’s denial of certification in Champion I. Plaintiffs claim that they did not know that the court would not grant the collective certification in that case, and that to preserve their rights, each plaintiff in a collective action would have to file individual actions at the same time they filed their consents to sue. The failure to predict the outcome of a motion for collective certification is experienced by each FLSA collective action litigant, and the possibility that diligence would be required in the filing of an individual claim if a collective action was denied or de-certified neither amounts to extraordinary circumstances nor a situation out of a plaintiff’s control.

Click Orduna v. Champion Drywall, Inc. to read the entire Opinion.

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S.D.Ohio: Stage I Scrutiny Applied to Motion for Conditional Certification, Filed Prior to Bulk of Discovery, Notwithstanding Discovery Thereafter

Engel v. Burlington Coat Factory Direct Corp.

In a scenario that seems to be playing out more and more throughout the country, given the prevalence of FLSA collective action filings, this court was faced with a decision regarding which type of scrutiny to apply to plaintiffs’ motion for conditional certification of a collective action. Although the plaintiffs filed their motion only three (3) months into discovery, by the time the court was able to address the motion, discovery had concluded. While the plaintiffs maintained that the court should apply Stage I scrutiny, the defendants argued that Stage II scrutiny (or “final certification” scrutiny) should be applied, because discovery had been completed after plaintiffs filed their motion. The court reasoned that the lower Stage I scrutiny should be applied, based on the posture of the case when plaintiffs filed their Motion, not when the decision was rendered.

Discussing the issue, the court explained:

Plaintiffs and Defendants dispute whether this suit is in the first or second phase of inquiry. Defendants argue that this case is fully discovered, as the parties have produced more than 3,500 documents, served multiple sets of interrogatories and requests for production, and have taken six depositions. (Doc. 24, at 23). Plaintiffs filed their motion for conditional certification eight months after discovery opened, and five months before discovery closed on March 29, 2013. (Id.). Plaintiffs argue that because no discovery was permissible prior to the February 13, 2012 26(f) conference, and the parties agreed to postpone discovery pending mediation in July 2012, discovery had occurred less than three months before their motion for conditional certification was filed. (Doc. 26, at 8). Before Plaintiffs’ motion was filed in October, only three depositions had been taken. (Id.)

This Court finds that this suit is in the first phase of inquiry. Discovery closed on March 29, 2013, and Plaintiffs’ motion was filed in October 2012. Thus, discovery had not completed by the time Plaintiffs’ motion was filed. Moreover, as Plaintiffs correctly point out, only three out of eight total months of discovery took place before their motion was filed.

In ruling on Plaintiff’s motion, the Court’s analysis will employ the first phase of inquiry.

Click Engel v. Burlington Coat Factory Direct Corp. to read the entire Order & Opinion.

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N.D.Ala.: Arbitration Agreements Obtained By Defendant in Required Meetings After Putative Collective Commenced Unenforceable

Billingsley v. Citi Trends, Inc.

This case was before the court following the court’s order prohibiting enforcement of arbitration agreements that the defendant obtained from opt-ins (prior to the time they opted in to the case). The court previously had ruled that such arbitration agreements were unenforceable, because of the manner in which they were obtained from current employees, following an evidentiary hearing regarding same. This case is particularly important because it addresses the common situation in which a defendant-employer, at least arguably, crosses the line from attempting to mount a defense to a potential collective/class action, and begins to improperly exercise its unequal power over its current employees/putative class members. Denying the defendant’s motion for reconsideration, the court expanded on the reasoning of its prior order.

As the court explained:

This Fair Labor Standards Act case presents the court with a dilemma: enforce arbitration agreements against Defendant Citi Trends Store Managers, who are potential opt-in Plaintiffs in this collective action that were obtained during the conditional certification stage of this case and gut the collective action mechanism Congress provided for the protection of employees or refuse to enforce the arbitration agreements and run afoul of the federal policy favoring their enforcement. Because of the particular events surrounding the roll-out of the arbitration agreement in this case, as specifically discussed below, the court finds it cannot approve employer conduct like that involved in this case specifically targeting only potential class members during a critical juncture in this case with the definite goal of undercutting the Congressional intent behind the collective action process. The court will DENY the Defendant’s motion to compel arbitration and preserve the viability of the collective action mechanism.

Summarizing the parties’ respective contentions, the court explained:

Defendant Citi Trends, Inc. argues that this court’s ruling at the January 2013 hearing that it could not seek to compel arbitration against those opt-in Plaintiffs who signed mandatory arbitration agreements was an error of law. The Plaintiffs argue that the court’s ruling was appropriate and necessary to correct Citi Trends’s wrongful action—intimidating its employees into waiving their rights to join this lawsuit by signing mandatory arbitration agreements. On April 19, 2013, the court granted the motion to reconsider its ruling and set an evidentiary hearing to hear evidence surrounding presentment of the arbitration agreements to determine if any coercion, duress, or intimidation occurred.

