Sales et al v. Bailey et al

Filing 65

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by District Judge Sharion Aycock on 8/8/2014. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
KENDRICK SALES, Individually,
WILLIAM E. WHITE, JR., Individually,
WAYNE TUBBS, JR., Individually,
And on Behalf of Others Similarly Situated
v.

PLAINTIFFS
CIVIL ACTION NO.: 2:12-CV-00056-SA-SAA

JAMES BAILEY,
DELTA PRODUCTS TREE SERVICE, LLC,
And MS RIGHT OF WAY PROFESSIONALS, LLC

DEFENDANTS

FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs filed the present action under the Fair Labor Standards Act (“FLSA”), 29
U.S.C. § 201 et seq., seeking damages in the form of unpaid compensation.
subsequently commenced a three day bench trial on January 21, 2014.

This Court

Following a thorough

review of the evidence and applicable law, the Court is prepared to rule.
Findings of Fact
James Bailey has been an entrepreneur and small business owner for approximately thirty
years. In 2003 or 2004, he opened Delta Products Tree Service, a residential tree clearing
business, as a sole proprietorship. After gaining experience, Bailey set his sights on more
lucrative public utilities right of way clearing contracts. He eventually landed separate contracts
with both Centerpoint Energy and Entergy Services. Bailey signed a contract with Entergy on
March 22, 2010, but did not start providing clearing services to Entergy until January 1, 2011.
Bailey conceded that, according to his understanding, he was the employer under the Fair
Labor Standards Act for those working under his charge at least prior to March 25, 2011.
Although Bailey was unable to provide start and end dates for any of the Plaintiffs, the evidence

established that John Lane, Jr., Adolfo Garcia, Gustavo Hernandez, Luis Hernandez, Gregorio
Luna, and Homero Sanchez served under the employ of Delta Products Tree Service prior to that
date.
Bailey argued that on March 25, 2011, however, he terminated all of his employees.
Bailey contended that the terminations included both field workers and his office staff. Bailey
contended that because of the inexperience and inefficiency of his workforce, he had fallen
severely behind on Entergy’s checkpoints for his progress, that Entergy was going to require him
to redo a significant portion of the clearing without pay, and that Entergy had suspended any
future disbursements until the work was deemed suitable. Bailey contended that in light of this
setback, he decided to essentially shut down Delta Products’ operations as a commercial right of
way clearing business, and to merely subcontract the work out to another enterprise. According
to Bailey, he met with his entire workforce on August 25, 2011 and informed them that their
services would no longer be needed.
After that meeting, Bailey contended that Kennedy Harrell, one of his longtime foremen,
proposed that he be allowed to form a partnership and pursue the subcontract opportunity.
Several witnesses for Defendants testified that such a partnership was indeed consummated, and
that it, as a matter of pure coincidence, consisted of all of Bailey’s former employees. Bailey
testified that the partnership was the brainchild of Harrell, and that he did not inquire into the
specifics of with whom Harrell intended to partner. Again coincidentally, however, Bailey’s
daughters, Jaime Mitchell and Shekia Renea Dillon, who had previously worked in the office for
Delta Products Tree Service, were additionally added as partners. Harrell, himself, however,
who purportedly founded the partnership, was unable to recall with whom he had decided to

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partner, citing the fact that it had been three years ago and that not all of the partners were in the
courtroom.
On October 10, 2011, Bailey registered Delta Products Tree Service, LLC as a
Mississippi limited liability company. According to Bailey’s testimony, he was content with
operating as a sole proprietorship, but the LLC was something that his youngest daughter “got
[him] into.” Less than a week later, on October 17, 2011, a number of the alleged Harrell
partners registered MS Right of Way Professionals, LLC (“MS Right of Way”) as a Mississippi
limited liability company. According to Harrell, Bailey’s daughter Shekia Dillon decided to
form MS Right of Way as an LLC and he himself had nothing to do with the company’s
formation. According to Jaime Mitchell, however, the idea was conceived by both Harrell and
Dillon. Shekia Dillon, Jaime Mitchell, Eddie White, Sr., Christopher Thomas, Adolfo Garcia,
Homero Sanchez, Luis Hernandez, Andres Alverado, Janalisha Heard, Kenneth Jones, Kennedy
Harrell, Randy Buckingham, David Camarana, Deon Ammons, Gustavo Hernandez, and
Kendrick Sales were listed as members of the LLC. At the time of trial, Mitchell served as
“manager one” for the LLC, her husband Nathaniel Mitchell served as “manager two,” and
Janalisha Heard served as the corporate secretary.
Ironically, despite the alleged amount of separation between the two companies, MS
Right of Way Professionals, LLC and Delta Products Tree Service, LLC shared both the same
address and phone number. Despite such shared resources, Defendants contended that Bailey
had little to nothing to do with MS Right of Way, merely occupying office space down the hall.
Mitchell, who at the time of trial served as MS Right of Way’s “manager one,” stated that MS
Right of Way had only employed two employees during its entire existence. One of those
purported employees, Janalisha Heard, was actually listed as a member on the certificate of

