Gutierrez, et al. v. Carter Brothers Security Services, LLC, et al.

Filing 61

MEMORANDUM and ORDER signed by Chief Judge Morrison C. England, Jr on 10/29/14 ORDERING that Defendant's Motion to Dismiss 32 is DENIED. (Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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RAMSES GUITIERREZ, et al.,
individually and on behalf of all others
similarly situated,

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Plaintiffs,

No. 2:14-cv-00351-MCE-CKD

MEMORANDUM AND ORDER

v.
CARTER BROTHERS SECURITY
SERVICES, LLC, AT&T DIGITAL LIFE,
INC., PACIFIC BELL TELEPHONE
COMPANY DBA AT&T DATACOMM,
INC., ATT&T CORP. and DOES 1
through 10, inclusive,
Defendants.

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On March 10, 2014, Plaintiffs filed the instant class action on behalf of themselves

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and other putative class members (collectively “Plaintiffs or “Class Members”) against

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Carter Brothers Security Services, LLC (“Carter Brothers”), AT&T Digital Life, Inc.

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(“AT&T”), Pacific Bell Telephone Company dba AT&T Datacomm, Inc. (“PacBell”), AT&T

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Corp., and Does 1 through 10 inclusive (“Doe Defendants”). See ECF No. 8. Plaintiffs

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are seeking damages, restitution, civil penalties, and injunctive relief as a result of

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Defendants’ alleged violations of both state and federal labor laws. Plaintiffs further

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allege conversion along with violations of California’s Unfair Competition Law. Id.
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Presently before the court is a Motion brought by Defendant AT&T to dismiss Plaintiffs’

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First Amended Complaint (“FAC”). For the following reasons, that motion is DENIED.

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BACKGROUND1

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In 2012, Carter Brothers entered into a contract with AT&T that called for Carter

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Brothers to provide technicians for the installation of AT&T Digital Life security systems

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in customer homes and businesses. Carter Decl., ¶ 2. Under the terms of that contract,

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Carter Brothers pledged to hire, train, and supply labor and construction-related

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installation and monitoring technicians to AT&T in California and various other states.

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Prior to commencing work, Carter Brothers and AT&T required Plaintiffs and Class

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Members to sign an Independent Contractor Agreement (“Agreement”), which Plaintiffs

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allege misclassified them as independent contractors rather than employees. Plaintiffs

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claim that Carter Brothers entered into these Agreements with Class Members, even

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though both Carter Brothers and AT&T knew the contract between them did not include

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sufficient funds to comply with all applicable local, state, and federal laws or regulations

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governing the labor or services to be provided.

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The main thrust of Plaintiffs’ argument is that Plaintiffs were required to enter into

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the Agreements so that Carter Brothers and AT&T could avoid and evade federal and

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state labor laws, wage and hour laws, and numerous other state and federal laws, taxes

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and requirements. According to Plaintiffs, Carter Brothers and AT&T knew that their

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contract failed to provide sufficient funds to comply with such requirements. As an

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inducement to sign these agreements, Plaintiffs claim that Defendants fraudulently

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promised Class Members they would be converted to W-2 employees after a short

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introductory period of employment, which did not occur. Moreover, according to

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Plaintiffs, the Agreements contained illegal, unconscionable, void and voidable terms.

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The following recitation of facts is taken, sometimes verbatim, from Plaintiff’s First Amended
Complaint. Compl., March 10, 2014, ECF No. 8.

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Those terms included provisions relating to non-competition, indemnification, dispute

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resolution and governing law. Plaintiffs seek to rescind the Agreements and request that

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the Court find the Agreements unconscionable and therefore invalid and unenforceable

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in their entirety.

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Although Plaintiffs signed Agreements purporting to state that they were

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independent contractors, Plaintiffs claim they were in fact employees of both Carter

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Brothers and AT&T. In support of that proposition, Plaintiffs point to a number of factors

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indicating that they were employees rather than independent contractors. Class

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Members were given their work schedule, for example, by both Carter Brothers and

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AT&T, and were expected to abide by the scheduling dictated by those two entities.

