Goodly v. Check-6, Inc. et al
Filing
351
OPINION AND ORDER by Chief Judge Gregory K Frizzell ; denying 293 Motion for Summary Judgment (kjp, Dpty Clk)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
JOSEPH GOODLY, on behalf of himself
and other persons similarly situated,
Plaintiffs,
v.
Case No. 16-CV-334-GKF-JFJ
CHECK-6, INC., YAREMA SOS, BRIAN
BRURUD, DENNIS ROMANO, S. ERIC
BENSON, LAURA OWEN, and JOHN
DILLON,
Defendants.
OPINION AND ORDER
In this action, the plaintiffs seek overtime compensation pursuant to the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq. Before the court is the Motion for Summary
Judgment [Doc. No. 293] of defendants Check-6, Inc. (“Check-6”), Yarema Sos, and Brian Brurud.
The defendants contend they are entitled to summary judgment because the plaintiffs were
independent contractors rather than “employees” within the meaning of the FLSA. Alternatively,
the defendants argue that, if the plaintiffs were employees, then certain exemptions to the FLSA’s
overtime requirements apply. For the reasons set forth below, the court denies the motion. 1
I. Background
Check-6 is in the business of providing consultant services to companies in the energy,
manufacturing, mining, petrochemical, and transportation industries. [Doc. Nos. 255-1, p. 1 ¶ 1;
For the same reasons, the court denies the motion with respect to defendant Laura Owen to the extent she adopted
the arguments contained therein [see Doc. No. 300, p. 5].
1
289, p. 8 ¶ 1]. 2 In order to provide these services, Check-6 contracted with individuals, known as
“coaches,” who acted as consultants at client work sites. [Doc. Nos. 255-1, pp. 1–2 ¶¶ 2–3; 289,
p. 8 ¶¶ 2–3]. Coaches were military veterans who had extensive military training and leadership
experience. [Doc. Nos. 290, pp. 13–14 ¶¶ 55–56; 311-1, p. 13 ¶¶ 55–56]. They were the primary
revenue generators for Check-6, which generally paid them a “day rate” for work performed on its
behalf. [Doc. Nos. 255-1, p. 2 ¶¶ 4–5; 289, p. 8 ¶¶ 4–5].
Check-6 interviewed prospective coaches to vet skill sets, languages spoken, specialty
during military service, and other relevant attributes. [Doc. Nos. 290, p. 5 ¶ 14; 311-1, p. 5 ¶ 14].
Coaches went through a new contractor training, and some coaches underwent drug screening.
[Doc. Nos. 255-1, p. 2 ¶¶ 3, 7; 289, p. 8 ¶¶ 3, 7]. Check-6 provided pants, shirts, hard hats, e-mail
addresses, and training materials to coaches. [Doc. Nos. 255-1, p. 2 ¶¶ 9–10, 15; 289, p. 9 ¶¶ 9–
10, 15; 240-16]. Check-6 also provided coaches with an “Operations Manual,” which coaches
were expected to follow. [Doc. Nos. 255-1, p. 2 ¶ 6; 289, p. 8 ¶ 6; 289-2; 289-4; 289-5]. For
example, the “2015 Operations Manual” indicates, among other things, the following:
•
that Check-6 will provide certain standardized clothing, [Doc. 289-4, p. 16 § 2.4.2];
•
that coaches must provide biographies and pictures to Check-6’s marketing
department for posting on Check-6’s website, [id., p. 17 § 2.5];
•
that Check-6 randomly selects coaches each month for drug testing, [id., p. 17
§ 2.6];
The parties’ submissions in connection with the instant motion incorporate by reference their submissions in
connection with the plaintiffs’ closely related Motion for Partial Summary Judgment [Doc. No. 238]. The court has
also considered those submissions in deciding the instant motion.
2
2
•
that, to remain in “good standing,” contractors must have a minimum of fifty
“client/travel days associated with client events in [the] last 365 days,” [id., p. 29
§ 3.1.6.1];
•
that coaches must follow a particular dress code, [id., p. 37 § 3.3];
•
that coaches must upload videos to Check-6’s database for management approval
before showing them to a Check-6 client, [id., p. 37 § 3.5]; and
•
that Check-6 implemented a “Field Standardization Evaluation program,” [id., p.