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formation and then took the role as the entity’s corporate secretary. Heard, who contended that
she was responsible for keeping up with MS Right of Way’s inventory, was asked to list
examples of assets owned by MS Right of Way. According to Heard, the company owned
chains, chaps, vests, gloves, and hats. Curiously, Heard made no mention of the trucks, chippers,
and other large-scale implements that Nathaniel Mitchell cited as assets owned by the company.
Witnesses for Defendants further contended that the management structure for MS Right
of Way was incredibly inclusive, that there were no bosses, and that the decisions on where to
work, when to work, and how to work were reached by group vote. Defendants’ witnesses
claimed that no one had the power to fire employees because all individuals working for the
company were members, and that no one had ever been fired. Defense witnesses contended that
if they needed to hire someone, they first had to hold a member meeting to allow everyone to
provide input. Essentially, all corporate decisions were purportedly made by the group of
members at large. Several witnesses for the defense, including Jaime Mitchell, contended that
the members’ LLC agreement was embodied in a written operating agreement. That agreement,
which Mitchell produced at trial, turned out to be nothing more than a PowerPoint presentation
drafted after the commencement of the current lawsuit.
Further casting doubt on Defendants’ theory of the case was the odd state of the records
produced. The inconsistencies were in abundance, and the Court does not attempt to catalogue
them in their entirety here. The most glaring examples, however, involved Defendants’
production of Plaintiffs’ payroll information. First, a number of checks issued after March 25,
2011, the date of the Delta Products Tree Service en masse lay off and Kennedy Harrell’s
formation of a partnership, continued to bear Delta Products Tree Service as the payor. Such

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“mislabeled” checks continued to be issued even after the formation of MS Right of Way as
well.
Defendant’s Exhibit 4 and Plaintiff’s Exhibit 3 both included check 900 issued to
Plaintiff Gustavo Hernandez on September 16, 2011. With regard to the Defendant’s exhibit,
however, the check reflected that it had been issued by MS Right of Way. As to Plaintiff’s
exhibit, which had been furnished by Hernandez, the check reflected that it had been issued by
Delta Products Tree Service. Mitchell, under oath, admitted that she had modified the check
after the fact in an attempt to “correct the error.” In her words:
As I stated earlier, it was the exact—it was the same software. It
was the same program. Once I noticed the errors—it’s only an
error in name. It’s not to be malicious of any type. Once I noticed
the error, I did change it. From that point, when you all requested
our documents, if I noticed an error prior to receiving any type of
litigation towards us, once I changed it, what I print out from my
records, it will have the corrected.
Additionally, a number of Plaintiffs’ paychecks reflected that federal and state taxes had
been withheld even after Defendants claim to have formed a partnership and converted all
employees to members and/or independent contractors.

According to Defendants, such

inconsistencies were also a software glitch and that, as agreed between the parties, the monies
purportedly withheld as “taxes” were actually applied as “owner’s equity” in the newly formed
organization. Eventually, Defendants were able to correct the withholding line and began to
uniformly withhold a portion of Plaintiffs’ paychecks as a “membership fee.”
Plaintiffs had no recollection of any group management meetings, much less a written
operating agreement. Kendrick Sales and Thomas Brown, who were hired after Bailey had
allegedly fired his workforce, testified that they were hired by Bailey, personally, rather than by
group vote. None of the Plaintiffs who were purportedly members of the LLC ever remembered

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having an organizational meeting to discuss management of the company. Instead, they testified
that Bailey had been involved in the management of the company, regardless of its name,
throughout their tenure. They testified that he had the power to hire and fire, and that the
company ultimately answered to his authority. They did, however, recall a discussion about the
“membership fees.” According to the majority of Plaintiffs, Bailey had approached them with
regard to the new deduction and had informed them that monies would be withheld from each
paycheck, but that they would be applied toward an employer-sponsored “savings account.”
Plaintiffs additionally testified in near unison that their average work hours were from
approximately 6:00 or 6:30 in the morning until 5:00 or 5:30 in the evening. Plaintiffs recalled
working overtime regularly, but did not recall ever being paid overtime. Thomas Brown, who
was hired as a drag operator, testified that Bailey had told him at his hiring that “he didn’t pay
overtime, but [Brown] could work all of the hours [he] wanted.”
After careful review, the Court determines that the organizational gymnastics of Delta
Products Tree Service, MS Right of Way, and the unnamed partnership were nothing more than
an elaborate charade, concocted in an attempt to avoid overtime obligations. The Court finds that
Brown’s testimony that Bailey simply didn’t pay overtime is probably close to the truth.
Throughout the trial, Bailey adamantly stated that he had never paid overtime and almost as
adamantly stated that he had never paid overtime because overtime was never owed. On at least
one occasion, however, Bailey equivocated as to that second assertion. The following exchange
is illustrative:
Q: But it’s your testimony that, at no time, no laborer ever worked
more than 40 while they were employed by you?
A: That’s correct. I kept an eye on that. I—the only time that I
would ever consider—which I was always completing my work
prior to this Entergy contract on time, but the only time I would
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ever consider letting any worker go overtime is because I was
behind on my work, which I never was.
When pressed with regard to the records for one particular worker who was not a party to this
action, Bailey abandoned his theory that no worker had ever worked overtime:
Q: Now, you didn’t pay Randy Buckingham overtime that week
did you?
A: I don’t know that you can establish that, because Randy
Buckingham—obviously, he and I had some sort of agreement. He
didn’t choose to sue me.
Q: Well, sir, look on the very next page, and you can see his rate is
$10 an hour. If you take 455, which is what he made that week,
divided by 10, it—guess how much hours it—take 455, divide by
$10 an hour. That produces 45.5 hours. Do you see that?
A: I see that.
Q: You don’t dispute that math, do you?
A: No, but it don’t say what agreement Randy Buckingham and I
had over that amount either.
Q: Well, assuming you employed Randy Buckingham in early of
March 2011, and if he went over 40 hours in a workweek, he
would have been entitled to time and a half, correct?
A: Which was obviously paid.
At another point on direct examination, Bailey inadvertently dropped the façade on the
separate corporate identities:
Q: Did you set the individual rates of pay for anyone that worked
for Mississippi Right of Way?
A: I set the rates of pay when?
Q: For any individual—
A: For the year—what year are you talking about?
Q: For 2011.
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A: In 2011, I set the rate of pay from the start of the contract up
until the end of the contract. After that, I didn’t set a rate of pay.
Q: Okay. And what was that rate.
A: Well, it was—I call it rate. I mean, it’s—you know, hourly pay,
you know, is what I was doing.
Q: You mean—I’m talking about—you’re talking about before
March?
A: Before—
Q: Let me re—let me ask you the question again.
A: Okay.
Q: Have you ever set the rate of pay for anyone that worked at
Mississippi Right of Way, any individual?
A: At what time?
Q: Anytime.
A: Oh, for Mississippi Right of Way?
Q: Right.
A: I’m sorry. I was thinking about—no, no, no. I never set a rate
for Mississippi Right of Way, no.
The Court finds that Bailey continued to direct the operations of MS Right of Way even
after it was formed as a separate legal entity. The Court discredits the testimony offered by
Defendants that Delta Products merely provided maps for the work to be completed, and that the
individual workers were then able to determine where to work and what tasks to perform without
any further instruction from a superior. The Court accepts Plaintiffs’ separate contentions that
Bailey continued to supervise the operations and personally observed the progress they achieved.
While the Court accepts that Bailey did indeed decrease his personal involvement out in the