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Additionally, Class Members were required to drive vehicles owned and provided by

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AT&T that displayed AT&T’s logo and branding. Class Members were not allowed to

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use those vehicles for any personal reason. Class Members had no ownership or

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investment in the work they did for Carter Brothers and for AT&T, and had to provide

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their own tools and supplies, even though Carter Brothers and AT&T promised that such

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items would be provided. Class Members were also required to wear uniforms bearing

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AT&T logos and were expressly forbidden from engaging in any outside work with

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competing employers during and after the term of the Agreements. Class Members

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were required to participate in a two-week initial training session provided by Carter

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Brothers and AT&T, and also had to participate in on-going training sessions which

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served as direction for the means and manner for carrying out the work they were

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required to perform. Additionally, Class Members’ work was regularly overseen,

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supervised and directed by Carter Brothers and by AT&T.

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AT&T moves to dismiss the present action pursuant to Federal Rule of Civil

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Procedure 12(b)(6),2 for failure to allege sufficient facts to support Plaintiffs’ claims

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against AT&T. Specifically, AT&T argues that Plaintiffs’ allegations do not allow a

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All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure unless
otherwise noted.

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reasonable inference that AT&T was Plaintiffs’ employer, and that AT&T cannot

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therefore be liable for alleged violations of the state and federal labor statutes on that

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basis. See ECF No. 32.

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STANDARD

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On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all

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allegations of material fact must be accepted as true and construed in the light most

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favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,337-38

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(9th Cir. 1996). Rule 8(a)(2) requires only “a short and plain statement of the claim

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showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly,

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550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A

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complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual

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allegations. However, “a plaintiff’s obligation to provide the grounds of his entitlement to

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relief requires more than labels and conclusions, and a formulaic recitation of the

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elements of a cause of action will not do.” Id. (internal citations and quotations omitted).

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A court is not required to accept as true a “legal conclusion couched as a factual

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allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (quoting Twombly, 550 U.S.

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at 555). “Factual allegations must be enough to raise a right to relief above the

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speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R.

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Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading

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must contain something more than “a statement of facts that merely creates a suspicion

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[of] a legally cognizable right of action.”)).

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Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket

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assertion, of entitlement to relief.” Twombly, 550 U.S. at 556 n.3 (internal citations and

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quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard

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to see how a claimant could satisfy the requirements of providing not only ‘fair notice’ of
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the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. (citing 5 Charles

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Alan Wright & Arthur R. Miller, supra, at § 1202). A pleading must contain “only enough

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facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . .

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have not nudged their claims across the line from conceivable to plausible, their

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complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed

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even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a

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recovery is very remote and unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S.

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232, 236 (1974)).

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ANALYSIS

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A.

AT&T’s Status as an Employer
1. Preliminary Considerations

As an initial matter, Defendant AT&T argues that Plaintiffs’ use of the term

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“Defendant Employers” renders it impossible to ascertain which allegations in the FAC

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are being made against AT&T, Carter Brothers, or both. ECF No. 32 at 11. In Plaintiffs’

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Opposition, they clarify and explain that their use of that term “is an efficient manner of

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describing actions undertaken by both AT&T and Carter Brothers.” ECF No. 37 at 8.

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The joint employer doctrine recognizes that even where business entities are separate, if

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they share control of the terms or conditions of an individual’s employment, both

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companies can qualify as employers. Real v. Driscoll Strawberry Assocs., Inc, 603 F.2d

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748, 769-70 (9th Cir. 1979). In determining employer status for pleading purposes, the

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Court will view allegations against “Defendant Employers” in the FAC as implicating

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actions taken by both Defendants AT&T and Carter Brothers.

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Defendant AT&T argues in its motion to dismiss that it is neither an employer nor

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a joint employer of Plaintiffs and therefore cannot be liable for alleged violations of

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either state law or the Federal Fair Labor Standards Act, 29 U.S.C. § 201 et seq.,

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(“FLSA”). ECF No. 32 at 17. Specifically, Defendant AT&T argues that Plaintiffs have

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failed to provide any facts that would establish that AT&T was Plaintiffs’ employer. Id. at
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sufficient facts to support their claim that AT&T was a joint employer for pleading

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purposes.

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Joint employment exists where an employee works for more than one employer at

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the same time. For example, under the FLSA, a joint employment relationship will

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generally be considered to exist when “(1) the employers are not ’completely

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disassociated’ with respect to the employment of the individuals; and (2) where one

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employer is controlled by another or the employers are under common control.” Chao v.

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A-One Med. Servs, Inc., 346 F.3d 908, 918 (9th Cir. 2003). Similarly, under California

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law, where an employer sends an employee to work for another employer, and where

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both retain the right to control the employee’s activities, dual employment exists. Cnty.