50 § 5.3; see also id., p. 109].
On March 7, 2016, the named plaintiff, Joseph Goodly, commenced this action, asserting
claims “on behalf of himself and all others similarly situated.” [Doc. No. 1, p. 1 ¶ 1]. On
November 4, 2016, the court entered an order conditionally certifying the claims as a collective
action pursuant to 29 U.S.C. § 216(b). [Doc. No. 45, p. 7]. The court limited the class of potential
plaintiffs in this collective action to the following: “All persons who worked for Check-6, Inc. as
‘Coaches’ and were paid a ‘day rate’ at any time in the three years preceding the date of [the]
order.” [Id.]. Thereafter, eighteen opt-in plaintiffs filed consent forms indicating their intent to
join the collective action. [Doc. Nos. 49–56, 58, 61–63, 75, 80, 83–85, 95].
II. Standard of Review
A motion for summary judgment shall be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). Federal Rule of Civil Procedure 56(a) “mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who fails to make a
showing sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
3
(1986); Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A court must examine
the factual record in the light most favorable to the party opposing summary judgment. Wolf v.
Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir. 1995).
When the moving party has carried its burden, “its opponent must do more than simply
show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as
a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine
issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986)
(citations omitted). In essence, the inquiry for the court is “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-sided that one party
must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986).
III. Analysis
A. The Plaintiffs’ Employment Status
A central question in this case is whether the plaintiffs were “employees” or “independent
contractors” for purposes of the FLSA, which establishes overtime protections for covered
employees. See 29 U.S.C. § 207(a)(1). Instead of relying on contractual terminology or traditional
common-law concepts, the Tenth Circuit applies an “economic realities” test to determine whether
an individual is an independent contractor or employee. Acosta v. Paragon Contractors Corp.,
884 F.3d 1225, 1235 (10th Cir. 2018) (citing Baker v. Flint Eng’g & Const. Co., 137 F.3d 1436,
1440 (10th Cir. 1998)). The test focuses on “whether the individual is economically dependent on
the business to which he renders service, or is, as a matter of economic fact, in business for
himself.” Barlow v. C.R. England, Inc., 703 F.3d 497, 506 (10th Cir. 2012) (quoting Doty v. Elias,
733 F.2d 720, 723 (10th Cir. 1984)).
In their briefs, the defendants discuss at length the FLSA’s history and purpose. The court
agrees with the defendants to the extent they argue that courts should keep in mind the FLSA’s
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purpose when applying the economic realities test and interpreting the statute. The defendants go
further, however, and suggest that the court should disregard the economic realities test and rule
in their favor based solely on the statute’s abstract purpose: “the Economic Realities Test should
not be applied here, because the FLSA should be found not to apply.” [Doc No. 289, p. 12].
Essentially, the defendants argue that the court need not utilize the economic realities test because
it is obvious that the FLSA should not protect the plaintiffs here. [Id.]. The court disagrees and,
in the pages that follow, applies the economic realities test in accordance with well-established
Tenth Circuit precedent.
The defendants also argue that certain provisions within the contracts between Check-6
and the plaintiffs make it clear that the plaintiffs were independent contractors. However, “the
economic realities of an individual’s working relationship with the employer—not necessarily the
label or structure overlaying the relationship—determine whether the individual is an employee
under the FLSA.” Acosta v. Jani-King of Oklahoma, Inc., No. 17-6179, 2018 WL 4762748, at *2
(10th Cir. Oct. 3, 2018). The inquiry into the plaintiffs’ employment status “is not limited to the
contractual terminology between the parties or the way they choose to describe the working
relationship.” Id.
Citing the parties’ contracts, the defendants further assert that “[t]his is a case of waiver
and/or estoppel.” [Doc. No. 293, p. 12]. However, the defendants failed to raise waiver and
estoppel as affirmative defenses in their answer to the complaint [Doc. No. 29] and therefore
waived those defenses. See FED. R. CIV. P. 8(c) (requiring a party responding to a pleading to
“affirmatively state any . . . affirmative defense, including . . . estoppel . . . and waiver”); Racher
v. Westlake Nursing Home Ltd. P’ship, 871 F.3d 1152, 1167 (10th Cir. 2017) (“[F]ailure to assert
an affirmative defense results in waiver of that defense.”). Moreover, the defenses of waiver and
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estoppel do not apply here, as this is “an area where agreements and other acts that would normally
have controlling legal significance are overcome by Congressional policy.” Mencia v. Allred, 808
F.3d 463, 470 (10th Cir. 2015) (quoting Caserta v. Home Lines Agency, Inc., 273 F.2d 943, 946
(2d Cir. 1959)).
