Kenneth M. Hoyt, United States District Judge.
This matter was referred to United States Magistrate Judge Dena Palermo to conduct all further proceedings pursuant to 28 U.S.C. § 636. [ECF No. 75]. Pending before Judge Palermo was Defendant Jim Kim's motion for summary judgment. [ECF No. 68]. On August 20, 2019, Judge Palermo filed a Report and Recommendation ("R&R") recommending that Defendant's motion for summary judgment be denied. [ECF No. 77]. The deadline for filing objections to the R&R has expired without any objections being filed.
The Court finds that Judge Palermo's R&R is well founded and that it should be adopted.
It is so ORDERED.
Dena Hanovice Palermo, United States Magistrate Judge.
Plaintiffs bring this suit for unpaid overtime compensation as a collective action under the Fair Labor Standards Act of
Defendant JFE Franchising, Inc. ("JFE Franchising") is a Texas corporation engaged in the franchising and management of sushi kiosks located in grocery stores throughout the United States. ECF No. 68-1 at 6.
Between 2012 and 2017, Plaintiffs Seong Song, Jae Bak Bae, Matthew Kim, and Johnathan Olvera worked at JFE Franchising's headquarters in Houston. ECF Nos. 71-6, 71-7, 71-8, and 71-9. Plaintiffs' principal claim is that they were often required to work more than 40 hours per week but were not paid proper overtime compensation, in violation of the FLSA's overtime pay provision. ECF No. 46 ¶¶ 20, 23, 26, 29, 30, 32, 35.
Defendant Kim denies Plaintiffs' allegations and moves for summary judgment on the sole ground that he was not their "employer" and/or a "joint employer" alongside JFE Franchising. ECF No. 68. Relying on Gray v. Powers, 673 F.3d 352 (5th Cir. 2012), he argues that he cannot be held liable for the alleged overtime pay violation because there is no evidence that he "(1) possessed 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." ECF No. 68 at 9 (quoting Gray, 673 F.3d at 355).
Plaintiffs oppose the motion for summary judgment, arguing that there is a genuine issue of material fact as to whether Defendant Kim was their "employer" and/or "joint employer." ECF No. 71. While they maintain that Defendant Kim meets the criteria identified in Gray, Plaintiffs also rely on a more expansive framework for determining "employer" and "joint employer" status set forth in Wirtz v. Lone Star Steel Co., 405 F.2d 668, 669-70 (5th Cir. 1968) (listing five questions that courts should consider in assessing "whether a person or corporation is an `employer' or `joint employer'" under the FLSA). ECF No. 71 at 15-16. Plaintiffs point to evidence showing that, during the course of their employment at JFE Franchising, they were required to work at and for private events held at Defendant Kim's home, and to do work on his house, vehicles, and private ranch. ECF No. 71 at 5, 7, 9, 11-14, 16. In addition, Plaintiffs cite evidence indicating that Defendant Kim's influence within JFE Franchising enabled him to exercise power over their employment; they note, for example, that JFE Franchising's human resources manager served a dual role as Defendant Kim's secretary and conveyed work instructions to Plaintiffs. Id. at 14, 16. All this evidence, Plaintiffs claim, demonstrates Defendant Kim's "position of authority and power" over them and provides a sufficient basis for holding him accountable, along with JFE Franchising, for violating the FLSA. Id. at 16.
"Summary judgment is appropriate only 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.'" Tolan v. Cotton, 572 U.S. 650, 656-57, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014) (quoting Fed. R. Civ. P. 56(a)). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
The summary-judgment movant bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the record that demonstrate the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); EEOC v. Chevron Phillips Chem. Co., 570 F.3d 606, 615 (5th Cir. 2009). If the movant seeks summary judgment based on an issue for which the nonmoving party bears the burden of proof at trial, the movant may satisfy this initial burden by showing that there is an absence of evidence to support an essential element of the nonmoving party's case and that, as a result, judgment should be entered in the movant's favor on the basis of purely legal considerations. Celotex, 477 U.S. at 325, 106 S.Ct. 2548; Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). If the movant fails to meet its initial burden, the motion for summary judgment must be denied, regardless of the nonmoving party's response. Celotex, 477 U.S. at 325, 106 S.Ct. 2548; United States v. $92,203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir. 2008).
If the summary-judgment movant carries its initial burden, the burden then shifts to the nonmoving party to show that summary judgment should not be granted. Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548; Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). The nonmoving party may discharge this burden by identifying specific evidentiary material showing that there is a genuine issue for trial. Sanchez v. Young Cty., Tex., 866 F.3d 274, 279 (5th Cir. 2017); Isquith ex rel. Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 198-200 (5th Cir. 1988).
