HARGROVE et al v. SLEEPY'S LLC
MEMORANDUM and ORDER denying 54 Plaintiffs Motion for Partial Summary Judgment; granting 64 Sleepy's Motion for Summary Judgment. Signed by Judge Peter G. Sheridan on 3/28/2012. (eaj)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
SAM HARGROVE, ANDRE HALL, and
MARCO EUSEBIO, individually and on
behalf of all others similarly situated,
Civil Action No.:
MEMORANDUM AND ORDER
This matter is before the Court on two motions for summary judgment. The case
concerns whether employees (Plaintiffs) were misclassified as independent contractors by
Defendant, Sleepy's LLC. The Plaintiffs sue under the Employee Retirement Income Security
Act (ERISA) 29 U.S.C. § 1001, et seq.
In this case, there are facts presented generally which apply to all Sleepy's deliverers, and
some that relate to three named plaintiffs. The general facts are presented first.
Defendant Sleepy's LLC (“Sleepy’s”) is a New York based mattress retailer that provides
delivery services to its customers. In turn, Sleepy’s contracts with delivery companies or with
individuals (collectively “deliverers”) to deliver mattresses, beds, pillows, and mattress pads to
its customers. Sleepy’s refers to these contracts as Independent Driver Agreements (“IDAs”).
The IDAs classify the deliverers with whom Sleepy's enters into contracts as
“independent contractors” and the delivery companies’ personnel as “not employee(s) of
Sleepy’s.” The relationship between Sleepy’s and its deliverers is nonexclusive. On any
particular day, Sleepy’s is not obligated to request and no signatory to an IDA is obligated to
provide delivery services for Sleepy’s. A deliverer is free to use its vehicles and/or personnel to
perform deliveries for other companies when it is not performing deliveries for Sleepy’s.
However, Sleepy’s does not permit a truck making deliveries for it to have merchandise from
other companies on the truck while making Sleepy’s deliveries. Additionally, Sleepy’s provides
training materials to anyone who drives or works as a helper on a truck making Sleepy’s
deliveries. The training materials set forth several requisites for trucks used for Sleepy’s
Deliverers must procure Sleepy’s products from one of Sleepy’s six distribution centers.
One of Sleepy’s six distribution centers is located in Robbinsville, New Jersey (“Robbinsville
facility”). A deliverer that picks up mattresses from the Robbinsville facility must supply its
own trucks, which it is responsible for insuring and maintaining. Sleepy’s provides deliverers
with scanners, known as Agentek, which Sleepy’s requires drivers to use during the course of
their day. The scanners enable Sleepy’s to monitor where trucks are located at any given time of
the day. Drivers are required to enter each delivery as it is made into the scanners after each
Deliverers are responsible for hiring, firing, and paying its personnel and bearing its own
business expenses. However, in order to work on a truck making Sleepy’s deliveries, an
individual must consent in writing to a background check performed by Mind Your Business,
Inc. (“MYB”) which is paid for by Sleepy's. Failing the MYB background check disqualifies an
individual from making Sleepy’s deliveries. A deliverer may continue to employ an individual
that fails a MYB background check so long as he or she does not perform deliveries for Sleepy’s.
Sleepy’s reserves the right to audit trucks to ensure that the delivery personnel are working in
accordance with Sleepy’s rules. Sleepy’s requires deliverers to wear Sleepy’s uniforms while
making deliveries for it.
Sleepy’s has the right to alter drivers’ schedules as it deems
appropriate, in order to accommodate a customer’s request. Sleepy's maintains a policy which
imposes penalties upon delivers for failure to make assigned stops in the assigned order.
Sleepy’s also has the authority to terminate a deliverer at its discretion.
In addition to the above, there are additional facts presented about three plaintiffs, Marco
Eusebio, Samuel Hargrove and Andre Hall.
Plaintiff Marco Eusebio created Eusebio Trucking Corp. (“ETC”) in September 2003.
