Perez v. Austin Electric Services LLC et al
Filing
244
ORDER denying 111 Defendants' Motion for Summary Judgment and granting the Secretary's Motion for Summary Adjudication (Doc. 114 ). Signed by Senior Judge Roslyn O Silver on 11/13/18. (EJA)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF ARIZONA
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R Alexander Acosta,
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No. CV-16-02737-PHX-ROS
Plaintiff,
ORDER
v.
Austin Electric Services LLC and Toby
Thomas,
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Defendants.
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Plaintiff Secretary of Labor (“the Secretary”) alleges Defendants Austin Electric
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Services LLC and Toby Thomas, Austin Electric’s president (collectively, “Defendants”),
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failed to pay employees overtime compensation and to keep employee records, in
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violation of the Fair Labor Standards Act (“FLSA”). Before the Court are cross-motions
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for summary judgment (Doc. 111) and summary adjudication (Doc. 114) on the same
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issue: Whether Defendant Toby Thomas is an “employer,” therefore individually liable,
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under the FLSA.
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BACKGROUND
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Austin Electric is a residential electrical contractor based in Arizona.1 (Docs. 115
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at 1:25–26; 126 at 1:21.) Its employees do electrical work on houses in the area. Toby
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Thomas founded Austin Electric in 1997.2 (Docs. 115 at 2:4–5; 126 at 2:7.) In 2011,
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Unless otherwise noted, factual statements included in the Court’s summary are
undisputed.
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All of Defendants’ evidentiary objections based on relevance are overruled. (Doc. 126.)
The issue of whether Defendant Thomas is an “employer” under the FLSA requires a
totality of circumstances analysis. See Guifu Li v. A Perfect Day Franchise, Inc., 281
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during the economic downturn, Thomas approached Scott Tonn and Don Tapia about a
potential equity purchase of the company. (Doc. 115-1 at 9:25–10:2.) Tonn and Tapia
both purchased shares: From 2013 through 2016, Tonn held majority ownership and
Tapia held minority ownership of Austin Electric. (Doc. 115–1 at 9:4–20). Thomas was
minority owner of Austin Electric from 2013 through 2016, as his ownership interest
ranged from 20 to 30 percent. In 2013 and 2014, Thomas’ ownership interest was 20
percent. In 2015 and 2016, Thomas’ ownership interest was 30 percent. (Doc. 115-1 at
8:9–19.) Tonn and Tapia are both inactive owners and play no role in the operations of
the company. (Doc. 115-1 at 9:18–20.)
Thomas is the president of Austin Electric. (Doc. 115-1 at 7:16–17.) Joe Church
is Vice President of Operations at Austin Electric and reports directly to Thomas. (Doc.
115-1 at 10:21–25; 11:23–24.) The parties do not state whether Austin Electric has a
Board of Directors; nor do they state the existence of a CEO, CFO, or any other possible
corporate officers.
According to Thomas’s deposition testimony, Austin Electric
employs office workers, warehouse workers, and field workers.
Approximately 15
employees work in the office. (Doc. 115-1 at 99:6–9.) They include, among others, a
scheduling manager, safety manager, estimator, and hiring manager. (Doc. 115-1 at 99–
100.) Jennifer Thomas, Toby Thomas’s wife, also works in the office in accounts
payable.
(Doc. 115-1 at 100:21–22.)
Austin Electric employs approximately eight
warehouse workers who staff the warehouse where field workers go and pick up their
supplies. (Doc. 115-1 at 97:11–22.) The majority of Austin Electric’s employees are
field workers. Field workers are paid either by the hour or by the piece (each task they
complete). Thomas testified that in 2013, there were approximately 100–150 hourly
workers and 80–100 pieceworkers. (Doc. 115-1 at 91:3–92:9.)
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F.R.D. 373, 397 (N.D. Cal. 2012). The Court finds that all factual statements in the
Secretary’s Statement of Facts (Doc. 112) are relevant. See, e.g., Herman v. RSR Sec.
Services Ltd., 172 F.3d 132, 140 (2d Cir. 1999) (“Appellant contends that such cannot be
the basis for liability because two of those three occasions occurred before the period
giving rise to liability, but this contention is not a relevant consideration in determining
his status as an employer.”).
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Church’s role as Vice President of Operations is to run the day-to-day operations,
including scheduling, office production, and contracts. Church also oversees the fleet,
personnel, and safety at the company. (Doc. 115-1 at 11:17–22.) Church began working
at Austin Electric in 2003. (Doc. 115-1 at 191:2–3.) The parties dispute over who hired
Church: Thomas testified that he hired Church while Church stated he was hired by
Robert de Markowitz.