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field, the Court finds that he continued to pull the strings on MS Right of Way’s operations.
Particularly indicative of this fact was that MS Right of Way was consistently unable to put
anyone on the witness stand who had an accurate grasp on the company’s operations.
Kennedy Harrell, who was designated the corporate representative for MS Right of Way,
was unable to recall with whom he had decided to form a partnership, and claimed to have had
no involvement in the formation of MS Right of Way Professionals, LLC. Further, Harrell
testified that all of the company’s assets were obtained after March 25, 2011. Harrell gave no
opinion as to how his partnership could have possibly operated from October 2011 until March
of 2011 without any assets. Additionally, Harrell was unable to testify as to how the individual
rates of pay for workers were reached, and made no mention of the maps that supposedly
provided instruction for the laborers. Jaime Mitchell and Nathaniel Mitchell, managers one and
two, were similarly unable to provide a clear picture of the decision making process at MS Right
of Way.
Plaintiffs’ employment history, including their hourly rates of pay, hours worked in a
week, and employment start dates and end dates were difficult to determine given the lack of
accurate employment records. The Court finds that as a matter of practice, Defendants routinely
reverse engineered the pay records of numerous Plaintiffs to avoid the appearance of overtime
work. Plaintiffs’ hourly rates of pay were adjusted on a regular basis in an attempt to prevent
from recording over 40 hours of work. In other words, if an individual worked over 40 hours,
the plaintiff’s hourly wage would be adjusted upward so that the employee would receive
straight time for all of the hours worked, but he would receive no overtime wages. Defendants
were unable to testify to start dates and end dates for any of the Plaintiffs, and wholly failed to
produce a large number of relevant records.

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In piecing together the Plaintiff’s testimony and the few records that were made
available, the Court makes the following findings:
1. Plaintiff Adolfo Garcia started performing brush work for Bailey on September 4,
2008. He continued to work for Bailey until October 17, 2011. From October 17,
2011 until June 15, 2012, Garcia worked for MS Right of Way. Garcia was initially
paid $12.00 per hour, but eventually received a raise to $13.00 per hour.
2. Plaintiff John Lane, Jr. worked for Bailey from December 2010 until August 2011.
Lane was paid $10.00 per hour.
3. Plaintiff Kendrick Sales worked for Bailey from August 2011 until October 17, 2011.
From October 17, 2011 until his termination in March 2011, Sales worked for MS
Right of Way. Sales was paid an hourly wage of $9.00 per hour.

Sales was

terminated by Bailey.
4. Plaintiff Thomas Brown worked for Bailey from late May 2011 until November
2011. Brown was paid an hourly wage of $18.50 until August 13, 2011 when he
received an increase to $21.00 per hour.
5. Luis Torres-Hernandez worked for Bailey from March 11, 2011 until June 2012. He
was paid between $11.00 an hour and $11.50 an hour. Torres-Hernandez returned to
work at the end of 2013 and worked for MS Right of Way until the time of trial. At
the time of his testimony, he was still employed by Defendants. At the time of trial,
Torres-Hernandez was purportedly paid $106.00 per mile. Based on Jaime Mitchell’s
testimony that the workers could complete one mile of work in eight and a half hours,
$106.00 per mile would equate to an hourly wage of $12.47.

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6. Gregorio Luna worked for Bailey from December 5, 2010 until September 2011.
Luna was paid between $12.00 per hour and $12.25 per hour.
7. Homero Sanchez worked for Bailey from April 2011 until June 2012. Sanchez was
paid $11.00 per hour.
8. Gustavo Hernandez worked for Bailey from August 2009 until July 2012. He was
paid $12.00 per hour. He did not work for MS Right of Way.
9. Eddie White worked for Bailey from August 2011 until April 2012. He was hired by
Bailey. White was paid $11.00 an hour from August 2011 until October 2011, and
was then given a dollar per hour raise from October 2011 until April 2011.
10. Wayne Tubbs, according to pay records entered into evidence, worked for MS Right
of Way from at least November 2011 until March 2012.
11. Kenneth Jones, according to pay records entered into evidence, worked for Bailey
from at least September 2011 until October 17, 2011. He continued to work for MS
Right of way until at least December 2011.
The equipment used by Plaintiffs was almost entirely provided by Bailey and MS Right
of Way. The companies owned all of the chainsaws, chaps, trucks, all-terrain vehicles, bobcats,
trailers, and other implements used for the clearing work. The companies also provided the
employees with personal protective equipment including hard hats and vests. The workers were
issued such equipment free of charge, but had to pay for any replacements. The workers had no
control over when or where they worked. Further, their hourly wage was dictated by Bailey and
MS Right of Way, and they had little to no influence over the income they were able to earn in a
week. The workers were hired on an indefinite basis, and few, if any, held outside employment.