On a motion for summary judgment, "a court must view the evidence `in the light most favorable to the opposing party.'" Tolan, 572 U.S. at 657, 134 S.Ct. 1861 (quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). The nonmoving party's evidence must be accepted as true, and all reasonable inferences must be drawn in that party's favor. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Chaplin v. NationsCredit Corp., 307 F.3d 368, 372 (5th Cir. 2002); Richardson v. Oldham, 12 F.3d 1373, 1379 (5th Cir. 1994). "If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Carlson v. FedEx Ground Package Sys., Inc., 787 F.3d 1313, 1318 (11th Cir. 2015) (quoting Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997)); accord Askanase v. Fatjo, 130 F.3d 657, 665 (5th Cir. 1997) ("Summary judgment is inappropriate when conflicting inferences and interpretations may be drawn from the evidence."); see also Byrd v. Roadway Express, Inc., 687 F.2d 85, 87 (5th Cir. 1982) ("That the movant appears more likely to prevail at trial is no reason to grant summary judgment; it is not the province of the court on a motion for summary judgment to weigh the evidence, assess its probative value, or decide factual issues.").
Section 7(a) of the FLSA mandates that "no employer shall employ any of his employees ... for a workweek longer than forty hours" unless the employee is compensated for time worked in excess of that
In keeping with its "remedial and humanitarian" purpose, Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597, 64 S.Ct. 698, 88 S.Ct. 949 (1944), the FLSA defines the term "employer" expansively: the statute places no express limitation on the word's meaning, stating only that it "includes any person acting directly or indirectly in the interest of an employer in relation to an employee," 29 U.S.C. § 203(d) (emphasis added); see also id. § 203(a) (defining "person" as "an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons"). The Act defines the related terms "employee" and "employ" in similarly broad fashion. Id. § 203(e)(1) (defining "employee" as "any individual employed by an employer"); id. § 203(g) (stating that the term "employ" "includes to suffer or permit to work"). As the Supreme Court has recognized, the "striking breath" of these definitions brings within the FLSA's coverage some employment relationships that might not qualify as such "under a strict application of traditional agency law principles" or under other federal statutes. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992); see also United States v. Rosenwasser, 323 U.S. 360, 363 n.3, 65 S.Ct. 295, 89 S.Ct. 301 (1945) (describing the FLSA's definition of "employee" as "the broadest definition that has ever been included in any one act" (quoting 81 Cong. Rec. 7657 (1937) (statement of Sen. Hugo Black))).
Under the FLSA, "[a] single [worker] may stand in the relation of an employee to two or more employers at the same time." 29 C.F.R. § 791.2(a). "If all the relevant facts establish that [those] employers are acting entirely independently of each other and are completely disassociated with respect to the employment of [the] employee," then they are treated as "separate and distinct" employers. Id. On the other hand, if the facts show that "employment by one employer is not completely disassociated from employment by the other employer(s)," then they are treated as "joint employers." Id.; accord Donovan v. Sabine Irrigation Co., 695 F.2d 190, 194 (5th Cir. 1983) (recognizing that the term "employer" "has been interpreted to encompass one or more joint employers").
The joint employment doctrine "treats a worker's employment by joint employers as `one employment' for purposes of determining compliance with the FLSA's wage and hour requirements." Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 134 (4th Cir. 2017); accord 29 C.F.R. § 791.2(a) ("[A]ll of the employee's work for all of the joint employers during the workweek is considered as one employment for purposes of the Act."). Thus, a finding of joint employment requires that the hours an employee works for each joint employer "be aggregated for overtime pay purposes" and that the joint employers be held jointly and severally liable for any failure to pay proper overtime compensation. Wirtz v. Hebert, 368 F.2d 139, 141 (5th Cir. 1966); Mitchell v. John R. Cowley & Bro., Inc., 292 F.2d 105, 111-12 (5th Cir. 1961) ("[T]he matter of joint employment ... is a question whether for the purposes of the Act [the worker] may be deemed to be doing work for both [joint employers] so that the hours worked are aggregated to determine compliance with
The test of employment under the FLSA is one of "economic reality." Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 301, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985); Goldberg v. Whitaker House Co-op., Inc., 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961). This entails a fact-intensive inquiry based "upon the circumstances of the whole activity," not "isolated factors." Rutherford Food Corp. v. McComb, 331 U.S. 722, 730, 67 S.Ct. 1473, 91 S.Ct. 1772 (1947); accord Gulf King Shrimp Co. v. Wirtz, 407 F.2d 508, 512 (5th Cir. 1969).
In Lone Star Steel, the Fifth Circuit set forth the following framework for determining joint employer status:
405 F.2d at 669-70. Under Lone Star Steel, these five considerations are always potentially relevant, but they are not exhaustive since"[e]ach case must be considered in light of the total situation or whole activity to determine whether an employer-employee relationship exists." Id. at 669. The Lone Star Steel framework has long been used by the Fifth Circuit and by district courts in the circuit. E.g., Hodgson v. Griffin & Brand of McAllen, Inc., 471 F.2d 235, 237-38 (5th Cir. 1973); Itzep v. Target Corp., 543 F.Supp.2d 646, 653 (W.D. Tex. 2008) (quoting the Lone Star Steel test and observing that "[n]o one factor is determinative of whether a defendant is an `employer' under the FLSA"); Artis v. Asberry, Case No. 3:10-cv-323, 2012 WL 5031196, at *4 (S.D. Tex. Oct. 16, 2012) (Costa, J.) (same).