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of Los Angeles v. Workers' Comp. Appeals Bd., 30 Cal. 3d 391, 405 (1981).

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2. Factors Considered Under California Law

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In determining whether an employment relationship exists, the most important

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consideration “is whether the person to whom service is rendered has the right to control

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the manner and means of accomplishing the result desired.” S. G. Borello & Sons, Inc.

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v. Dep't of Indus. Relations, 48 Cal. 3d 341, 350 (1989), quoting Tieberg v.

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Unemployment Ins. App. Bd., 2 Cal.3d 943, 946 (1970). There are also several

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additional secondary factors that may be considered when determining the existence of

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an employment relationship such as: “(a) whether the one performing services is

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engaged in a distinct occupation or business; (b) the kind of occupation, with reference

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to whether, in the locality, the work is usually done under the direction of the principal or

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by a specialist without supervision; (c) the skill required in the particular occupation;

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(d) whether the principal or the worker supplies the instrumentalities, tools, and the place

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of work for the person doing the work; (e) the length of time for which the services are to

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be performed; (f) the method of payment, whether by the time or by the job; (g) whether

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or not the work is a part of the regular business of the principal; and (h) whether or not

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the parties believe they are creating the relationship of employer-employee.” Borello,
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48 Cal. 3d at 351. Recently, the California Supreme Court held that the Borello court’s

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“all necessary control” test is applicable in determining the employment status in a suit

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for wage and hour protections like the present action. Ayala v. Antelope Valley

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Newspapers, Inc., 59 Cal. 4th 522, 531 (2014).

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a.

Right to Control

When evaluating the employer’s right to control, what matters is how much control

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the hiring entity retains the right to exercise, not how much control that entity actually

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exercises. Id. at 533; see Malloy v. Fong, 37 Cal. 2d 356, 370 (1951) (“It is not essential

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that the right of control be exercised or that there be actual supervision of the work of the

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agent.”). First, AT&T can and did control the Class Members’ appearance by requiring

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them to wear AT&T uniforms. See Ruiz v. Affinity Logistics Corp., 754 F.3d 1093, 1101

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(9th Cir. 2014) (finding right to control under California law where a company controlled

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“every exquisite detail” of the drivers’ appearance). Second, Plaintiffs have alleged in

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their FAC that Defendants Carter Brothers and AT&T gave Class Members their work

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schedule and dispatched them to work sites. ECF No. 8 at 14. Moreover, Class

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Members had “no control” over setting appointments or their work schedules. Id. Third,

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Class Members’ work was “regularly overseen, supervised, and directed” by Defendants

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Carter Brothers and AT&T. Id. at 15. Fourth, Plaintiffs also allege that Class Members

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could be involuntarily terminated for any reason. Id. at 16; see also ECF No 1-1 at 5

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(“Either Party may terminate this Agreement with or without cause . . . . .”). Although this

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provision applies explicitly only to Carter Brothers, since Plaintiffs assert that Defendant

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AT&T also possessed considerable control and supervision over the terms and

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conditions of Plaintiffs’ work, AT&T also presumably had the power, at least indirectly, to

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terminate Class Members. The California Supreme Court has noted that “[p]erhaps the

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strongest evidence of the right to control is whether the hirer can discharge the worker

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without cause . . . .” Ayala, 59 Cal. 4th at 531; see Malloy, 37 Cal. 2d at 370 (Because

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“[t]he power of the principal to terminate the services of the agent gives him the means

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of controlling the agent’s activities.”). Fifth, AT&T also controlled the manner and means
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of Class Members’ work by requiring Class Members to participate in training, and AT&T

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regularly supervised and oversaw their work. ECF No. 8 at 15.

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Given the above allegations, it is clear that Defendant AT&T had control over

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Class Members’ appearance, working hours and working conditions. These facts, as set

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forth in Plaintiffs’ FAC, support the conclusion that, at least for pleadings purposes,

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Defendant AT&T exercised a significant right to control the activities of Class Members.

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b.

Secondary Factors

In light of the substantial facts alleged by Plaintiffs that evidence AT&T’s right to
control the manner in which Class Members performed their work, none of the remaining

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secondary factors sufficiently weigh in AT&T’s favor for purposes of concluding, as a

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matter of law on the pleadings, that Class Members were independent contractors vis-à-

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vis AT&T. Notably, the only secondary factor supporting the existence of an

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independent contractor relationship is the fact that Class Members signed the

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independent contractor agreements and obtained their own licenses. ECF No. 8 at

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13-14. According to AT&T, this lends credence to the conclusion that both AT&T and

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Class Members believed they were creating an independent contractor relationship.