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the salary for Church. (Doc. 115-1 at 12:4–5.)
Below Church is Rodolfo Becerra, Austin Electric’s Field Operations Manager.
Thomas hired Becerra in early 2005. Thomas also promoted Becerra to his current
position in 2007. (Doc. 112-1 at 28:22 – 29:5.) As Field Operations Manager, Becerra
oversees Austin Electric’s field employees alongside Church. (Doc. 112-1 at 31:9–15.)
For example, Becerra and Church handle employee discipline. (Doc. 112-1 at 49:9–12.)
Becerra and Church also determine the vehicle reimbursement rate for employees who
use their own vehicles for work.
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(Doc. 112-1 at 20:16–21.)
Becerra manages
approximately 20–25 field managers, who manage assistant field managers and the field
workers in turn. (Doc. 115-1 at 94–96.) Becerra reported to Thomas “years ago” and
now reports to Church. Church sets Becerra’s current salary. In the event of Church’s
absence, however, Becerra goes to Thomas for decisions. (Doc. 115-1 at 12:23–13:22.)
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(Doc. 115-1 at 11:3–4; 191:4.) Thomas promoted Church to
Vice President of Operations in 2014. (Doc. 115-1 at 11:8–13.) Currently, Thomas sets
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As President of Austin Electric, Thomas has the power to hire and fire employees,
although he has not exercised this authority in the last six or seven years. (Doc. 115-1 at
20:15–16; 174:6–7.) Thomas also has the authority to set employees’ pay rate but
testified he does not set or know the current pay rate, although he does know the formula
used to calculate the pay rate. (Doc. 115-1 at 16:6–9.) Austin Electric pays pieceworkers
a rate based on the livable square footage of the house they wire. (Doc. 115-1 at 16:21–
17:8.)
An informal committee determines the rate per square footage paid to
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The parties do not state who Robert de Markowitz is or was; nor do they indicate his
relationship to Austin Electric.
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pieceworkers. (Doc. 115-1 at 17:18–19.) Church testified the pay-rate-setting process
involves himself, Becerra, estimator Jeremy Forgia, and Thomas. Church and Becerra
“come up with what [they] think is a fair rate” and then show it to Thomas and Forgia for
review. (Doc. 115-1 at 208:24–209:5.) Church further testified the four members “all
agree whether or not we can afford that rate. If we say yes, then we change the
rate.” (Doc. 115-1 at 209:3–5.) Church also stated he “won’t change the piece value rate
without discussing it first with Mr. Thomas, but ultimately [Thomas] is probably going to
defer to [Church’s] decision.” (Doc. 115-1 at 209:22–25.) Although Church indicated he
believes he is entitled to set pay rate without Thomas, he consults Thomas before making
the decision “out of respect” for Thomas. (Doc. 115-1 at 210:5–6.)
Importantly,
nowhere in the depositions or motion papers do Defendants dispute the accuracy of
Church’s testimony. Rather, they appear to argue it is significant that Thomas does not
know the current pay rate but “simply confirms that Austin Electric can afford a rate
change determined by Mr. Church and Mr. Becerra.” (Doc. 125 at 5.) Additionally,
Thomas testified he decides the method of payment (cash or check) and whether
employees receive benefits. (Doc. 115-1 at 18:21–19:17.)
Prior to 2013, Thomas made the decision to treat pieceworkers as independent
contractors rather than employees. (Doc. 115 at 3:24–25.) Sometime around 2013,
Thomas decided to reclassify independent contractors as employees. Thomas testified
that he began maintaining employment records for pieceworkers around this time. (Doc.
115-1 at 21:11–15.)
During the reclassification, Thomas personally researched the
correct method of calculating wages for pieceworkers—by “convert[ing] the piece rate
into the number of hours they worked.” (Doc. 115-1 at 177:21–178:18.)
Thomas
admitted that although Austin Electric had inadvertently applied the incorrect calculation
for a few weeks, Thomas remedied the situation by working with his payroll staff to
implement the correct calculation method. (Doc. 180:22–181:4.)
Thomas has the authority to set pieceworkers’ work schedule but apparently does
not exercise this authority. Thomas’s testimony indicates that “nobody in the company
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sets schedules over the piece employers” and it is “entirely up to the pieceworkers when
or if they want to work.” (Doc 115-1 at 173:14–17.)
statement, noting that scheduling manager Jose Ballesteros testified that Austin Electric
determines when to assign pieceworkers to do electrical work and how many of them are
required for each particular job. (Doc. 128-1 at 4:11–20.)