While the court had previously denied the plaintiff’s motion for protective order and/or to strike declarations obtained from current employees, that was not the end of its inquiry as to whether the arbitration agreements should be enforced. Rather, the court held an evidentiary hearing because the

high standard had not been met on the parties’ submission alone, and thus, the court decided it needed to hold a hearing to determine if any coercion, duress, intimidation, or other abusive conduct occurred at the time SMs were required to sign the Agreement. The question of enforcement of or invalidation of the Agreement invokes a different standard than did the motion to strike or to enter a protective order, which was the requested relief before the court previously.

The court summarized the evidence received at the hearing as follows:

At the evidentiary hearing on May 14 and 15, 2013, the court heard testimony from opt-in Plaintiffs Roilisa Prevo and Katina Alfred, former Citi Trends SMs; Ivy Council, Executive Vice President of Human Resources for Citi Trends; Rashad Luckett, Human Resources Coordinator for Citi Trends; Vanessa Davis, Director of Human Resources for Citi Trends; and LaKesha Wilkins, an “independent third party witness” hired by Citi Trends to sit in SM meetings with Ms. Davis. The court will briefly summarize that testimony here but will also reference it as needed in the discussion below.

Citi Trends devised and implemented its new ADR policy in the late spring and early summer of 2012—shortly after it was served with the complaint on February 27, 2012 (doc. 6), and after the court on May 16, 2012, set a scheduling conference for May 31, 2012. (Doc. 17). On May 31, 2012, this court issued a Scheduling Order requiring the Plaintiffs to file their motion for conditional certification of the class on or before July 31, 2012 with briefing to be completed by September 10, 2012. (Doc. 18). Just a couple weeks after the Order, in mid-June, Citi Trends began the process of rolling out its new Alternative Dispute Resolution (“ADR”) plan, including the mandatory Agreement. Ms. Davis testified that as of mid-June she had virtually completed the new employee handbook she was working on, which did not include an ADR policy; she learned for the first time in mid-June that the updated handbook would include the new ADR policy. Citi Trends, under the direction of Ms. Council, sent Ms. Davis, Mr. Luckett, and other HR representatives to have two-on-one private meetings with SMs across the country as early as June 30, 2012 to roll out the new ADR policy. The HR representatives met with all SMs individually throughout the summer.

District Managers (“DMs”) told the SMs that they must attend the meetings that concerned the issuance of a new employee handbook. DMs were only asked to sign the Agreement if the HR Representatives happened to see them at the SM meetings, but Citi Trends distributed the Agreement to DMs, other corporate employees, and store associates at a later date.

When the SMs arrived at the meetings, they were greeted by an HR Representative and another individual, who Ms. Prevo claimed was never introduced to her and whom Ms. Alfred identified as another Citi Trends corporate employee. The HR Representatives gave the SMs four documents: the SM Disclosure, the Agreement, the SM Declaration, and a photocopied version of a new employee handbook. The two-on-one private meetings took place in small, back rooms in Citi Trends retail stores, the same places where interrogations or investigations of employees occurred. The HR Representatives who met with the SMs played an advisory role in the employment decisions of Citi Trends employees, and both Ms. Prevo and Ms. Alfred testified that they believed the HR representatives conducting the meetings had authority to make employment decisions about them, such as hiring and firing.

Ms. Alfred and Ms. Prevo testified that they signed the documents but came away from those meetings having felt intimidated by the HR Representatives and pressured to sign the Agreement or lose their jobs. The SMs were not given copies of the documents they signed at the meeting or at anytime afterward, even if they specifically requested copies.

After finding the agreements at issue to be both procedurally and substantively unconscionable, the court weighed the related public policy concerns as well:

The biggest public policy concern that the court has to consider about actions of Citi Trends, however, is the effect of the Defendant’s efforts on the purpose of an FLSA collective action. The court’s decision on this issue is bigger than this one case, and that concern is what has plagued the court about this situation from the first mention of the Agreement. The purposes of the FLSA and its collective action procedure factor into the court’s decision on this motion.

Congress passed the FLSA during the Great Depression to protect workers from overbearing practices of employers with greatly unequal bargaining power over them. See Roland Elec. Co. v. Walling, 326 U.S. 657, 668 n. 5 (1946) ( “The Bill was introduced May 24, 1937, [and] … accompanied by a Presidential message by Franklin D. Roosevelt …. ‘to protect the fundamental interests of free labor and a free people we propose that only goods which have been produced under conditions which meet the minimum standards of free labor shall be admitted to interstate commerce. Goods produced under conditions which do not meet rudimentary standards of decency should be contraband and ought not to be allowed to pollute the channels of interstate trade.’ “) (quoting 81 Cong. Rec. 4960, 4961). To further that purpose, § 216(b) of the FLSA authorizes an employee to file suit for and on behalf of himself and others similarly situated. See 29 U.S.C. § 216(b). Those employees who wish to join the lawsuit must give written consent or opt-in to the lawsuit, but they only know that they can do so once court-approved notice has been sent to them. See id…

In this case, the court finds that such goals are defeated if the court approves actions taken by defendants, such as those taken by Citi Trends in this case, that are designed and used to prevent employees from vindicating their rights in an FLSA collective action. The court wishes to make clear that it is not addressing a pre-lawsuit or pre-employment arbitration agreement between an employer and employee that would preclude participation in a collective action. Instead, this ruling only addresses the Agreement in this case that was presented to the specifically-targeted potential class of employees in the specific manner that gave those potential opt-in Plaintiffs no meaningful choice or known opportunity to refuse to sign without the fear of termination in a setting that was ripe for and calculated to produce perceived intimidation or coercion and when its very purpose and effect was to preclude participation in this lawsuit.