The Tenth Circuit instructs that, in focusing on the economic realities of the worker’s
economic dependence on the business, the economic realities ordinarily turn on six factors:
(1) the degree of control exercised by the alleged employer over the worker,
(2) the worker’s opportunity for profit or loss,
(3) the worker’s investment in the business,
(4) the permanence of the working relationship,
(5) the degree of skill required to perform the work, and
(6) the extent to which the work is an integral part of the alleged employer’s business.
Paragon, 884 F.3d at 1235. The overarching inquiry depends on the totality of the circumstances,
and no single factor is dispositive. Id. (citing Johnson v. Unified Gov’t of Wyandotte Cty., 371 F.3d
723, 729 (10th Cir. 2004)).
Under the FLSA, “the question of whether a worker is an independent contractor or an
employee is a question of law.” Herr v. Heiman, 75 F.3d 1509, 1513 (10th Cir. 1996).
Nevertheless, the “existence and degree of each factor is a question of fact.” Id. (quoting Dole v.
Snell, 875 F.2d 802, 805 (10th Cir. 1989)). Courts within this circuit have repeatedly denied
summary judgment motions where there remained disputed facts material to the classification of
workers as employees or independent contractors. See, e.g., Herr, 75 F.3d at 1513; Henderson v.
Inter-Chem Coal Co., 41 F.3d 567, 571 (10th Cir. 1994); Merrill v. Pathway Leasing LLC, No. 16CV-02242-KLM, 2018 WL 2214471, at *12 (D. Colo. May 14, 2018); Renteria-Camacho v.
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DirecTV, INC., No. 14-2529, 2017 WL 4619354, at *3 (D. Kan. Oct. 16, 2017); Powers v. Emcon
Assocs., Inc., No. 14-CV-03006-KMT, 2017 WL 4075766, at *7 (D. Colo. Sept. 14, 2017); Rojas
v. Westco Framers, LLC, No. 15-CV-0168-WJM-KLM, 2016 WL 8540843, at *3 (D. Colo. June
14, 2016). The parties in this case disagree about both the direction in which certain factors point
and the degree of their importance.
1. Degree of Control
A worker’s ability to act autonomously tends to show that he or she is an independent
contractor. See Baker, 137 F.3d at 1441. Considerations include the plaintiffs’ independence in
setting their own work hours and other conditions of their work, the extent of Check-6’s
supervision of the plaintiffs, and the degree of the plaintiffs’ ability to work for other employers.
See Paragon, 884 F.3d at 1235.
The degree of the defendants’ control over the plaintiffs is highly contested.
The
defendants argue that Check-6 did not exercise direct control over coaches in the manner required
for employee status. Among other things, the defendants emphasize that coaches worked at the
locations of Check-6’s clients, that Check-6 did not dictate the hours worked by coaches, and that
coaches could and did work for other businesses while under contract with Check-6.
In contrast, the plaintiffs argue that the first factor weighs in favor of classifying the
plaintiffs as employees. Among other things, the plaintiffs point to the training and standardization
implemented by Check-6—reflected in the operations manuals and other training materials—as
evidence that Check-6 exercised extensive control over their work. Furthermore, the defendants
concede that the plaintiffs were prohibited from working for clients directly or for competitors
while under contract with Check-6. [Doc. No. 290, p. 8 ¶ 31]. At her deposition, Laura Owen, a
former CEO of Check-6, indicated that it was unlikely coaches could work other jobs while they
were working on Check-6 projects. [Doc. No. 305-1, p. 2]. Cf. Baker, 137 F.3d at 1441 (employee
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status was supported by evidence that remote work sites and other conditions made it “practically
impossible” for plaintiffs to work on more than one project at a time). The court finds that genuine
disputes of material fact remain as to the degree of control exercised by the defendants.