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However, even this factor is insignificant because Plaintiffs claim Defendants required

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them to obtain the licenses and were induced into signing the Agreements by

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Defendants’ promises that Plaintiffs would be converted to W-2 employees after a short

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introductory period of employment. Id. Additionally, while Class Members apparently

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were required to buy some of their own tools, and while that arrangement can point

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towards an independent contractor status, the FAC also alleges that Class Members

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were in fact told that Defendants would furnish tools, and that Class Members only

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purchased tools when they were not supplied. Id. at 15. In any event, California courts

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have found on numerous occasions that an employee-employer relationship can still

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exist where employees invested in tools. See Borello, 48 Cal. 3d 341, 357.

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Several of the secondary factors weigh in favor of finding an employee-employer
relationship. The fact that Class Members had little or no previous specific or
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specialized training, and had no ownership or investment in their own business, favors a

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finding of employment. See ECF No. 8 at 15. Class Members were also required to

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drive vehicles owned and operated by AT&T and displaying AT&T branding and logos.

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Id. at 14. Class members were forbidden from engaging in any outside work in

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competition with Defendants both during and after the relationship ended. Id. at 15.

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Additionally, Class Members were required to participate in on-going training sessions in

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order to carry out their work in a specific manner proscribed by Carter Brothers and

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AT&T. Id.

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In sum, Plaintiffs have alleged sufficient facts to demonstrate they were

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employees under California’s all necessary control test, and that AT&T had a broad right

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to control the manner in which Class Members performed their work.

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3. AT&T’s Status as an Employer Under Federal Law

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The definition of employee set forth in the FLSA , has been called the “broadest

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definition that has ever been included in any one act.” United States v. Rosenwasser,

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323 U.S. 360, 363 n.3 (1945). In determining whether or not an employment relationship

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exists under federal law, the Ninth Circuit applies an “economic reality” test. Bonnette v.

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California Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir.1983); Real v. Driscoll

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Strawberry Associates, Inc., 603 F.2d 748, 754-55 (9th Cir. 1979) (“Economic realities,

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not contractual labels determines employment status for the remedial purposes of the

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FLSA.”). All factors that are “relevant to [the] particular situation” should be considered

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when evaluating the “economic reality” of an alleged employment relationship.

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Bonnette, 704 F.2d at 1470. Courts typically look to the following non-exhaustive list of

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factors when determining whether an employee/employer relationship exists: (a) the

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degree of the alleged employer’s right to control the manner in which the work is to be

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performed; (b) the alleged employee’s opportunity for profit or loss depending on his

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managerial skill; (c) the alleged employee’s investment in equipment required for his

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work, or his employment of helpers; (d) whether the service requires a special skill; (e)
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the degree of permanence of the working relationship; and (f) whether the service is an

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integral part of the alleged employer’s business. Real, 603 F.2d 748, 754.

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The economic reality test is similar to California’s “all necessary control” test and

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also leads the Court to conclude that, for pleading purposes, Plaintiffs have alleged

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sufficient facts to indicate that Class Members were employees of Defendant AT&T. The

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following facts indicate AT&T controlled the manner in which Class Members performed

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their work. Class Members were given their work schedule by Carter Brothers and

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AT&T who dispatched them to work sites. ECF No. 8 at 14. Class Members were

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required to drive vehicles owned and provided by AT&T, and not allowed to make

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personal stops or carry passengers while driving the AT&T vehicles. Id. at 15. Class

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Members’ work was regularly overseen and supervised by Carter Brothers and AT&T.

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Id. These allegations support the conclusion that AT&T possessed considerable control

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over the manner in which Class Members performed their work.

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Class Members provided support services for an important part of AT&T’s

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business. Class Members installed AT&T’s Digital Life home security system, which was

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integral to AT&T’s provision of services to Digital Life customers. ECF No. 8 at 13.

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Additionally, Class Members had no ownership or investment in their own business, and

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supplied only some of their own tools. Id. at 14-15. Class Members had little to no

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previous specific training in security system installation or services. Id. at 15. In

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addition, similar to the farmworkers in Torres-Lopez v. May, 111 F.3d 633, 644 (9th Cir.