For these reasons, the court finds that the Agreement at issue in this case reeks of both procedural and substantive unconscionability in the context in which it was presented and obtained. The Agreement cannot and will not be enforced against Ms. Prevo, Ms. Alfred, or Ms. Cunningham, and the court will DENY Citi Trends’s motion to compel arbitration against them. In making this decision, the court notes that it found the testimony presented by the Defendant, specifically that from Ms. Council and Ms. Davis, particularly enlightening. In addition to the language of the documents themselves, the court finds that the concurrent timing of the ADR roll-out and the Plaintiffs’ preparation of the motion for conditional certification and court approved notice, and the manner in which the Agreement was presented weigh in favor of invalidating the Agreement as it relates to the SMs who were presented the Agreement during its initial roll-out in the summer of 2012.

The court truly believes it would be a derogation of the court’s responsibility if it were to approve employer conduct like that in this case that specifically undercuts the Congressional intent behind creating the FLSA collective action process for aggrieved employees, and the court does not take such action lightly.

In light of this reasoning, the court denied the defendant’s motion for reconsideration and held that the arbitration agreements, obtained from current employees were unenforceable.

Click Billingsley v. Citi Trends, Inc. to read the entire Memorandum Opinion.

A review of the docket shows that the defendant has filed an appeal to the Eleventh Circuit.  Thus, this issue will likely get further review.  Stay tuned for further developments….

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Filed under Arbitration, Class Waivers

LPNs, Commercial Cleaners and Cable Installers: Recent Decisions Continue to Clarify That So-Called “Independent Contractors” May Actually Be Employees Under the FLSA

As the workforce becomes more and more aware of the differences between true independent contractors and employees under the FLSA—the latter entitled to minimum wages and overtime premiums under the FLSA—courts continue to address this factually intensive issue in a variety of industries. However, as many FLSA practitioners are no doubt aware, certain industries seem to have more than their fair share of employers who misclassify their employees as independent contractors. In 3 recent cases, all from within the Eleventh Circuit, courts addressed the issue of independent contractor misclassification. Significantly, all of the cases held that—under the FLSA’s very wide definition of employment, each of the workers at issue were employees (or in one case reversed the lower court’s ruling otherwise). Because the decisions themselves are factually intensive inquiries, the facts of each case are discussed in detail below.

M.D.Fla.: LPNs Employees Not Independent Contractors

Solis v. A+ Nursetemps, Inc.

The first case discussed here concerned the defendant-employer’s misclassification of its LPN (licensed practical nurse) employees as independent contractors. Following a bench trial, the court held that the LPNs were employees and not independent contractors as the employer had maintained. Analyzing the issue, the court explained:

The Eleventh Circuit cases clearly establish that the “economic realities test” is the standard to be applied in determining whether a worker is an employee covered by the FLSA, or is an independent contractor who is not covered by the Act. Medrick v. Albert Enterprises, Inc., 508 F.2d 297 (5th Cir.1975); Villarreal v. Woodham, 113 F.3d 202 (11th Cir.1997); Freund v. Hi–Tech Satellite, Inc., 185 Fed. Appx. 782 (11th Cir.2006).9
See also Antenor, 88 F.3d 925 (applying the economic realities test in resolving a joint employer issue under the FLSA).

 Each of those pertinent Eleventh Circuit decisions recite various factors to be considered in applying the economic realities test, and the lists are not identical. All of the cases agree, however, either implicitly or explicitly, that “[n]o one of these considerations can become the final determinant, nor can the collective answers to all of the inquiries produce a resolution which submerges consideration of the dominant factor—economic dependence.” Freund, supra, 185 Fed. Appx. at 783 (quoting Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1311 (5th Cir.1976)).

The factors listed in the cases include: (a) whether the alleged employer had the power to hire and fire the workers in question; (b) whether the alleged employer supervised and controlled the employee work schedules or conditions of employment; (c) whether the alleged employer determined the rate and method of payment; (d) whether the alleged employer maintained work time records; (e) whether the worker performed a specialty job requiring specialized training or skill; (f) whether the contractual terms of the employment varied in a material way as one worker succeeded another; (g) whether the workers had business organizations that could offer the worker’s services to others; (h) whether the alleged employer supplied the premises and/or the equipment necessary to perform the work; (i) whether the worker employed others to assist in performing the job; (j) the employee’s opportunity for profit or loss depending upon management skill; (k) the degree of permanency or duration of the working relationship; and (l) the extent to which the service rendered by the worker is an integral part of the employer’s business.