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The Secretary disputes this
LEGAL STANDARD
Summary judgment is proper where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). Material facts are those that “might affect the outcome of
the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute of material fact is only genuine “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Id. In reviewing a
motion for summary judgment, all evidence must be construed in the light most favorable
to the non-moving party.
Here, both parties move for summary judgment on the same issue. “[W]hen
simultaneous cross-motions for summary judgment on the same claim are before the
court, the court must consider the appropriate evidentiary material identified and
submitted in support of both motions, and in opposition to both motions, before ruling on
each of them.” Tulalip Tribes of Wash. v. Wash., 783 F.3d 1151 (9th Cir. 2015)
(quoting Fair Hous. Council of Riverside Cty. v. Riverside Two, 249 F.3d 1132, 1134 (9th
Cir. 2001)).
ANALYSIS
The FLSA provides: “‘Employer’ includes any person acting directly or indirectly
in the interest of an employer in relation to an employee . . . .” 29 U.S.C. §
203(d). “Employer” under the FLSA is given “an expansive interpretation in order to
effectuate the FLSA’s broad remedial purposes.” Lambert v. Ackerley, 180 F.3d 997,
1012 (9th Cir. 1999) (quoting Bonnette v. California Health & Welfare Agency, 704 F.2d
1465, 1469 (9th Cir. 1999)). While “a defendant’s status as an employer under the FLSA
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is a question of law . . . the legal determination rests on ‘subsidiary factual [findings.]”
Solis v. Velocity Express, Inc., No. CV 09-864-MO, 2010 WL 2990293 (D. Oregon July
26, 2010).
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Whether or not an individual qualifies as an employer depends on if the individual
“exercises control over the nature and structure of the employment relationship, or
economic control over the relationship.” Lambert, 180 F.3d at 1012. In analyzing
control, the Ninth Circuit applies an “economic reality” test that asks whether the
individual in question has “significant ownership interest with operational control of
significant aspects of the [company’s] day-to-day functions.” Id. at 1012; Bonnette, 704
F.2d at 1469. Courts typically consider whether the alleged employer: (1) Has the power
to hire and fire employees; (2) determines the rate and method of payment; (3) supervises
and controls employee work schedules or conditions of employment; and (4) maintains
employment records. See, e.g., Solis v. Best Miracle Corp., 709 F. Supp.2d 843, 850
(C.D. Cal. 2010). No one factor is dispositive. Rather, courts take into account the
“circumstances of the whole activity.” Guifu Li v. A Perfect Day Franchise, Inc., 281
F.R.D. 373, 397 (N.D. Cal. 2012) (quoting Rutherford Food Corp. v. McComb, 331 U.S.
722, 730 (1947)); see also Lambert at 1012 (also taking into account the individual
defendant’s ownership interest of the company); Baird v. Kessler, 172 F. Supp.2d 1305,
1311 (considering whether defendants “control the purse strings” that support plaintiffs’
jobs).
Here, ample undisputed evidence in the record establishes that Thomas has
significant ownership as well as operational control of significant aspects of Austin
Electric’s day-to-day functions. Thus, Thomas is an “employer” under the FLSA.
The parties do not dispute that Thomas has significant ownership interest in Austin
Electric—from 2013 to 2016, his ownership ranged from 20 to 30 percent. (Doc. 115-1
at 8:9–19.) Not only does Thomas own a significant share of the company, he was and
remains the only active owner. The other two owners—Scott Tonn and Don Tapia—are
inactive. (Doc. 115-1 at 9:18–20.) Further, Austin Electric does not appear to have a
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Board of Directors and/or other corporate officers. Thus, Thomas, as an active owner and
president, is at the very top of the company’s hierarchy, without competing managers.
(Doc. 115-1 at 94:25–94:5.)
Thomas himself admitted during his deposition that he has the power to hire and
fire employees. (Doc. 115-1 at 20:15–16; 174:6–7.) However, Defendants argue that
Thomas has not actually exercised this power in the last six or seven years. Assuming
this is true, this factor still weighs against Defendants. The Court considers whether
Thomas has the “power to hire and fire employees,” not whether he currently exercises
that power. Lambert, 180 F.3d at 1012; see also Orquiza v. Bello, 634 Fed. App’x 605,
605 (9th Cir. 2016) (“We question whether Bello had the power to hire and fire. The
district court’s analysis of this question, which focused on whether Bello actually hired or
fired, is inapt.”).