2. Opportunity for Profit and Loss
A worker’s ability to earn a profit or suffer a loss based on performance is indicative of
independent contractor status. See Paragon, 884 F.3d at 1236. The plaintiffs contend that they
had no opportunity to earn a profit or suffer a loss because they were paid a fixed day rate. The
defendants argue that the plaintiffs had an incentive to work faster and more efficiently because
Check-6 did not require coaches to work a specific number of hours each day. The record is
unclear, however, regarding the extent to which coaches could, as a practical matter, perform other
work while assigned to client projects. The defendants also argue that coaches risked “loss”
because a coach “could lose his good reputation and be asked not to come back.” [Doc. No. 289,
p. 22]. However, reputational loss is a risk for both employees and independent contractors. The
court finds that genuine issues of material fact remain as to the second factor.
3. Investment in the Business
The third factor compares the investments of the worker and the alleged employer. The
relevant “investment” is “the amount of large capital expenditures, such as risk capital and capital
investments, not negligible items, or labor itself.” Dole, 875 F.2d at 810. The plaintiffs highlight
that Check-6 reimbursed coaches for certain expenses. [See Doc. No. 289-4, p. 35]. The
defendants argue that coaches invested in themselves “by acquiring more qualifications and
certifications.” [Doc. No. 289, p. 23]. The defendants also argue that the plaintiffs’ tax returns,
which reflect certain deductions for business expenses, show that the plaintiffs invested in their
businesses. [See, e.g., Doc. No. 295, pp. 9, 18]. However, the defendants fail to adequately address
how the plaintiffs’ investments compared to Check-6’s investment in the overall business. Cf.
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Baker, 137 F.3d at 1442 (noting that the plaintiffs’ investments were significant compared to other
workers but small when compared to the alleged employer’s investment in the overall business);
Renteria-Camacho, 2017 WL 4619354, at *4 (same). As such, genuine issues of material fact
remain as to the third factor.
4. Permanence of the Working Relationship
“Independent contractors” often have fixed employment periods and transfer from place to
place as particular work is offered to them, whereas “employees” usually work for only one
employer and such relationship is continuous and of indefinite duration. Dole, 875 F.2d at 811.
That said, “even when the relationship is short, the worker may be considered an employee when
the relationship is shortened because of the job’s ‘intrinsic nature’ rather than the worker’s ‘choice
or decision.’” Paragon, 884 F.3d at 1237 (quoting Baker, 137 F.3d at 1442).
Check-6 and coaches entered into Contractor’s Master Services Agreements (“CMSAs”),
which had indefinite durations. [See, e.g., Doc. Nos. 289-9, p. 1; 289-11, p. 5; 289-12, p. 1; 28913, p. 1]. Check-6 and coaches also entered into annual contracts, which required renewal in order
for a coach to continue receiving coaching assignments. [Doc. No. 289-3, p. 3 ¶ 10; see, e.g., Doc.
Nos. 289-8, p. 1; 289-11, pp. 1–2]. Check-6 is a project-based business, with projects varying in
length and locale. [Doc. No. 290, p. 11 ¶ 43].
The defendants argue that the fourth factor weighs in their favor because coaches worked
on a project-by-project basis and enjoyed the flexibility of choosing projects. However, a
reasonable trier of fact could find that this was the result of the “intrinsic nature” of the business
rather than the coaches’ choice. See Paragon, 884 F.3d at 1237. Additionally, the plaintiffs cite
deposition testimony from David Burnham—a former manager at Check-6—as evidence that
plaintiffs faced potential adverse consequences for declining projects. At his deposition, Mr.
Burnham indicated that a coach “could fall out of good standing” by declining a project due to
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unavailability that had not been scheduled previously with Check-6. [Doc. No. 240-2, p. 11, Tr.
38:12–39:19]. Mr. Burnham also testified that coaches had to be available and that Check-6 “had
to be their main job.” [Doc. No. 240-3, p. 27, Tr. 209:4–9]. According to Mr. Burnham, once
Check-6 hired a coach, the expectation was that “they would just go hitch to hitch to hitch no
matter what.” [Doc. No. 240-2, p. 17, Tr. 61:2–11]. Similarly, Billy Mac Perry, Jr.—another
former manager at Check-6—testified at his deposition that the relationship between Check-6 and
coaches was considered to be “ongoing,” as opposed to proceeding on a project-by-project basis.