Applying each of the factors, the court reasoned:

(a) The right to hire and fire. The Court interprets this factor (taken from Villarreal, supra ) to require an examination of whether the employer has retained the usual common law right to hire and fire at will, or has placed limitations on those rights by contract as would often be the case in dealing with an independent contractor and a contractual clause imposing liability or a penalty for cancellation of the work. Here, of course, Nursetemps has sole control with respect to the selection of nurses to be assigned to shifts, and may withhold such assignments if it pleases. Just as the nurses are under no obligation to take assignments, Nursetemps is under no obligation to make them.

(b) Control of work schedules and supervision of the work. This factor (also taken from Villarreal, supra ) has two aspects as applied to this case. Control of the work schedules, in terms of assigning work to the nurses, is in the hands of Nursetemps. Supervision of the work, however, is not. That control is in the hands of the client facility, not Nursetemps. Thus, as stated earlier, if the common law test applied, Nursetemps would have a stronger case. In the context of an FLSA examination, however, this division of control does not help the nurses’ independent contractor argument because control of the work does not shift to the nurses, it shifts to another entity (which may thereby become a joint employer, Antenor v. D & S Farms, supra,) but it does not mean that the nurses thereby become independent contractors.

(c) Determining the rate and method of payment. In an independent contractor relationship, the independent contractor normally has at least an equal say in the rate to be charged for particular work by bidding on the job or by posting or advertising standard rates for the work to be performed. Here, by contrast, it is Nursetemps that fixes the hourly rate it will pay the nurses for each shift or each assignment. Individual nurses have the right to negotiate with respect to the rate they will earn, but Nursetemps retains the upper hand in deciding the rate it will pay; and it is Nursetemps that pays the nurses, not the facility where the work is performed.

(d) Maintenance of time records. While the nurses keep their own time records, they are paid by the hour, and such records are turned in to and maintained by Nursetemps (albeit not in full compliance with 29 C.F.R. § 516.2) for the purpose of calculating the nurses’ pay. Stated another way, the nurses are not paid a flat rate or piece rate per shift. They are hourly employees.

(e) Performance of a specialty job requiring specialized training or skill. While it cannot be denied that the work of a nurse requires highly specialized training and skill, such work in this society is not necessarily a specialty job in the sense that members of the public do not typically seek them out for private or individual engagements; rather, the nurses involved in this case work, instead, on an hourly basis in institutional settings like the hospices, hospitals and detention facilities.

(f) Variation in terms of employment. There is no evidence of any variation in the terms of employment as one worker succeeds another. Nurses are assigned to work shifts for rates established by Nursetemps and (subject to occasional negotiation of rates with an individual nurse) remain the same from nurse to nurse, shift to shift, week to week.

(g) Business organization for offering nurses services to others. While some of the nurses formed limited liability or corporate entities, the evidence is that those who did so were acting at the suggestion of Nursetemps, and the existence of such entities did not change the practical day-to-day relationship between Nursetemps and the nurses in any way. Also, the formation of such entities did not lead any of the nurses to use them as a vehicle to offer their services as entrepreneurs to other health care providers or to the public in general.

(h) Premises and equipment. Nursetemps does not supply the premises on which the work is accomplished, but neither do the nurses. The equipment necessary for the nurses to do their work—stethoscopes, blood pressure cuffs, thermometers and uniforms are provided by the nurses who also bear the cost of their continuing educational requirements.

(i) Employment of others. The nurses do not employ others to assist them in the performance of their work.

(j) Opportunity for profit. The nurses are paid by the hour for shift work. There is no opportunity for additional income or profit through the exercise of managerial skill or increased efficiency in the manner or means of accomplishing the work.

(k) Permanency of the relationship. A majority of Nursetemps nurses have accepted work assignments on a regular basis for a year or more.

(l) Whether the nurses work is an integral part of Nursetemps business. The work performed by the nurses is more than an integral part of Nursetemps’ business, it is the whole of Nursetemps’ business.

Per its analysis of each of the factors, the court concluded:

Consideration of the foregoing factors, both individually and collectively, leads inexorably to the conclusion that Nursetemps nurses are employees for purposes of the FLSA, not independent contractors. The same result is reached when one simply steps back to take a common sense look at the nature of the relationship between Nursetemps and the nurses. While it is certainly true that the nurses enjoy a degree of flexibility in their working lives, not shared by many in the work force, including an enhanced ability to “moonlight” by working for more than one agency at a time and by choosing when and where to make themselves available for work, the simple fact remains that when the nurses are available for work they are dependent upon Nursetemps to provide it, and when they are working on assignment for Nursetemps they are, during those workweeks, employees of Nursetemps.

Click Solis v. A+ Nursetemps, Inc. to read the entire Memorandum Opinion Including Finding of Fact and Conclusions of Law.

S.D.Fla.: Commercial Contractors Were Employees Not Independent Contractors

Robles v. RFJD Holding Co., Inc.

