United States District Court, D. Arizona
ORDER
Honorable Roslyn O. Silver Senior United States District
Judge
Plaintiff
Secretary of Labor (“the Secretary”) alleges
Defendants Austin Electric Services LLC and Toby Thomas,
Austin Electric's president (collectively,
“Defendants”), failed to pay employees overtime
compensation and to keep employee records, in violation of
the Fair Labor Standards Act (“FLSA”). Before the
Court are cross-motions for summary judgment (Doc. 111) and
summary adjudication (Doc. 114) on the same issue: Whether
Defendant Toby Thomas is an “employer, ”
therefore individually liable, under the FLSA.
BACKGROUND
Austin
Electric is a residential electrical contractor based in
Arizona.[1] (Docs. 115 at 1:25-26; 126 at 1:21.) Its
employees do electrical work on houses in the area. Toby
Thomas founded Austin Electric in 1997.[2] (Docs. 115 at
2:4-5; 126 at 2:7.) In 2011, during the economic downturn,
Thomas approached Scott Tonn and Don Tapia about a potential
equity purchase of the company. (Doc. 115-1 at 9:25-10:2.)
Tonn and Tapia both purchased shares: From 2013 through 2016,
Tonn held majority ownership and Tapia held minority
ownership of Austin Electric. (Doc. 115-1 at 9:4-20). Thomas
was minority owner of Austin Electric from 2013 through 2016,
as his ownership interest ranged from 20 to 30 percent. In
2013 and 2014, Thomas' ownership interest was 20 percent.
In 2015 and 2016, Thomas' ownership interest was 30
percent. (Doc. 115-1 at 8:9-19.) Tonn and Tapia are both
inactive owners and play no role in the operations of the
company. (Doc. 115-1 at 9:18-20.)
Thomas
is the president of Austin Electric. (Doc. 115-1 at 7:16-17.)
Joe Church is Vice President of Operations at Austin Electric
and reports directly to Thomas. (Doc. 115-1 at 10:21-25;
11:23-24.) The parties do not state whether Austin Electric
has a Board of Directors; nor do they state the existence of
a CEO, CFO, or any other possible corporate officers.
According to Thomas's deposition testimony, Austin
Electric employs office workers, warehouse workers, and field
workers. Approximately 15 employees work in the office. (Doc.
115-1 at 99:6-9.) They include, among others, a scheduling
manager, safety manager, estimator, and hiring manager. (Doc.
115-1 at 99- 100.) Jennifer Thomas, Toby Thomas's wife,
also works in the office in accounts payable. (Doc. 115-1 at
100:21-22.) Austin Electric employs approximately eight
warehouse workers who staff the warehouse where field workers
go and pick up their supplies. (Doc. 115-1 at 97:11-22.) The
majority of Austin Electric's employees are field
workers. Field workers are paid either by the hour or by the
piece (each task they complete). Thomas testified that in
2013, there were approximately 100-150 hourly workers and
80-100 pieceworkers. (Doc. 115-1 at 91:3-92:9.)
Church's
role as Vice President of Operations is to run the day-to-day
operations, including scheduling, office production, and
contracts. Church also oversees the fleet, personnel, and
safety at the company. (Doc. 115-1 at 11:17-22.) Church began
working at Austin Electric in 2003. (Doc. 115-1 at 191:2-3.)
The parties dispute over who hired Church: Thomas testified
that he hired Church while Church stated he was hired by
Robert de Markowitz.[3] (Doc. 115-1 at 11:3-4; 191:4.) Thomas
promoted Church to Vice President of Operations in 2014.
(Doc. 115-1 at 11:8-13.) Currently, Thomas sets the salary
for Church. (Doc. 115-1 at 12:4-5.)
Below
Church is Rodolfo Becerra, Austin Electric's Field
Operations Manager. Thomas hired Becerra in early 2005.
Thomas also promoted Becerra to his current position in 2007.