[Doc. No. 240-7, p. 9, Tr. 161:25–162:3]. The defendants challenge the credibility of Mr. Burnham
and Mr. Perry [Doc. No. 289, p. 23 n.13], but credibility determinations are a jury function. The
court finds that there remain genuine disputes of material fact as to the fourth factor of the
economic realities test.
5. Degree of Skill
A worker is more likely to be considered an employee if his or her job does not require
“specialized skills.” Dole, 875 F.2d at 811. Here, coaches were required to have specialized skills,
which they acquired through their extensive military experience. As such, this factor tends to favor
classifying the plaintiffs as independent contractors.
6. Integral Part of the Defendants’ Business
The last factor concerns whether the plaintiffs’ services were a necessary component of the
defendants’ business. The defendants admit that Check-6 generated most of its revenue through
its coaches. Accordingly, this factor supports classifying the plaintiffs as employees.
A reasonable trier of fact could make findings as to several of the factors that would support
the legal conclusion that the plaintiffs were employees of Check-6. Therefore, the defendants are
not entitled to summary judgment on this issue. See Herr, 75 F.3d at 1513 (holding that fact issues
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precluded summary judgment as to determination of employee status under the FLSA);
Henderson, 41 F.3d at 570 (same).
B. Overtime Exemptions
In the alternative, the defendants argue that, if the plaintiffs were employees, then they
were exempt from the FLSA’s overtime-pay requirements. In particular, the defendants cite two
exemptions: the Administrative Employee (“AE”) exemption and the Highly Compensated
Employee (“HCE”) exemption.
1. Waiver of Exemptions as Affirmative Defenses
FLSA exemptions are affirmative defenses on which the employer bears the burden of
proof. See Lederman v. Frontier Fire Prot., Inc., 685 F.3d 1151, 1153, 1156–58 (10th Cir. 2012).
Consequently, an employer’s failure to state an FLSA exemption as an affirmative defense in a
responsive pleading can result in waiver. See Diaz v. Jaguar Rest. Grp., LLC, 627 F.3d 1212, 1214
(11th Cir. 2010).
Here, the defendants failed to raise the AE and HCE exemptions as affirmative defenses in
their answer, which they filed on July 18, 2016. [Doc. No. 29]. The defendants moved for leave
to file an amended answer on September 19, 2017, nearly thirteen months after the deadline for
amendments to pleadings and after the parties had completed significant discovery. [Doc. No.
133]. In their proposed amended answer, the defendants did not specifically identify the AE and
HCE exemptions as affirmative defenses, but they did assert that the plaintiffs “are exempt from
the FLSA.” [Doc. No. 133-1, p. 6 ¶ 6]. On October 19, 2017, this court entered an order denying
the defendants’ motion for leave to file an amended answer. [Doc. No. 147]. Among other things,
the court cited the defendants’ undue delay in seeking leave to amend and other dilatory conduct,
as well as the undue prejudice to the plaintiffs that would result from the proposed amendments.
[Doc. No. 147, p. 3].
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The defendants cite Ahmad v. Furlong, 435 F.3d 1196, 1201 (10th Cir. 2006), in which the
Tenth Circuit held that “strict adherence to the pleading requirement is inappropriate when the
purpose of the requirement has been otherwise fulfilled.” In that case, however, the Tenth Circuit
also instructed that “courts should not permit a party to circumvent . . . restrictions on amendments
simply by filing a dispositive motion rather than a motion to amend.” 435 F.3d at 1202. Rather,
courts should “apply the same standards that govern motions to amend when [they] determine
whether the defendant should be permitted to ‘constructively’ amend the answer by means of the
summary-judgment motion.” Id. Here, the court previously denied the defendants’ motion to
amend. Allowing the defendants to revive the exemptions as defenses now, after the completion
of discovery, would be unfairly prejudicial to the plaintiffs. For example, the plaintiffs were
deprived of an adequate opportunity to depose witnesses—including Check-6 managers—about
the extent to which the plaintiffs’ duties were “administrative” or “professional.” It would also
allow the defendants to circumvent the other grounds for denying their motion to amend, including
undue delay. Accordingly, the court finds that the defendants waived the AE and HCE exemptions
as affirmative defenses.
2. Merits
Even if this court were to consider the merits of the AE and HCE exemptions as affirmative
defenses, it would find that the defendants have failed to establish that the plaintiffs were exempt.