Furthermore, Thomas has significant control over employee compensation.
Thomas admitted during his deposition that he decided employees’ method of payment,
as well as whether they receive benefits.
(Doc. 115-1 at 18:21–19:17.)
While
Defendants maintain that Thomas neither sets nor even knows the pay rate of
pieceworkers, Thomas’s own testimony suggests otherwise. Importantly, even if Thomas
does not know the current rate per square footage, Thomas testified that he personally
researched and determined the correct formula for calculating pay rates. (Doc. 115-1 at
177:21–178:18.)
Thomas then implemented the formula through working with his
payroll staff. Specifically, Thomas testified that when his research revealed Austin
Electric’s previous methodology was incorrect, he “went to Monica Paloma [in payroll]
and . . . said this is wrong, we have been doing it wrong, we need [to] do it right.” (Doc.
115-1 at 182:1–3.)
Church, Vice President of Operations, testified in detail regarding the process of
setting pay rate. Church testified that he and Becerra first “come up with what [they]
think would be a fair rate,” and subsequently “present it and show it to [Thomas].” (Doc.
115-1 at 208:10–209:5.)
After reviewing the rate, Thomas and Forgia confirm the
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company “can afford that rate.” (Doc. 115-1 at 109:4.) Notably, Defendants do not
argue that Church’s testimony is false. Instead, Defendants argue that Thomas “simply
confirms that Austin Electric can afford a rate change determined by Mr. Church and Mr.
Becerra,” rather than actually setting the pay rate. (Doc. 125 at 5.) “To be classified as
an employer, it is not required that a party have exclusive control of a corporation’s dayto-day functions.” Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962, 966 (6th Cir.
1991). In Dole, the court concluded that a company president had significant control
when “he generally made arrangements for the amount of salary to be paid an employee,
[but] the actual details of calculating the hours, overtime, and commission were handled
by the payroll bookkeeper.” Id. Similarly, here, Thomas need not participate in every
stage of the pay-rate-setting process to demonstrate significant control.
Thomas
determines pieceworker compensation by (1) setting the formula through which
employees’ wages are calculated, and (2) reviewing the pay rate to confirm the company
can afford it. Thus, the factor of determining the rate and method of payment must weigh
against Defendants.
Although no factor is dispositive in the analysis of Thomas’s
individual liability under the FLSA, whether or not Thomas determined pieceworkers’
pay rates is particularly significant in this case, where the pay rate of pieceworker
employees goes to the crux of the alleged FLSA violations.
The factor of maintaining employment records also weighs against Defendants.
During his deposition, Thomas was asked: “[A]fter you made the decision to reclassify
field workers from independent contractors to employees, did you start maintaining
employment records?”
Thomas answered:
“Yes.”
(Doc. 115-1 at 21:11–15.)
Defendants contend that certain employment records (for example, disciplinary records)
are maintained by Jennifer Diaz and Gabriela Beruman of Austin Electric’s
Payroll/Human Resources Department. (Doc. 112 at 4:21–25.) Even assuming that Diaz
and Beruman maintain certain records, there is no reason to believe that Thomas—
contrary to his own testimony—does not also maintain employment records.
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Finally, the parties dispute how employee schedules are determined for
pieceworkers. Thomas’s testimony indicates employee schedules are determined on a
purely voluntary basis: “It is entirely up to” the pieceworkers if and when they want to
work. (Doc. 115-1 at 174:16–17.) According to Thomas, “nobody in the company”
exercises the power of setting schedules for piece employees. (Doc. 115-1 at 174:14–15.)
Ballesteros’s description of setting employee schedules, however, contradicts Thomas’s
testimony. Ballesteros testified he receives schedules from the office telling him which
houses need work and when the work needs to be complete, and Ballesteros assigns
employees to the houses accordingly. (Doc. 128-1 at 4:11–20.) The dispute over this
single factor, however, does not preclude finding individual liability. The weight of the
evidence—when considering the other factors and the circumstances of the whole
activity—supports finding that Thomas is an employer under the FLSA.
Accordingly,
IT IS ORDERED Defendants’ Motion for Summary Judgment (Doc. 111) is
DENIED and the Secretary’s Motion for Summary Adjudication (Doc. 114) is
GRANTED.
Dated this 13th day of November, 2018.
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Honorable Roslyn O. Silver
Senior United States District Judge
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