In a second recent case, a court in the Southern District of Florida was asked to decide whether commercial cleaners were employees or independent contractors, as the employer-defendant claimed. Applying the same test as the court above, the court granted the plaintiffs’ motion for summary judgment and denied the defendant’s motion—holding that the defendant had misclassified the commercial cleaners as independent contractors. Discussing the factors regarding its determination on the issue the court explained, in part:

1. Control of the Manner of Performing Work 

When an alleged employer provides “specific direction for how workers, particularly lowskilled workers, are to perform their jobs, courts have weighed the control factor in favor of employee status.” Montoya v. S.C. C.P. Painting Contractors, Inc., 589 F.Supp.2d 569, 579 (D.Md.2008) (finding factors such as the provision of supervision of painters, instruction in what paint to use and how many coats to apply, and on-the-job training to be indicative of employee status). Similarly, the provision of written instructions and procedures for how to complete the job also indicates employee status. See Schultz v. Capital Int’l Sec., Inc. ., 466 F.3d 298, 307 (4th Cir.2006) (finding an eight-page standard operating procedure document outlining job tasks indicative of employee status); Solis v. Int’l Detective & Protective Serv., Ltd., 819 F.Supp.2d 740, 750 (N.D.Ill.2011) (finding a policy and procedure handout coupled with close monitoring of workers’ compliance with the procedures indicative of control). The provision of training likewise indicates an employee-employer relationship. See Gate Guard Servs. L.P. v. Solis, 2013 WL 593418, at *4 (S.D.Tex. Feb.13, 2013) (noting the significance of training and observing that the non-provision of training indicates an independent-contractor relationship). Finally, supervision need not be constant to establish an employee-employer relationship. See Brock v. Superior Care, Inc., 840 F.2d 1054, 1060 (2d Cir.1988) (citing Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 1383–84 (3d Cir.1985)) (“An employer does not need to look over his workers’ shoulders every day in order to exercise control.”).

Here, the facts demonstrate that Defendants exercised substantial control over the manner of performing work. Defendants trained the cleaning crews in how to clean specific items, including what tools to use; they provided the crews with extensively detailed checklists of what to clean and how often to do so; they initially monitored the crews’ performance on-site and in person for an entire week; and, although there is some dispute as to how often any particular supervisor visited and inspected a specific restaurant,2 it is undisputed that Defendants’ supervisors regularly supervised the cleaning crews’ work. Viewed together, this all suggests that Defendants closely controlled the manner of Plaintiffs’ work as an employer would. While Defendants—as all businesses to some degree—may certainly have been concerned with “customer satisfaction,” Defendants manifested that concern through closely controlling and monitoring Plaintiffs’ work habits and methods. Accordingly, the first factor weighs in favor of finding that Plaintiffs were “employees” under the FLSA.

2. Opportunity for Profit or Loss Depending on Managerial Skill

Turning to the second half of the inquiry on this factor, the Court notes that Defendants do not point to any opportunity for loss that Plaintiffs risked. The opportunity for loss must extend beyond the mere threat of lost wages and must involve the risk of losing a capital investment. See Lauritzen, 835 F.2d at 1536;
Clincy v. Galardi S. Enters., Inc., 808 F.Supp.2d 1326, 1345–46 (N.D.Ga.2011). Beyond the occasional purchase of negligible cleaning supplies and tools, which is insufficient to present a risk of loss, Plaintiffs invested practically nothing but their labor in their cleaning work. See Lauritzen, 835 F.2d at 1536. To the extent that Defendants may contend that the back charges that they imposed on cleaning crews when customers were dissatisfied represent losses, see D.E. 56–1 at 9, the Court rejects this argument. Such back charges are not attributable to any discretionary managerial decision but, rather, are the result of poor cleaning performance.

When viewed as a whole, Plaintiffs’ opportunities to increase their profits support the idea that they were independent contractors, but the absence of any real risk of loss suggests Plaintiffs were “employees.” This factor is a wash.

3. Investment in Required Equipment or Materials and Employment of Workers

As discussed above, Plaintiffs were permitted to hire individuals on their own to accomplish their cleaning tasks but were not required to do so. D.E. 56–2, ¶ 5; D.E. 68–1, ¶ 5. During their fourteen-month tenure with Emmaculate, Plaintiffs Robles and Ulloa hired an individual only one time to help with their cleaning work. D.E. 56–2, ¶ 27; D.E. 68–1, ¶ 27. Plaintiffs’ investment in additional labor was minimal—even aberrant—and not indicative of independence. See Usery, 527 F.2d at 1312 (“Occasional exercise of the right to hire helpers also has not been found sufficiently indicative of independence to allow a finding of nonemployee status.”)…

Here, Plaintiffs made admittedly minimal purchases rather than large-scale investments in supplies and equipment. The lack of Plaintiffs’ substantial investment in equipment and materials tips in the direction of finding employee status.