Under the AE exemption, the FLSA’s overtime-pay provision does not apply to “any
employee employed in a bona fide executive, administrative, or professional capacity . . . as such
terms are defined and delimited from time to time by regulations of the Secretary [of Labor].” 29
U.S.C. § 213(a)(1). These governing regulations “are entitled to judicial deference and are the
primary source of guidance for determining the scope of exemptions to the FLSA.” Ellis v. J.R.’s
Country Stores, Inc., 779 F.3d 1184, 1187 (10th Cir. 2015) (quoting Ackerman v. Coca-Cola
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Enterprises, Inc., 179 F.3d 1260, 1264 (10th Cir. 1999)). To fall within the AE exemption under
the regulations, an employee must be compensated “on a salary or fee basis at a rate of not less
than $455 per week . . . exclusive of board, lodging or other facilities.” 29 C.F.R. § 541.200(a)(1).
Like the AE exemption, the HCE exemption applies only if the employee’s compensation included
at least the minimum required weekly amount “paid on a salary or fee basis.” 29 C.F.R.
§ 541.601(b)(1). 3
i. Fee-Basis Test
The defendants contend that the plaintiffs were paid on a fee basis. Under the governing
regulations, an employee is considered to be paid on a “fee basis” if the employee is paid an agreed
sum for a single job regardless of the time required for its completion. 29 C.F.R. § 541.605(a).
The regulations explain:
These payments resemble piecework payments with the important
distinction that generally a “fee” is paid for the kind of job that is
unique rather than for a series of jobs repeated an indefinite number
of times and for which payment on an identical basis is made over
and over again. Payments based on the number of hours or days
worked and not on the accomplishment of a given single task are not
considered payments on a fee basis.
Id.
Here, Check-6 used annual contracts, which specified various day rates that Check-6 would
pay each coach. [Doc. No. 289-3, p. 3 ¶ 10; see, e.g., Doc. Nos. 289-8, pp. 1–3; 289-11, pp. 1–4;
289-14, p. 11; 289-15, pp. 1–3]. The contracts were general in nature and not specific to particular
project assignments. [Doc. No. 289-3, p. 3 ¶ 10]. Although aspects of each project assignment
may have been unique, the assignments in general resemble “a series of jobs repeated an indefinite
Notably, the Department of Labor revised the regulations addressing highly compensated employees, effective
December 1, 2016. See Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside
Sales and Computer Employees, 81 Fed. Reg. 32391 (May 23, 2016). However, these revisions do not alter the court’s
analysis regarding the disposition of the instant motion.
3
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number of times and for which payment on an identical basis is made over and over again.” 29
C.F.R. § 541.605(a). Moreover, the defendants concede that the payments coaches received for
assignments were “dependent on the number of days, with coaches being paid $1000, generally,
for each day of the assignment.” [Doc. No. 290, p. 11 ¶ 44]. Because payments to coaches were
based on the number of days worked, Check-6 did not pay coaches on a fee basis.
ii. Salary-Basis Test
In the alternative, the defendants contend that the plaintiffs were paid on a salary basis.
Generally, an employee is considered to be paid on a “salary basis” if the employee regularly
receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting
all or part of the employee’s compensation, which amount is not subject to reduction because of
variations in the quality or quantity of the work performed. 29 C.F.R. § 541.602(a). Exempt
employees need not be paid for any workweek in which they perform no work. Id. Furthermore,
the regulations provide:
An exempt employee’s earnings may be computed on an hourly, a
daily or a shift basis, without losing the exemption or violating the
salary basis requirement, if the employment arrangement also
includes a guarantee of at least the minimum weekly required
amount paid on a salary basis regardless of the number of hours,
days or shifts worked, and a reasonable relationship exists between
the guaranteed amount and the amount actually earned.
29 C.F.R. § 541.604(b).
The defendants argue that the plaintiffs were paid on a “salary basis” because they were
paid a day rate of about $1,000, thereby guaranteeing that, in any week worked, they would receive
in excess of the $455 per week minimum under the FLSA. Courts have taken differing views on
the legal merits of such arguments. Compare McQueen v. Chevron Corp., No. C 16-02089 JSW,
2018 WL 1989937, at *1 (N.D. Cal. Apr. 3, 2018) (rejecting argument that day rate exceeding
$1,000 satisfied salary-basis requirement), reconsideration denied, 2018 WL 2552248, at *1 (May
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9, 2018), with Faludi v. US Shale Sols. LLC, No. CV H-16-3467, 2017 WL 5969261, at *10 (S.D.