(Doc. 112-1 at 28:22 - 29:5.) As Field Operations Manager,
Becerra oversees Austin Electric's field employees
alongside Church. (Doc. 112-1 at 31:9-15.) For example,
Becerra and Church handle employee discipline. (Doc. 112-1 at
49:9-12.) Becerra and Church also determine the vehicle
reimbursement rate for employees who use their own vehicles
for work. (Doc. 112-1 at 20:16-21.) Becerra manages
approximately 20-25 field managers, who manage assistant
field managers and the field workers in turn. (Doc. 115-1 at
94-96.) Becerra reported to Thomas “years ago”
and now reports to Church. Church sets Becerra's current
salary. In the event of Church's absence, however,
Becerra goes to Thomas for decisions. (Doc. 115-1 at
12:23-13:22.)
As
President of Austin Electric, Thomas has the power to hire
and fire employees, although he has not exercised this
authority in the last six or seven years. (Doc. 115-1 at
20:15-16; 174:6-7.) Thomas also has the authority to set
employees' pay rate but testified he does not set or know
the current pay rate, although he does know the formula used
to calculate the pay rate. (Doc. 115-1 at 16:6-9.) Austin
Electric pays pieceworkers a rate based on the livable square
footage of the house they wire. (Doc. 115-1 at 16:21- 17:8.)
An informal committee determines the rate per square footage
paid to pieceworkers. (Doc. 115-1 at 17:18-19.) Church
testified the pay-rate-setting process involves himself,
Becerra, estimator Jeremy Forgia, and Thomas. Church and
Becerra “come up with what [they] think is a fair
rate” and then show it to Thomas and Forgia for review.
(Doc. 115-1 at 208:24-209:5.) Church further testified the
four members “all agree whether or not we can afford
that rate. If we say yes, then we change the rate.”
(Doc. 115-1 at 209:3-5.) Church also stated he
“won't change the piece value rate without
discussing it first with Mr. Thomas, but ultimately [Thomas]
is probably going to defer to [Church's] decision.”
(Doc. 115-1 at 209:22-25.) Although Church indicated he
believes he is entitled to set pay rate without Thomas, he
consults Thomas before making the decision “out of
respect” for Thomas. (Doc. 115-1 at 210:5-6.)
Importantly, nowhere in the depositions or motion papers do
Defendants dispute the accuracy of Church's testimony.
Rather, they appear to argue it is significant that Thomas
does not know the current pay rate but “simply confirms
that Austin Electric can afford a rate change determined by
Mr. Church and Mr. Becerra.” (Doc. 125 at 5.)
Additionally, Thomas testified he decides the method of
payment (cash or check) and whether employees receive
benefits. (Doc. 115-1 at 18:21-19:17.)
Prior
to 2013, Thomas made the decision to treat pieceworkers as
independent contractors rather than employees. (Doc. 115 at
3:24-25.) Sometime around 2013, Thomas decided to reclassify
independent contractors as employees. Thomas testified that
he began maintaining employment records for pieceworkers
around this time. (Doc. 115-1 at 21:11-15.) During the
reclassification, Thomas personally researched the correct
method of calculating wages for pieceworkers-by
“convert[ing] the piece rate into the number of hours
they worked.” (Doc. 115-1 at 177:21-178:18.) Thomas
admitted that although Austin Electric had inadvertently
applied the incorrect calculation for a few weeks, Thomas
remedied the situation by working with his payroll staff to
implement the correct calculation method. (Doc.
180:22-181:4.)
Thomas
has the authority to set pieceworkers' work schedule but
apparently does not exercise this authority. Thomas's
testimony indicates that “nobody in the company sets
schedules over the piece employers” and it is
“entirely up to the pieceworkers when or if they want
to work.” (Doc 115-1 at 173:14-17.) The Secretary
disputes this statement, noting that scheduling manager Jose
Ballesteros testified that Austin Electric determines when to
assign pieceworkers to do electrical work and how many of
them are required for each particular job. (Doc. 128-1 at
4:11-20.)
LEGAL
STANDARD
Summary
judgment is proper where “the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). Material facts are those that
“might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A dispute of material
fact is only genuine “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Id. In reviewing a motion for summary
judgment, all evidence must be construed in the light most
favorable to the non-moving party.
Here,
both parties move for summary judgment on the same issue.
“[W]hen simultaneous cross-motions for summary judgment
on the same claim are before the court, the court must
consider the appropriate evidentiary material identified and
submitted in support of both motions, and in opposition to
both motions, before ruling on each of them.”
Tulalip Tribes of Wash. v. Wash., 783 F.3d 1151 (9th
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