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Conclusions of Law
A. Joint Employer Status
Under the FLSA, an ‘“[e]mployer’ includes any person acting directly or indirectly in the
interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). Whether an individual
or entity is an employer similarly turns on the “economic reality” of the working relationship.
Goldberg v. Whitaker House Co-op, Inc., 366 U.S. 28, 33, 81 S. Ct. 933, 6 L. Ed. 100 (1961).
The Fifth Circuit has articulated that the definition of employer is “sufficiently broad to
encompass an individual who, though lacking a possessory interest in the ‘employer’
corporation, effectively dominates its administration or otherwise acts, or has the power to act,
on behalf of the corporation vis-à-vis its employees.” Reich v. Circle C Investments, Inc., 998
F.2d 324, 329 (5th Cir. 1993) (citing Donovan v. Sabine Irrigation Co., 695 F.2d 190, 194 (5th
Cir. 1983)). Further, if an “individual with managerial responsibilities is deemed an employer
under the FLSA, the individual may be jointly and severally liable for damages resulting from
the failure to comply with the FLSA.” Lee v. Coahoma Co., 937 F.2d 220, 226 (5th Cir. 1991)
(citing Donovan v. Grim Hotel, Inc., 747 F.2d 966, 972 (5th Cir. 1984)).
In making such a determination, the court should consider whether the purported
employer: (1) had the power to hire and fire the employees, (2) supervised and controlled
employee work schedules or conditions of employment, (3) determined the rate and method of
payment, and (4) maintained employment records. Watson v. Graves, 909 F.2d 1549, 1553 (5th
Cir. 1990); see also Itzep v. Target Corp., 543 F. Supp. 2d 646, 653 (W.D. Tex. 2008).
Assuming there are no material facts in dispute, whether an individual or entity is a joint
employer is a question of law. Itzep, 543 F. Supp. 2d at 653 (citing Karr v. Strong Detective
Agency, Inc., 787 F.2d 1205, 1206 (7th Cir. 1986)).

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In the case at bar, the Court determines that at all relevant times, Bailey acted as an
employer of the Plaintiffs. First, he conceded that prior to the supposed termination of his
employees on March 25, 2011 he was the employer. Second, the Court finds that he continued to
act as the employer after that date, and that the formation of the informal Harrell partnership was
nothing more than a sham. Finally, even after the formation of Delta Products Tree Services,
LLC and MS Right of Way Professionals, LLC, the Court determines that Bailey still possessed
the power to hire and fire employees, still set wages for the workers, and still had the ability to
control the workers’ hours worked and conditions of employment.

The Court found it

particularly revealing that when asked whether he had ever set rates of pay for MS Right of Way,
Bailey felt it necessary to clarify which dates were at issue. Had Bailey actually had nothing to
do with MS Right of Way, it seems that the answer would have been readily available.
Additionally, the Court finds credible the statements of both Sales and White, who stated that
they were hired by Bailey, and that he set their rates of pay. Accordingly, the Court determines
that Bailey was the FLSA employer until the formation of MS Right of Way Professionals, LLC
and Delta Products Tree Service, LLC, but that after that point, all of Defendants may be
considered joint employers.
B. Employee Status
In order to state a claim for unpaid wages or overtime under the FLSA, a plaintiff must
first establish that he was an employee of the defendant. See Benshoff v. City of Virginia Beach,
180 F.3d 136, 140 (4th Cir. 1999) (“Those seeking compensation under the Act bear the initial
burden of proving that an employer-employee relationship exists and that the activities in
question constitute employment for purposes of the Act.”); Davis v. Food Lion, 792 F.2d 1274,
1276 (4th Cir. 1986) (Under [the overtime provisions of the FLSA], however, a plaintiff must

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also show that he was ‘employed’ by the defendant/employer in order to prove a violation.”).
Under the FLSA, “employee” is defined as “any individual employed by an employer,” while
“employ” means “to suffer or permit to work.” 29 U.S.C. § 203(e)(1), 29 U.S.C. § 203(g). As
observed by the Fifth Circuit, the definition is particularly broad and is intended to encompass
“some parties who might not qualify as such under a strict application of traditional agency law
principles.” Hopkins v. Cornerstone America, 545 F.3d 338, 343 (5th Cir. 2008) (quoting
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S. Ct. 1344, 117 L. Ed. 2d 581
(1992)).
In order to gauge whether an individual is an employee or an independent contractor, the
relevant inquiry is “whether, as a matter of economic reality, the worker is economically
dependent upon the alleged employer or is instead in business for himself.” Id. (citing Herman
v. Express Sixty-Minutes Delivery Serv., Inc., 161 F.3d 299, 303 (5th Cir. 1998)). In making
that determination, the court should consider five non-exhaustive factors: (1) the degree of
control exercised by the alleged employer; (2) the extent of the relative investments of the
worker and the alleged employer; (3) the degree to which the worker’s opportunity for profit or
loss is determined by the alleged employer; (4) the skill and initiative required in performing the
job; and (5) the permanency of the relationship. Hopkins, 545 F.3d at 343. No factor is
sufficient or dispositive in and of itself; instead each should be considered in the larger context of
the ultimate inquiry. Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1043-44 (5th Cir. 1987).
Additionally, “[n]either contractual recitations nor subjective intent” can mandate a finding of
employee or independent contract status. Usery v. Pilgrim Equip. Co., 527 F.2d 1308, 1315 (5th
Cir. 1976). Accordingly, the Court analyzes the economic reality of the parties’ relationship.