Tex. Nov. 30, 2017) (holding that $1,000 day rate satisfied salary-basis requirement), appeal filed,
No. 17-20808 (5th Cir. Dec. 26, 2017).
This court need not reach the legal question of whether a sufficiently large day rate can
satisfy the salary-basis requirement. Regardless of the answer, the defendants have failed to
substantiate with evidence their assertion that “each Coach was paid at least $455 every week he
worked.” [Doc. No. 293, p. 17]. In their statement of material facts, the defendants assert that
coaches “were paid an amount for each assignment that equals to $1,000 per day for every day
they were assigned to a client’s site.” [Doc. No. 290, p. 10 ¶ 35 (emphasis added)]. However, this
assertion does not address other days—when coaches were not assigned to client sites. Time spent
on job-related training and travel away from home during the workday can count as hours worked.
See 29 C.F.R. §§ 785.27, 785.29, 785.38, 785.39. Many of the annual contracts specify that
coaches would receive $400 for training and domestic travel days. [See, e.g., Doc. Nos. 289-8, pp.
1–3; 289-11, pp. 1–4; 289-15, pp. 1–3]. A coach who only spent a single day on training or
domestic travel in a week, at a rate of $400 per day, would not receive the weekly minimum amount
required under the salary-basis test.
Moreover, Check-6’s operations manual suggests that Check-6 expected coaches to
perform various tasks—such as completing orientation lessons and “Pre-Event Prep”—at times
when they were not at client sites. [See, e.g., Doc. No. 289-5, pp. 57–62]. Consistent with the
operations manual, several plaintiffs indicated in deposition testimony or sworn declarations that
coaches were expected to perform—and did perform—work when they were not at client sites.
[See, e.g., Doc. Nos. 322-1, p. 42, Tr. 37:8–12; 297-2, p. 2 ¶ 8; 297-3, p. 2 ¶ 8]. Time spent on
such tasks could also count as hours worked. See 29 C.F.R. § 785.12 (“If the employer knows or
15
has reason to believe that the work is being performed, he must count the time as hours worked.”).
The defendants have not established that the plaintiffs were guaranteed at least the weekly
minimum required amount for every week in which they completed such tasks.
The defendants assert that, “even if sometimes Plaintiffs performed work which was not
compensated, it would have been immediately adjacent to work which was compensated” and that
“the hitch itself . . . would more than make up for whatever ‘unpaid’ work was performed on the
preceding day.” [Doc. No. 322, p. 8]. This argument has two flaws. First, the defendants fail to
cite evidence in support of the adjacency proposition. Second, even if it so happened that the
plaintiffs received more than $455 for every week in which they worked, the defendants have
failed to establish that “the employment arrangement also include[d] a guarantee of at least the
minimum weekly required amount paid on a salary basis regardless of the number of hours, days
or shifts worked.” 29 C.F.R. § 541.604(b) (emphasis added); see also Roshon v. Eagle Research
Grp., Inc., 314 F. Supp. 3d 852, 862 (S.D. Ohio 2018) (denying summary judgment where
defendant failed “to prove that Plaintiff was guaranteed the threshold minimum salary that would
permit him to be considered an exempt employee”); Snead v. EOG Res., Inc., No. 5:16-CV-1134OLG, 2018 WL 1151138, at *3 (W.D. Tex. Feb. 13, 2018) (“[E]vidence that Plaintiff regularly
received a qualifying amount of pay is not the same as evidence that he was guaranteed to receive
that amount regardless of the quality or quantity of work he performed.”). Accordingly, the
defendants have failed to establish that Check-6 paid the plaintiffs on a salary or fee basis, as
required for the AE and HCE exemptions to apply.
16
IV. Conclusion
WHEREFORE, the Motion for Summary Judgment [Doc. No. 293] of defendants Check-6,
Inc., Yarema Sos, and Brian Brurud is denied.
IT IS SO ORDERED this 18th day of October, 2018
17
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