Marco Eusebio and his brother Pedro Eusebio served as President and Vice President of ETC
respectively. ETC entered into two separate IDAs with Sleepy’s, the first on September 18, 2003
and the other on February 24, 2005. Section 3 of both the 2003 and 2005 IDAs provided that
ETC “agree[d] and have advised your personnel that you and your personnel are not employee(s)
of Sleepy’s and are not entitled to and hereby waive any claim to any benefits provided by
Sleepy’s.” Under the IDA, the duration of the relationship between Sleepy’s and ETC was
day-to-day. Additionally, Marco Eusebio helped create and partially owned Curva Trucking
LLC (“Curva”). On August 6, 2008, Curva entered into an IDA with Sleepy’s. According to
Marco Eusebio, Sleepy’s exercised basically the same level of control over ETC as it did over
Curva from 2004 to 2009. Both ETC and Curva requested “Employer Identification Numbers”
from the Internal Revenue Service (“IRS”).
ETC apparently hired its own personnel. Marco Eusebio or Pedro Eusebio decided which
employees worked on which trucks without any input from Sleepy’s. ETC paid its personnel,
including drivers, helpers, and assistants, varying rates. Marco Eusebio, Pedro Eusebio, and
Emma Bravo, a former member of ETC’s Board of Directors, had input in setting ETC’s pay
rates. Sleepy’s had no input in setting ETC's pay rates. ETC provided worker's compensation,
and paid its own taxes and taxes. There is no evidence in the record that anyone ever reported to
the tax authorities that Sleepy’s employed Marco Eusebio. Furthermore, ETC apparently
employed a number of individuals who did not perform deliveries for Sleepy’s. ETC employed
at least fifteen individuals who were not on record with Sleepy’s as having passed the MYB
background check, a purported prerequisite to work on a Sleepy’s delivery.
If ETC personnel damaged an item during delivery, Marco Eusebio and Pedro Eusebio
decided whether and how much to deduct from the pay of the ETC personnel involved. When an
ETC or Curva driver received a traffic ticket, ETC or Curva paid that ticket from either a
corporate bank account or Marco Eusebio's personal money. ETC and Curva each spent money
on the repair and maintenance costs of their trucks. ETC bought and insured its trucks. ETC
spent money on legal and professional fees, hotel stays for drivers, wages, gas, tolls, parking,
food, advertising, telephone bills, mailboxes, and office facilities.
ETC and Curva both kept their records in their offices, including receipts, repair
documents, and manifests. ETC and Curva each had their own bank accounts. Both companies
had their own operating licenses from the Department of Transportation. Sleepy’s never dictated
that a particular person work on a particular truck and Marco Eusebio status as President of ETC
charged him with managing his personnel. On the days ETC made a delivery for Sleepy’s,
Marco Eusebio's workday did not end at a set time, but instead ended when he completed his
work. Sleepy’s contends that the record presents no evidence that it controlled Marco Eusebio's
actual hours of work.1
Plaintiff Samuel Hargrove (“Hargrove”) formed I Stealth LLC (“Stealth”) in November
2005 as a trucking firm. Hargrove managed Stealth and was its sole member. Prior to 2008,
Stealth delivered products for a tire company and Sleepy’s competitor Dial-a-Mattress. On May
20, 2008, Stealth entered into an IDA with Sleepy’s. On August 6, 2008, Stealth entered into an
addendum to the IDA, under which Stealth received compensation to advertise Sleepy’s by
imprinting Sleepy's logo on its delivery truck. Under the IDA, the duration of Stealth’s
relationship with Sleepy’s was day-to-day. In 2005, the IRS issued an “Employer Identification
Number” to Stealth.
Stealth utilized one truck to make deliveries for Sleepy’s. Stealth utilized the same truck
to make deliveries for Dial-a-Mattress, the tire company, and Sleepy’s. Stealth paid all costs
associated with that truck, including fuel, insurance, and maintenance. Stealth paid traffic tickets
incurred by the drivers of its delivery truck.