4. Whether the Service Rendered Requires Special Skills

As other courts have found, cleaning services such as those provided by Plaintiffs require no special skills. See Quinteros v. Sparkle Cleaning, Inc., 532 F.Supp.2d 762, 770 (D.Md.2008); see also Usery, 527 F.2d at 1314 (“Routine work which requires industry and efficiency is not indicative of independence and nonemployee status.”). Defendants’ arguments to the contrary are unpersuasive. To the extent that Defendants suggest experience is required to do Plaintiffs’ work, D.E. 67 at 7, the Court does not agree that experience is, or is equivalent to, a specialized skill, and Defendants point to no authority that suggests otherwise. See Lauritzen, 835 F.2d at 1537 (citing Brock v. Lauritzen, 624 F.Supp. 966, 969 (E.D.Wis.1985) (holding that the development of occupational skill through experience “is no different from what any good employee in any line of work must do”). Put another way, one can quickly and easily develop experience at routine, unspecialized tasks…

Accordingly, this factor weighs in favor of finding employee status.

5. Permanency and Duration of the Working Relationship

The ability to readily reject jobs is not reflective of the permanency found in an employee-employer relationship and supports finding an independent-contractor relationship. On balance, the duration and permanency factor tips slightly in favor of Defendants.

6. The Extent to Which the Service Is an Integral Part of the Alleged Employer’s Business

Next, the Court considers the extent to which Plaintiffs’ cleaning services were an integral part of Defendants’ business. It is undisputed that Emmaculate is a “commercial cleaning business specializing in restaurant cleaning.” D.E. 56–2, ¶ 1; D.E. 68–1, ¶ 1. As Plaintiffs provide the cleaning services that Defendants’ offer, Plaintiffs’ services are indisputably integral, if not essential, to Defendants’ business. While Defendants attempt to cursorily dismiss this factor as “not determinative of one’s employee’s status,” D.E. 56–1 at 11, the reality is that this factor informs the inquiry as much as any other factor listed here. Freund, 185 F. App’x at 784;
Scruggs v. Skylink, Ltd., 2011 WL 6026152, at *8 (S.D.W.Va. Dec.2, 2011) (“Generally, the more integral the work, the more likely the worker is an employee, not an independent contractor.” (citation omitted)). Consequently, this factor weighs strongly in favor of finding an employee relationship.

Having weighed each of the factors, the court concluded that the commercial cleaner workers were defendant’s employees, as a matter of law:

Upon consideration of the six factors above and the circumstances as a whole, the Court finds that Plaintiffs were dependent on Defendants in their economic relationship and are considered employees under the FLSA. The fact that Robles and Ulloa worked exclusively for Emmaculate during their fourteen-month association highlights Plaintiffs’ economic dependency on Defendants. Further, Defendants’ significant control and supervision of Plaintiffs’ work habits and methods, Plaintiffs’ minimal capital investments and nonexistent risk of loss, Plaintiffs’ dependence on Emmaculate to find and engage restaurants to be cleaned, the lack of a need for specialized skills, and the integral and essential nature of Plaintiffs’ services to Defendants’ business all describe a relationship with the character of one between an employee and an employer, notwithstanding the few indicia of independent-contractor status found on the record. Taken together, these facts demonstrate that Plaintiffs were not in business for themselves but were, instead, dependent on Defendants for their continued employment in the restaurant-cleaning business. Accordingly, Plaintiffs’ motion for summary judgment is granted on this point, and Defendants’ motion is denied.

Click Robles v. RFJD Holding Co., Inc. to read the entire Order on Motions for Summary Judgment.

11th Cir.: Cable Installers May Be Employees; Summary Judgment For Employer Reversed

Scantland v. Jeffrey Knight, Inc.

The final case was before the Eleventh Circuit on the appeal of cable installer employees, following the district court’s order in which it held that the installers were independent contractors rather than employees, notwithstanding many cases holding to the contrary on similar facts. Applying the economic realities test discussed above, and taking the facts in the light most favorable to the plaintiffs (as the non-movants), the Eleventh Circuit held that a reasonable jury could find that the cable installers were employees under the FLSA. As such, the court reversed the decision below and remanded the case for trial on the issue.

Weighing the various factors, the court explained:

A. Control

The first factor considers the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed. 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. Usery, 527 F.2d at 1312–13. The facts, viewed in the light most favorable to plaintiffs, indicate that Knight exercised significant control over plaintiffs such that they did not stand as separate economic entities who were in business for themselves.