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A. Control
In determining the degree of control exercised by the purported employer, the court
should look to whether an individual exerts such control over a meaningful part of the business
that she stands as a separate economic entity, or whether the alleged employer still controls the
meaningful economic aspects of the business. See Hopkins, 545 F.3d at 343. The autonomy of
the individual must be meaningful, as “the lack of supervision over minor regular tasks cannot be
bootstrapped into an appearance of real independence.” Id. (quoting Mr. W. Fireworks, 814 F.2d
at 1049). Illustratively, the Fifth Circuit gave extensive consideration to the control prong in
Hopkins. There, the question before the court was whether an insurance company’s sales
leaders, who were “primarily responsible for recruiting, training, and managing a team of
subordinate sales agents,” were properly considered independent contractors or employees. Id.
at 342. Although the plaintiffs there had agreed to remain independent contractors and were able
to maintain control over their day-to-day affairs, the company still retained significant authority
over the business operations of the sales leaders. Id.
In weighing the control factor, the court examined such considerations as who had the
authority to hire, fire, assign, and promote the leaders’ subordinate employees, who had the
authority to authorize advertisements for their subordinate agents, who had control over the type
and pricing of products sold, who had control over the geographic area in which the agents could
operate, and how many sales leads each sales leader could receive. Id. at 344. Finding that the
company retained control over the vast majority of these variables, the Fifth Circuit found that
because the company controlled “the meaningful aspects of the business model,” the plaintiffs
could not “plausibly be considered ‘separate economic entities’ and the control factor therefore
weighed in favor of employee status. Id. (quoting Mr. W. Fireworks, 814 F.2d at 1049).

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In the case at bar, the Plaintiffs controlled none of the meaningful economic aspects of
the business. The Court completely discredits any testimony that the Plaintiffs participated in
organizational meetings whereby they voted on business decisions. Further, the Plaintiffs were
consistently under the supervision of a superior. Their hours, work location, and work methods
were all dictated by either a supervisory foreman or Bailey, himself. Accordingly, the control
factor clearly weighs in favor of employee status.
B. Relative Investment
As to the relative-investment prong, the court should compare the worker’s individual
investment to that of the purported employer. Id. at 344. The greater the investment made by
the purported employer, the more likely the disputed party should be considered an employee
rather than an independent contractor. Id. In the case at bar, the Court finds this prong clearly
leans in favor of employee status. The putative employees made little to no investment in the
business. The evidence revealed that although they may have purchased replacement personal
protective equipment, the vast majority of the machinery and implements required to perform the
right of way clearing work was owned by Bailey or MS Right of Way. Additionally, although
the Plaintiffs indeed had a “membership fee” deducted from their paycheck issued by MS Right
of Way, there was no credible evidence that Plaintiffs held anything more than an illusory
interest in the company’s equity. Defendants’ argument that the parties operated as though the
Plaintiffs held a legitimate ownership interest in MS Right of Way is simply unbelievable. That
already tenuous assertion was further discredited by the fact that the Friday before trial, Mitchell
and Heard filed paperwork with the Secretary of State to remove the Plaintiffs as “members” of
the company. Accordingly, the investment prong weighs in favor of employee status.

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C. Opportunity for Profit or Loss
Turning to the degree to which the worker’s opportunity for profit or loss is determined
by the alleged employer, the court should analyze whether the worker or employer controlled the
“major determinants of the amount of profit which the [worker] could make.” Usery, 527 F.2d at
1313. Whether such workers are paid on a commission or percentage basis is relevant, but not
necessarily dispositive; instead, factors such as pricing of the service offered, service location,
advertising, and customer volume should also be considered. Usery v. Pilgrim Equip. Co., Inc.,
527 F.2d 1308, 1313 (5th Cir. 1976). In Thibault v. Bellsouth Telecommunications, Inc., for
instance, the workers were paid a set hourly rate, but were able to control their opportunity for
profit or loss by controlling costs such as “repairs, supply costs, food, water, housing, etc.” 612
F.3d 843, 848 (5th Cir. 2010). As such, the Fifth Circuit determined that the factor weighed in
favor of the plaintiffs’ status as independent contractors. Id. Moreover, in Hickey v. Akra
Industries, Inc., the Fifth Circuit found that where a salesperson’s profits were determined by his
ability to increase customer volume and he was allowed to sell other products, he was likewise
an independent contractor. 699 F.2d 748, 752 (5th Cir. 1983). Conversely, in Usery, the
plaintiffs, who worked as dry cleaning operators, were paid a percentage of their sales volume,
but the company retained control over the pricing of services, location of the sales area, and
advertising. 527 F.2d at 1314. Additionally, there was no risk of loss involved for the plaintiffs.
Id. The Fifth Circuit therefore concluded that “[n]o opportunity for loss of the capital investment
in the [dry cleaning] station’s operation and control by [defendant] of major determining factors
of profit indicate that the operators are dependent upon [defendant], and therefore, that they are
employees.” Id.