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1997), Class Members had no opportunity for profit or loss depending upon their

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managerial skill, because they were paid an hourly wage. ECF No. 8 at 15.

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The Court finds that Plaintiffs have pled sufficient facts at this stage to support

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their allegation that Class Members and Defendant AT&T were engaged in an

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employee-employer relationship under both California and federal law.

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B.

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AT&T also argues that Plaintiffs’ allegations do not allow a reasonable inference

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that AT&T violated California Labor Code § 2810, as alleged in Plaintiff’s Fifth Cause of

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Action. ECF No. 32 at 21. Specifically, AT&T argues that the FAC provides no factual

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allegations that demonstrate (1) that the installation of Digital Life security systems

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involved any “construction labor…or services” as required by §2810; and (2) that AT&T

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knew or should have known the sums it paid to Carter Brothers pursuant to their

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Agreement were insufficient to comply with all labor laws, if the contract was indeed

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under-funded. Id. at 22.

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California Labor Code § 2810

Both cases cited by AT&T in support of their argument are distinguishable from

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the present case, and therefore lack precedential value. In Hawkins v. TACA Int'l

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Airlines, S.A., 223 Cal. App. 4th 466, 472 (2014), reh'g denied (Feb. 18, 2014), review

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denied (May 14, 2014), the plaintiff filed a third amended complaint after the action had

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been pending for twenty months, and for the first time alleged a cause of action for

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violation of Section 2810. Plaintiff had never attempted to ascertain through discovery

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whether or not a contract in fact existed. Id. at 476. Moreover, the court found that the

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allegations in the complaint were inconsistent with a § 2810 claim because the plaintiffs’

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had alleged in their complaint that the defendant had the ability to pay all wages earned

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by the plaintiff classes, thus contradicting their assertions that the contracts were

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underfunded. Id. at 480. Similarly in Rojas v. Brinderson Constructors Inc.,

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567 F. Supp. 2d 1205, 1209-10 (C.D. Cal. 2008), the court found the plaintiffs’ § 2810

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allegations to be purely speculative, unreasonable and a product of guesswork.

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Plaintiffs here commenced their action in February 2014, alleging a § 2810 claim.

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The First Amended Complaint was filed in March 2014. In the original complaint,

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Plaintiffs attached the independent contractor agreement, which was required by both

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Carter Brothers and AT&T, as evidence that AT&T knew the technicians were

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misclassified as independent contractors rather than employees, and did not receive the

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benefits owed to them under state and federal law. See ECF No 1-1. Taking into
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account the totality of the circumstances alleged in the FAC, Plaintiffs have pled enough

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factual allegations to support a § 2810 claim, namely that Carter Brothers and AT&T

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entered into a contract or agreement for electrical contracting services and knew or had

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reason to know the agreement included insufficient funds to allow compliance with all

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applicable local, state and federal laws. ECF No. 8 at 20. Defendant AT&T’s argument

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that the installation of AT&T Digital Life security systems cannot constitute “construction

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labor or services,” for the purpose of a Section 2810 claim is not well taken. ECF No. 32

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at 22. Because Plaintiffs have alleged that the requisite “construction labor” is indeed

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entailed by the installation services being performed, and since the Court must accept

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that contention as true for purposes of this motion, AT&T’s argument to the contrary

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does not warrant dismissal at this time. See ECF No. 37 at 18; ECF No. 32 at 22.

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C.

Conversion

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AT&T argues it owed no legal duty to Plaintiffs as an alleged employer, and that

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therefore Plaintiffs’ conversion claim against AT&T, as set forth in the Eighth Cause of

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Action, should be dismissed. ECF No. 32 at 23. Because Plaintiffs have provided

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sufficient factual allegations to support their argument that AT&T was an employer,

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dismissal of this claim is improper.

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D.

California’s Unfair Competition Law

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AT&T also argues that because Plaintiffs have not sufficiently alleged that AT&T

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was their employer, AT&T cannot be liable for violations of California’s Unfair

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Competition Law, California Business and Professions Code § 17200, et seq., as

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Plaintiffs assert in their Ninth Cause of Action. ECF No. 32 at 24. Because Plaintiffs

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have provided sufficient factual allegations to support their argument that AT&T was an

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employer, dismissal of this claim is also improper.

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CONCLUSION

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For all the reasons set forth above, Defendant’s Motion to Dismiss, ECF No. 32, is
DENIED.
IT IS SO ORDERED.
Dated: October 29, 2014

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