Technicians were required to report to a Knight facility by 7:00 to 7:15 each morning. Technicians would turn in equipment from the previous day and submit their work orders, which included the billing codes that determined their pay for particular jobs. These billing codes were set by Knight, and managers could unilaterally change the codes that technicians reported, thereby reducing a technician’s pay.4 Plaintiffs would also receive a route detailing the current day’s work orders, which were generally assigned in two-hour timeslots. Though plaintiffs’ Independent Contractor Service Agreements provided that they could decline any work assignments, plaintiffs testified that they could not reject a route or a work order within their route without threat of termination or being refused work in the following days. Thus, while a technician might consider a specific route or work order unprofitable, because, for example, it was low-paying or far away, plaintiffs had no power to decline the assignment. Technicians also might be required to attend quality control meetings and classes on new equipment or participate in a monthly equipment inventory conducted by BHN, which required technicians to unload their trucks and account for all BHN equipment. This morning routine could last up to two hours. Plaintiff Sperry testified that he had to arrive by 5:30 a.m. in order to make it to his first job assignment on time. During occasional downtime, technicians could request additional jobs; they could also be required to assist other technicians or be assigned additional jobs that they could not refuse. Technicians might be required to stay on the job until all the technicians in their area had completed their work; they could also be called back to jobs long after completing them to address problems. Plaintiffs could upsell by convincing customers to add additional BHN services, but those orders had to be approved by Knight. Plaintiffs could not sell non-BHN services to customers and could not work for other companies, either because they were told they could not do so or because the schedule Knight imposed prevented them from doing so. Plaintiffs could, according to their contract, employ others to help them, but any such employees had to be technicians already engaged by Knight, and were therefore bound by Knight’s policies. Plaintiffs were subject to meaningful supervision and monitoring by Knight. Technicians routinely communicated with dispatch during the day and were required to log in and out of Work Force Management—a service on their cellular phones that they paid for via payroll deductions—to indicate when they arrived on a job, when they completed a job, and what their estimated time of arrival was for their next job. Knight or BHN also conducted site checks of technicians’ work, and Knight tracked technicians’ quality control discrepancy rate. Technicians with consistent quality control issues could be given remedial training at a mock house or they could be terminated. An installation manager also might counsel a technician regarding his physical appearance or the appearance of his vehicle. Knight levied uncontestable fines called chargebacks for not meeting specifications, not using Work Force correctly, misplacing inventory, or being late to a job. Typically, $100 would be deducted from the technician’s pay for chargebacks on residential jobs and $150 for commercial jobs. Plaintiff Downs testified that chargebacks could mount up to the point where they surpassed the amount of money a technician could earn on a job. Technicians could also be downloaded, i.e., fired, for consistently misbilling, fraudulently billing, stealing, having a bad attitude, having consistently low quality control ratings, and being rude to customers, other technicians, or Knight employees. Knight’s Jill Williams testified that she and another installation manager had downloaded more than one hundred technicians. Plaintiff technicians worked five to seven days a week; some were required to work six days a week and sometimes seven days a week because of a requirement that they work rotating Sundays. Plaintiffs regularly worked more than forty hours a week.7 Technicians either had to inform their supervisors that they would be taking time off or request time off in advance, sometimes in writing.

In sum, Knight controlled what jobs plaintiffs did, how much they were paid, how many hours they worked, how many days they worked, their daily work schedule, whether they could work for others, whether they could earn additional income from customers, and closely monitored the quality of their work. Plaintiffs could not bid for jobs or negotiate the prices for jobs. Their ability to hire and manage others was illusory. This alleged control strongly suggests that the plaintiffs were economically dependent upon Knight…

B. Opportunity for Profit or Loss

The second factor considers the alleged employee’s opportunity for profit or loss depending upon his managerial skill. The facts, taken in the light most favorable to plaintiffs, indicate that plaintiffs’ opportunity for profit or loss depended more upon Knight’s provision of work orders and technicians’ own technical skill and efficiency than their managerial skill.

Plaintiffs’ opportunity for profit was largely limited to their ability to complete more jobs than assigned, which is analogous to an employee’s ability to take on overtime work or an efficient piece-rate worker’s ability to produce more pieces. An individual’s ability to earn more by being more technically proficient is unrelated to an individual’s ability to earn or lose profit via his managerial skill, and it does not indicate that he operates his own business. As the Supreme Court has explained, a job whose profits are based on efficiency is more like piecework than an enterprise that actually depend[s] for success upon the initiative, judgment or foresight of the typical independent contractor. Rutherford Food, 331 U.S. at 730, 67 S.Ct. at 1477. Technicians could not negotiate or otherwise determine the rates they were paid for jobs. In fact, the billing codes they submitted were subject to unilateral change by Knight. They were also subjected to uncontestable chargebacks that could wipe out their earnings from a single job.12 Knight’s argument that plaintiffs could control losses by avoiding chargebacks is unpersuasive. Chargebacks relate to the quality of a technician’s skill, not his managerial or entrepreneurial prowess. Plaintiffs’ ability to earn additional income through their own initiative was limited. Though plaintiffs could upsell, any jobs added to a work order by a technician had to be approved by Knight, and plaintiffs testified that the extra income was minimal and often not worth the additional effort. Plaintiffs could not sell non-BHN services to customers, nor work for other companies because of either a flat prohibition or because the schedules demanded by Knight prevented them from pursuing other work. Plaintiffs were able to exert some control over their opportunity for profits by pairing up to complete jobs and trading jobs among each other, but this ability was ultimately limited by the number and types of jobs Knight assigned them and whether Knight’s assigned schedule permitted them time to do so. Furthermore, as previously discussed, though the parties’ contract provided that technicians could hire helpers, this authority was illusory. Any helpers were required to be contracted with Knight as technicians, thus precluding the exercise of any real managerial skill over such helpers.