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In the case at bar, the purported employers controlled the “major determinants of the
amount of profit which the [workers] could make.” Usery, 527 F.2 at 1313. The evidence
revealed that the workers were paid a set hourly rate and that they could not control any of the
costs of their work. The workers were not required to purchase supplies or repair equipment, and
those costs were instead borne by Bailey or MS Right of Way. Additionally, the workers worked
only as a crew, and they could not control the number of hours they worked. As such, the Court
finds that this factor similarly leans in favor of employee status.
D. Skill and Initiative
With regard to the skill and initiative required in performing the job, the court should
look for some unique skill set. Carrell, 998 F.2d at 345. For instance, the court has before noted
that “[p]ipe welding, unlike other types of welding, requires specialized skills.” Id. at 333.
“Routine work which requires industry and efficiency is not indicative of nonemployee status.”
Usery, 527 F.2d at 1311. In Herman v. Express Sixty-Minutes Delivery Services, Inc., the Fifth
Circuit echoed its previous observation that “initiative, not efficiency determines independence.”
161 F.3d 299, 305 (5th Cir. 1998) (quoting Mr. W Fireworks, 814 F.2d at 1053).
Here, the vast majority of Plaintiffs had no unique skill set. Although their work was
certainly difficult and required efficiency, it did not require a specialized body of knowledge or
training. That observation was underscored by the fact that several of the Plaintiffs came to the
job with no previous training or experience in the clearing business, but were able to adjust to the
requirements of the job in a fairly efficient manner. The evidence revealed that the workers
primarily served as unskilled laborers, operating chainsaws, picking up debris, driving trucks and
other equipment, and performing general landscaping tasks. Accordingly, as to Plaintiffs Sales,

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White, Tubbs, Hernandez, Torres-Hernandez, Garcia, Sanchez, Jones, Lane, and Luna, the Court
finds that this prong is indicative of employee status.
As to Plaintiff Brown, however, the Court finds that he indeed possessed a unique skill
set. The evidence indicated that Brown had extensive expertise operating a drag line, which he
described as a sixty foot boom with a Skil saw blade attached. Additionally, it was clear that few
other workers were able to operate the machinery, and that Brown had failed to successfully train
others to operate the equipment. As such, that factor weighs in favor of independent contractor
status with respect to Brown.
E. Permanency of the Relationship
Finally, in turning to the permanency of the relationship between the parties, the court
should consider the temporal length of the relationship between the parties, with longer periods
weighing in favor of an employer/employee relationship. Hopkins, 545 F.3d at 346. In Carrel,
where the welders “moved from job to job, company to company, and state to state” for a six to
nine month construction season, the Fifth Circuit found the situation indicative of an independent
contractor relationship. 998 F.3d at 332.
Here, a number of the Plaintiffs worked for the Defendants for a multi-year period and
were largely financially dependent on that relationship. They did not move from job to job, but
saw their employment relationship as indefinite. White, Sales, Sanchez, and Luna, who worked
for Defendants for shorter periods, did not take the jobs as short-term opportunities. They did
not take the job as seasonal work, but similarly sought an indefinite employment relationship.
With regard to those employees, the Court again finds that the consideration points toward
employee status.

As to Brown, however, the Court must once again draw a distinction.

Somewhat curiously, the evidence revealed that he maintained his residence in Arkansas during

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his employment with Defendants, indicating that he might have viewed the job as merely a shortterm commitment. On the other hand, Brown too testified that he intended to stay at the job on a
long-term basis, and that he only left because he was given fewer and fewer hours. On the
whole, the Court finds that the permanency prong fails to point clearly in either direction with
regard to Brown.
F. Employee Status Conclusion
On review, the Court finds that the economic realities of the relationship between the
parties point heavily in favor of an employer/employee relationship. These Plaintiffs were not
“in business for themselves,” but were instead “economically dependent upon the alleged
employer.” See Hopkins, 545 F.3d at 343. Because with respect to most of the Plaintiffs the
control, investment, opportunity for profit and loss, permanency, and skill and initiative factors
all weigh in favor of employee status, the Court finds that those employees were indeed
employees of Defendants for purposes of the FLSA. With regard to Plaintiff Brown, although an
admittedly closer call, because the control, investment, and opportunity for profit or loss
considerations weigh in favor of employee status, the Court similarly finds that Brown was also
an employee for purposes of the FLSA.
C. Damages
Having shown that they are indeed employees under the FLSA, in order to recover,
Plaintiffs must establish that they performed work for which they were not compensated
properly. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 686-87, 66 S. Ct. 1187, 90 L.
Ed. 1515 (1946). “The FLSA requires any employee working over 40 hours in a week to be paid
overtime, premium compensation at the rate of one and one-half times their ‘regular rate’ of
pay.” York v. City of Wichita Falls, 48 F.3d 919, 921 (5th Cir. 1995). The employee bringing a