Sleepy’s never paid Hargrove any money directly. Instead, Sleepy’s paid Stealth, and
Stealth, in turn, paid its personnel. Moreover, Stealth paid its drivers overtime, worker's
compensation insurance and disability insurance. Hargrove maintained Stealth’s personnel files,
receipts, and tax returns at its office in Willingboro, New Jersey. Hargrove decided when he
would take a lunch break and the particular route Stealth drivers took to make deliveries. Stealth
and Sleepy’s ended their relationship in October 2008.
On December 17, 2005, Andre Hall (“Hall”) entered into an IDA with Sleepy’s and
requested an “Employer Identification Number” from the IRS. Hall signed the IDA on his own
Plaintiffs dispute this fact pointing to evidence that failure to make assigned stops in the
assigned order could result in fines or other sanctions
behalf. On August, 28, 2007, Hall entered into an addendum to the IDA, under which he would
receive compensation to advertise Sleepy’s logo on his delivery truck. Hall hired his own help
without direction from Sleepy’s except for the MYB background checks. Sleepy’s provided Hall
with a 1099 Form every year. Sleepy’s never provided Hall with a W-2 form, and there is no
evidence in the record that Hall ever reported to any tax authority that Sleepy’s was his
Sleepy’s paid Hall directly on a weekly basis as an independent contractor but did not
provide him with any benefits. Hall negotiated pay rates for deliveries with Sleepy’s. The
amount Sleepy’s paid Hall depended on the amount of deliveries he performed and the location
of those deliveries. However, Sleepy’s did not pay the individuals that worked for Hall. Hall had
the responsibility of compensating his workers without any input from Sleepy’s. Moreover, Hall
paid for, insured, and serviced all of his vehicles with the only requirement from Sleepy’s being
that the delivery trucks be fourteen or sixteen feet in size.
Hall maintained business records related to his work with Sleepy’s in a file cabinet at his
home. Although Hall ate at the Robbinsville facility approximately twice a week, Sleepy’s did
not require him to eat there. Hall's working hours varied widely when he delivered for Sleepy’s.
Furthermore, Hall bore the risk of loss if a mattress was damaged during delivery.
Plaintiffs contend that Sleepy’s drivers are, in fact, employees entitled to the same
protections and benefits as all other employees. Plaintiffs seek damages against Sleepy’s because
it allegedly misclassified them as independent contractors, causing various losses of a financial
and non-financial nature. All three Plaintiffs signed an IDA; but plaintiffs allege it is a guise to
avoid payment of employee benefits.
Two Plaintiffs signed the IDA as a limited liability
company while the third signed as a proprietorship. Plaintiffs’ claims include violations of state
wage laws, overtime, unjust enrichment, and breach of contract. Moreover, Plaintiffs also allege
that certain federal laws are at issue – the Family Medical Leave Act (“FMLA”) (sick time), and
ERISA (health and 401(k) benefits).
Plaintiffs seek damages and a declaratory judgment
regarding their status as employees for purposes of the legal benefits and protections that would
Sleepy’s provides individuals it deems to be employees with medical, dental, and vision
benefits, as well as 401(k) benefits. Additionally, Sleepy’s provides voluntary benefits such as
term life insurance, short term disability, long term disability, and flexible spending. All fulltime employees are eligible for benefits and the available benefits are the same for all eligible
employees. The three named plaintiffs allege that they sought medical and/or family leave; but
Sleepy's has no record of same.
Summary judgment is appropriate under Fed. R. Civ. P. 56(c) when the moving party
demonstrates that there is no genuine issue of material fact and the evidence establishes the
moving party’s entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for
the non-movant, and it is material if, under the substantive law, it would affect the outcome of
the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “In considering a motion
for summary judgment, a district court may not make credibility determinations or engage in any
weighing of the evidence; instead, the non-moving party’s evidence ‘is to be believed and all
justifiable inferences are to be drawn in his favor.’”
Marino v. Indus. Crating Co., 358 F.3d
241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).
Once the moving party has satisfied its initial burden, the party opposing the motion must
establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v.
Lacey Twp., 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for summary
judgment cannot rest on mere allegations and instead must present actual evidence that creates a
genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; Siegel Transfer, Inc. v.
Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). “[U]nsupported allegations . . . and
pleadings are insufficient to repel summary judgment.” Schoch v. First Fidelity Bancorp., 912
F.2d 654, 657 (3d Cir. 1990); see also Fed. R. Civ. P. 56(e) (requiring nonmoving party to “set
forth specific facts showing that there is a genuine issue for trial”). Moreover, only disputes
over facts that might affect the outcome of the lawsuit under governing law will preclude the
entry of summary judgement.
Anderson, 477 U.S. at 247-48. If a court determines, “after
drawing all inferences in favor of [the non-moving party], and making all credibility
determinations in his favor – that no reasonable jury could find for him, summary judgment is
appropriate.” Alevras v. Tacopina, 226 Fed. Appx. 222, 227 (3d Cir. 2007).
The decision of whether an individual is an employee or an independent contractor is
usually made as a result of a summary judgment motion. See Kalkama v. Konica, 2011 WL
3703471 (DNJ 2011); Sturgis v. Mattel, 525 F. Supp. 2d 695 (DNJ 2007).
Generally, the Third Circuit has held that determining whether an individual is an
employee or an independent contractor is a question of law to be determined by the court.
DaBronao v. Roche Vitamins, Inc., 232 F.Supp. 2d 306, 315-16 (D.N.J. 2002); Metropolitan
Pilots Association, LLC v. Schlosberg, 151 F. Supp. 2d 511 (D.N.J. 2001); see also Cox v.
Master Lock, Co., 815 F. Supp. 844, 845 (E.D. Pa. 1993)
In this matter, the chief precedent was established twenty years ago in Nationwide
Mutual v. Darden, 503 U.S. 318 (1992). In Darden, the Court determined the factors to be
considered in defining an “employee” under ERISA. Darden utilized general common law of
agency since Congress did not legislate any other definition when enacting ERISA. Id. at 323.
Justice Souter adopted the common law test as the Court had done previously. See, Community
for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). Quoting from the Reid case, Justice
Souter framed the analysis as follows:
In determining whether a hired party is an employee
under the general common law of agency, we
consider the hiring party's right to control the
manner and means by which the product is
accomplished. Among the other factors relevant to
this inquiry are the skill required; the source of the
instrumentalities and tools; the location of the work;
the duration of the relationship between the parties;
whether the hiring party has the right to assign
additional projects to the hired party; the extent of
the hired party's discretion over when and how long
to work; the method of payment; the hired party's
role in hiring and paying assistants; whether the
work is part of the regular business of the hiring
party; whether the hiring party is in business; the
provision of employee benefits; and the tax
treatment of the hired party.
Id. at 323-24.
Most importantly, Justice Souter noted that the common law test contains “no shorthand
formula or magic phrase that can be applied to find the answer . . . all of the incidents of the
relationship must be assessed and weighed with no one factor being decisive.” Id. at 324
(quoting from NLRB v. United Ins. Co., 390 U.S. 254, 258 (1968). See generally, Kalksma v.
Konica, 2011 WL 3703471 (D.N.J. 2011); Sturgis v. Mattel, Inc., 525 F. Supp. 2d 695 (D.N.J.
In weighing the Darden factors to the facts of this case, they overwhelmingly show that
the plaintiffs were independent contractors. The facts are: (1) each plaintiff set up their own
business entity; (2) each entered an IDA; (3) each maintained their own business records; (4)
each hired their own workers; (5) each maintained a relationship with the IRS, as a business
entity; (6) each purchased their own trucks, and maintained vehicle insurance and obtained
motor vehicle registrations from state authorities; and (7) each paid their own expenses.
On the other side of the coin, plaintiffs argue that Sleepys had extensive control of
deliverer's activities. More specifically, Sleepy's monitored the delivery progress each day with
electronic equipment, and required background checks on all deliveries. These two requirements
were to assure customer satisfaction and safety in a competitive business.
IT IS on this 28th day of March, 2012;
ORDERED that the motion for summary judgment by Sleepy's [docket number
64] is granted; and it is further
ORDERED that the motion for partial summary judgment by Plaintiffs [docket
number 54] is denied.
s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.
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