Assuming factual inferences in favor of plaintiffs, and in light of the minimal opportunity for profit (and that being little different from the usual path of an employee), this factor suggests economic dependence, and points strongly toward employee status.

C. Investment in Equipment or Materials

The third factor considers the alleged employee’s investment in equipment or materials required for his task, or his employment of workers. This factor favors independent contractor status, although it does so only weakly.

As previously discussed, technicians’ ability to employ workers was illusory. As regards investment in equipment and materials, Knight provides, via BHN, the hardware that is actually installed in customers’ homes and businesses, such as cable boxes, DVRs, and cable modems. Technicians are required to have vehicles, auto insurance, tools and safety equipment, and commercial general liability insurance. However, in light of the fact that most technicians will already own a vehicle suitable for the work and that many technicians purchased specialty tools from Knight directly via payroll withholdings, there seems to be little need for significant independent capital and very little difference from an employee’s wages being increased in order to pay for tools and equipment. Furthermore, even though a technician who initially bought his tools from Knight and paid for them via withholdings has some economic independence when the tools are paid for, it is analogous to the independence any employee has who has gained experience and the ability to market himself to competing employers.

In sum, these expenditures seem to detract little from the worker’s economic dependence on Knight, which is the lens through which we evaluate each of the several factors. Thus, to the extent that this factor weighs in favor of independent contractor status, the weight in that direction is minimal.

D. Special Skill

The fourth factor considers whether the service rendered requires a special skill. This factor favors independent contractor status, but it does so only weakly.

Plaintiffs were clearly skilled workers. The meaningfulness of this skill as indicating that plaintiffs were in business for themselves or economically independent, however, is undermined by the fact that Knight provided most technicians with their skills. Technicians could come to Knight from other installation outfits or be completely inexperienced. Most technicians, however, were inexperienced and underwent some length of unpaid training by Knight, which was followed by some period of unpaid ride-alongs with experienced technicians, before performing work on their own. Robert Collins, a former Knight installation manager, testified that Knight generally provided about two weeks of training and technicians did about a week of ride-alongs, and he estimated that only 10 to 15 percent of technicians did not require training.

Plaintiffs were, therefore, dependent upon Knight to equip them with the skills necessary to do their jobs. The skills attained by technicians point toward a degree of economic independence insofar as a highly trained technician could gain economic independence by the ability to market his skills to a competing employer. This does not, however, significantly distinguish such a worker from the usual path of an employee. To the extent that this factor favors independent contractor status, it does so weakly.

E. Permanency and Duration

The fifth factor considers the degree of permanency and duration of the working relationship. This factor points strongly toward employee status.

Named plaintiffs worked for Knight for an average of more than five years. Their contracts were for year terms, were automatically renewed, and were terminable only with thirty days’ notice. These facts suggest substantial permanence of relationship…

Assuming factual inferences in favor of plaintiffs, and looking through the lens of economic dependence vel non, long tenure, along with control, and lack of opportunity for profit, point strongly toward economic dependence. Thus, this factor strongly indicates employee status.

F. Integral Part of Alleged Employer’s Business

The sixth and final factor considers the extent to which the service rendered is an integral part of the alleged employer’s business. This factor weighs clearly and strongly toward employee status.

Approximately two-thirds of Knight’s business consists of the telecommunications installation and repair services it performs for BHN. Knight relies on approximately five hundred technicians to perform installations and repairs in BHN customers’ homes and businesses. Knight’s website described its Installation Services department as the backbone of its business.

The integral role played by technicians in Knight’s business shows that the arrangement follows more closely that of an employer-employee relationship than an independent contractor dynamic. If Knight had truly outsourced such a large portion of its business, as would be true if plaintiffs were independent contractors, then the company would retain far less control over the business. However, because of Knight’s concern with the quality of the services it provides through this arrangement, it does, as one might expect, control the relationship in much the same way a company would control its employees. The technicians’ integral part in Knight’s business follows the usual path of an employee.

Assuming factual inferences in favor of plaintiffs, this factor points strongly toward employee status.

Given these factual circumstances, the Eleventh Circuit concluded:

When all the facts are viewed in the light most favorable to the plaintiffs and all reasonable inferences are drawn in their favor, four of the six factors weigh strongly in favor of employee status. The two factors that do not—investment and special skill—weigh only very slightly toward independent contractor status. Neither contributes in any significant manner to the workers’ economic independence or to distinguishing the workers from the usual path of an employee. Thus, we conclude that, viewing the facts most favorably toward plaintiffs and with all justifiable inferences drawn in their favor, plaintiffs were employees—not independent contractors—under the FLSA. Because there are genuine issues of material fact, and because plaintiffs were employees if all reasonable factual inferences are found in plaintiffs’ favor, the district court erred in granting summary judgment to Knight.

Click Scantland v. Jeffrey Knight, Inc. to read the entire Opinion and DOL Amicus Brief to read the brief submitted by the Department of Labor in support of the Plaintiffs-Appellants.

Click independent contractor misclassification for more information on industries where employees are frequently misclassified as independent contractors.

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