20

suit for unpaid compensation bears the burden of proving, with definite and certain evidence, that
such uncompensated work was performed. Anderson, 328 U.S. 680, 686-87, 66 S. Ct. 1187.
That burden is easily satisfied where an employer is in possession of pertinent employment
records. Id.; See 29 U.S.C. §211(c) (“Every employer subject to any provision of this chapter . .
. shall make, keep, and preserve such records of the persons employed by him and of the wages,
hours, and other conditions and practices of employment maintained by him. . . .”), 29 C.F.R. §
516. Where an employer’s records are inaccurate and inadequate, however, the employee may
still discharge his burden by proving that he performed work for which he was improperly
compensated by producing sufficient evidence to show the amount and extent of the work by
“just and reasonable inference.” Id.
As stated by the Supreme Court, when an employer fails to conform with its statutory
duty to keep and maintain proper employment records, the solution “is not to penalize the
employee by denying him any recovery on the ground that he is unable to prove the precise
extent of uncompensated work.” Id. Instead, the Court should allow the plaintiff’s claim to
advance if he is merely able to show “that he has in fact performed work for which he was
improperly compensated and if he produces sufficient evidence to show the amount and extent of
that work as a matter of just and reasonable inference.” Id. The burden then shifts to the
employer, who may negate the plaintiff’s showing with evidence of the precise amount of work
performed. Id. “If,” however, “the employer fails to produce such evidence, the court may then
award damages to the employee, even though the result may be only approximate.” Id.
According to the Fifth Circuit, under such circumstances, the courts have “in effect
ordered the fact finder to the do the best he could in assessing damages.” Reeves v. Int’l Tel. and
Tel. Corp., 616 F.2d 1342, 1351 (5th Cir. 1980) (quoting Mitchell v. Riley, 296 F.2d 614, 616

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(5th Cir. 1961)). An employer simply “cannot be heard to complain that damages lack the
exactness and precision of measurement that would be possible had he kept records in
accordance with the requirements of [§211(c)] of the Act.” Donovan v. Grantham, 690 F.2d 453,
458 (5th Cir. 1982).
Here, the Court determines that Defendants failed to keep and maintain accurate
employment records as statutorily required. Although Defendants did produce some records,
there were large spans which were simply unaccounted for. Additionally, there was significant
cause for concern as to the accuracy of the records that were produced. First, it was apparent that
rates of pay had been adjusted in order to obfuscate the fact that overtime hours were being
worked. Although Defendants testified that the workers worked more than one job and therefore
received different rates of pay for different tasks performed, none of the Defendants were able to
recall which jobs certain Plaintiffs were able to perform or recite specifically what type of job
would receive precisely what rate of pay. And, although the Plaintiff’s typically received a
rounded hourly rate of pay, the adjusted rates of pay were often stated in odd numbers such as
$12.62 or $13.49 per hour. Second, but just as troubling, was the fact that Mitchell testified that
she had modified a number of the records after the fact.

Although she stated that the

modifications were not malicious and that she was simply attempting to correct any mistakes,
such actions significantly call into question the veracity of those records. Accordingly, the Court
determines that Defendants failed to accurately keep and maintain Plaintiffs’ employment
records and the Plaintiffs are entitled to rely on the relaxed burden articulated in Anderson, 328
U.S. at 686-87, 66 S. Ct. 1187.
Based on Plaintiffs’ testimony, the Court finds that Plaintiffs did indeed perform work for
which they were improperly compensated. After all, even Kennedy Harrell was unable to testify

22

that the workers had not been required to work in excess of forty hours per week to stay on
schedule with the demands of the contract. Plaintiffs, on the other hand, convincingly testified
that their approximate work hours were from 6:00 to 6: 30 in the morning until 5:00 to 5:30 in
the evening with a thirty minute lunch break. Brown, on the other hand, succinctly testified that
they worked approximately ten hours per day. As to the hours worked in a week, Plaintiffs
testified that the typical workweek involved working in excess of forty hours, and that working
less was the exception. Based on the evidence presented, the Court finds that Plaintiffs have
established “the amount and extent of [their improperly compensated] work as a matter of just
and reasonable inference” and that Defendants have failed to rebut that showing.
With regard to the workweeks for which employment records were produced, the Court is
able to arrive at a fair calculation by dividing their gross pay for the pay period by their
understood hourly wage. Based on the evidence presented at trial, that figure should represent a
fair estimate of the hours actually worked. As for the weeks for which no records exist, the
Court assumes that the Plaintiffs worked 45 hours per week. That estimation is based on
Plaintiffs’ testimony that they typically worked about ten hours per day, but that there work was
heavily dependent on external factors and that there were certainly weeks in which they worked
no overtime. Accordingly, the Court finds that overtime is owed as follows:
Plaintiff

Adolfo Garcia

Overtime Owed
Based on Produced
Records
$1231.02

Gustavo Hernandez

$2,090.75

Luis Hernandez

$1,525.74

Overtime Owed for
Weeks in Which No
Records Exist
85 weeks at $12.00
per hour.
85 weeks x ($12.00/2)
x 5 = $2,550
67 weeks at $12.50
per hour.
67 weeks x ($12.50/2)
x 5 = $2,093.75
1 week at $11.00 per
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Total Overtime Owed

$3,781.02

$4,184.50

$1,553.24

hour.

Gregorio Luna

Homero Sanchez
John Lane
Eddie White

Kendrick Sales
Thomas Brown

Wayne Tubbs1
Kenneth Jones

$75.60

$981.37
$962.00
$607.91

$361.83
$848.53

$1,143.58
$134.48

1week x ($11.00/2) x
5 = $27.50
1 week at $12.00 per $105.60
hour.
1week x ($12.00/2) x
5 = $30.00
N/A
$981.37
N/A
$962.00
2 weeks at $11.00 per $662.91
hour.
2 weeks x ($11.00/2)
x 5 = $55.00
N/A
$361.83
2 weeks at $18.50 per $941.03
hour.
2 weeks x ($18.50/2)
x 5 = $92.50
N/A
$1,143.58
N/A
$134.48
Total $14,811.56

Notably, the Court adopts Plaintiffs’ proposed findings with regard to the calculation of
overtime owed on the face of the trial exhibits and additional overtime owed for week in which
no records exist. With regard to Plaintiffs Gustavo Hernandez and Luis Hernandez, however, the
Court finds that Plaintiffs’ subtotals for each category only added to a total of $4,184.50 and
$1,553.24, respectively. Accordingly, the Court’s total sum of damages is slightly less than that

1

Following the close of Plaintiffs’ case, Defendants moved for a directed verdict as to Plaintiffs
Kenneth Jones and Wayne Tubbs on the basis that they failed to appear and testify in this case.
Plaintiffs countered by asserting that the Court had sufficient proof in front of it to issue a
finding with respect to those two Plaintiffs even without their testimony. The Court instructed
Defendants that it would defer ruling on the issue until the parties had an opportunity to brief the
dispute. The Defendants failed to advance any further argument on the matter, and the Court
therefore considers the motion and argument abandoned. See Keenan v. Tejada, 290 F.3d 252,
262 (5th Cir. 2002); Sanders v. Sailormen, Inc., 2012 WL 663021, at *3 (S.D. Miss. Feb. 28,
2012) (“Failure to address a claim results in the abandonment thereof.”).
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proposed by Plaintiffs. In adopting Plaintiffs’ proposed calculations, the Court concludes that
Plaintiffs are owed $14,811.56 in damages.
D. Liquidated Damages
Having concluded that Plaintiffs are indeed owed damages, the Court next considers
whether a liquidated damages award is appropriate. Under the FLSA, “[a]ny employer who
violates the provisions of section 206 or section 207 of this title shall be liable to the employee or
an employees affected in the amount of their unpaid minimum wages, or their unpaid overtime
compensation, as the case may be, and in an additional equal amount as liquidated damages.” 29
U.S.C. § 216(b). Accordingly, the general rule is that “an employer who violates the overtime
provisions is liable not only for the unpaid overtime compensation, but also for ‘an additional
equal amount as liquidated damages.’” Singer v. City of Waco, 324 F.3d 813, 823 (5th Cir.
2003) (quoting 29 U.S.C. § 216(b)). If, however, the district court determines that the employer
acted in “good faith” and had “reasonable grounds” to believe that its actions complied with the
FLSA, the court has the discretion to either reduce or eliminate the liquidated damages award.
Id. (quoting 29 U.S.C. § 260). Notably, though, the employer faces a “substantial burden” in
proving such good faith and claims of ignorance alone are insufficient. Id.; Reeves, 616 F.2d at
1353.
In the case at bar, the Court finds that Defendants have failed to carry their burden with
regard to the “good faith” defense. Instead, the great weight of evidence presented at trial
indicated that after the company fell behind on the Entergy contract, Bailey could not pay his
workers overtime and still return an acceptable profit. Bailey testified that as a business owner it
was ideal to prevent overtime, and that he had never paid overtime in the past. Accordingly,
Bailey sought to circumvent his obligations as an employer under the FLSA through the creation

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of what was in practical effect a sham corporation. Although counsel for Defendants has argued
that Bailey’s actions were reasonable, the Court finds that they were nothing more than an
elaborate ruse. Accordingly, liquidated damages in the amount of $14,811.56 are due.
E. Willfulness
Under the FLSA, “[t]he issue of whether a particular violation was ‘willful’ determines
the statute of limitations that applies to that violation.” Singer, 324 F.3d at 821(citing 29 U.S.C.
§255(a)). “If the violation was not willful, then a two-year statute of limitations applies to that
violation.” Id. “If the violation was willful, however, a three-year statute of limitations applies.”
Id. “The standard for determining willfulness is whether the employer either knew or showed
reckless disregard for whether his conduct violated the FLSA.” Reich v. Tiller Helicopter Serv’s,
Inc., 8 F.3d 1018, 1036 (5th Cir. 1993) (internal citation omitted).
On the present facts, the Court finds that, at a minimum, the Defendant’s exhibited a
reckless disregard for whether their conduct violated the FLSA.

The Court finds that the

Defendants sought to eliminate paying overtime through subterfuge, rather than through a
legitimate business management endeavor. Because the Defendants magically deemed their
employees “independent contractors” without changing any of the economic realities of the
relationship, the Court finds that the violation was willful and that the three year statute of
limitations applies.
F. Attorneys’ Fees
Finally, the FLSA authorizes an award of attorneys’ fees to a successful plaintiff. Lee v.
Coahoma County, 937 F.2d 220, 227 (5th Cir. 1991). Under 29 U.S.C. § 216(b), “[t]he court in
such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a
reasonable attorney’s fee to be paid by the defendant and the cost of the action.”

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Because

Plaintiffs here are a prevailing party, the Court concludes that they are entitled to an award of
reasonable attorney’s fees and costs. Plaintiffs are therefore allowed thirty (30) days from the
entry of this judgment to file a motion for attorney’s fees and costs. Defendant shall thereafter
be allowed fourteen (14) days in which to file a response.
Conclusion
Based on the law and the evidence presented, the Court finds that the Plaintiffs at issue
here were employees, that James Bailey was the employer for purposes of the FLSA prior to
October 17, 2011, that the Defendants operated as joint employers after October 17, 2011, and
that the Plaintiffs are owed $14,811.56 in damages, $14,811.56 in liquidated damages, and
reasonable attorney’s fees and costs.
SO ORDERED AND ADJUDGED, this the 8th day of August, 2014.

/s/ Sharion Aycock_____
U.S. DISTRICT JUDGE 

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