Lone Star Steel is valid and binding precedent. Nonetheless, Defendant Kim urges the application of a much more restrictive test of employer status set forth in Gray. In that case, a three-judge panel of the Fifth Circuit stated:
Defendant's reliance on Gray is misplaced. Although there is some overlap between the Lone Star Steel framework and Gray's test (in particular, Lone Star Steel's second and third considerations appear to be quite similar to factors one and two of Gray), the four factors recited in Gray ignore several of the considerations expressly identified in Lone Star Steel as being particularly relevant to assessing joint employer status. If the panel in Gray had acknowledged that other factors can suffice to establish a joint employment relationship, it might be possible to reconcile its decision with Lone Star Steel. But Gray's requirement that at least one of the four factors be present to find employer status precludes such a reading. As a result, Gray unavoidably contradicts Lone Star Steel's mandate that joint employer determinations be based upon the totality of each situation, as well as its identification of particularly relevant considerations.
What is more, Gray borders on embracing the sort of blindered analysis of "isolated factors" that the "economic reality" test has long rejected. Gray's four-factor test ultimately derived from the Ninth Circuit's decision in Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983). See Williams, 595 F.3d at 620 n.17. Bonnette, in turn, "reflect[s] the common-law test for determining whether an agency relationship exists, which focuses on the putative principal's `formal right to control the physical performance of another's work.'" Salinas, 848 F.3d at 136 (quoting Zheng v. Liberty Apparel Co., 355 F.3d 61, 69 (2d Cir. 2003)). But as the Supreme Court and Fifth Circuit have held, the common law "control test" is not the test of employment under the FLSA. E.g., Nationwide Mut. Ins. Co., 503 U.S. at 325-26, 112 S.Ct. 1344; Castillo v. Givens, 704 F.2d 181, 190 (5th Cir. 1983) (observing that the Fifth Circuit "has on several occasions found employment status even though the defendant-employer had no control over certain aspects of the relationship, e.g., the right to set hours, hire and fire, or determine wages"); Gulf King Shrimp Co., 407 F.2d at 512 ("[I]n determining who is and who is not an employee under the Act, `common law employee categories... are not of controlling significance.'" (quoting Walling v. Portland Terminal Co., 330 U.S. 148, 150, 67 S.Ct. 639, 91 S.Ct. 809 (1947))). Even the Ninth Circuit has not strictly applied the Bonnette factors: it "now assesses whether a joint employment relationship exists using thirteen nonexclusive factors." Salinas, 848 F.3d at 136-37 (citing Torres-Lopez v. May, 111 F.3d 633, 639-41 (9th Cir. 1997)). Thus, while satisfying Gray's four-factor test may be sufficient to establish joint employer status, it is by no means necessary for a plaintiff to do so. Id. at 136; Zheng, 355 F.3d at 69.
The conflict between Gray and Lone Star Steel implicates the Fifth Circuit's "rule of orderliness," which forbids one panel from overruling a prior panel. Teague v. City of Flower Mound, 179 F.3d 377, 383 (5th Cir. 1999). "Where two previous holdings or lines of precedent conflict, `the earlier opinion controls and is the binding precedent in the circuit.'" Soc'y of Separationists, Inc. v. Herman, 939 F.2d 1207,
Plaintiffs do not dispute that they will bear the burden of proof at trial on whether Defendant Kim was their "employer" and/or a "joint employer" alongside JFE Franchising. See Johnson v. Heckmann Water Res. (CVR), Inc., 758 F.3d 627, 630 (5th Cir. 2014). As the summary-judgment movant, however, it is Defendant Kim who bears the initial burden of showing that there is an absence of evidence to support this aspect of Plaintiffs' case and that judgment should therefore be entered in his favor as a matter of law. Celotex, 477 U.S. at 325, 106 S.Ct. 2548; Fontenot, 780 F.2d at 1194. It is well established that "[s]imply filing a summary judgment motion does not immediately compel the party opposing the motion to come forward with evidence demonstrating material issues of fact as to every element of its case." Russ v. Int'l Paper Co., 943 F.2d 589, 591 (5th Cir. 1991). On the contrary, "before the non-moving party is required to produce evidence in opposition to the motion, the moving party must first satisfy its obligation of demonstrating that there are no factual issues warranting trial." Id. at 592. To satisfy this obligation, it is not enough for Defendant Kim to show the absence of a material fact dispute concerning just any aspect of his purported status as an employer or joint employer; rather, he must show the absence of a material fact dispute that concerns a legally dispositive aspect of that status. Id. (summary-judgment movant met its initial burden by "point[ing] to two issues ..., either of which would be considered dispositive under [governing] law" (emphasis added)); see also Fontenot, 780 F.2d at 1194 ("The principal function of the motion for summary judgment is to show that, in the absence of factual disputes, one or more of the essential elements of a claim or defense before the court is not in doubt and that, as a result, judgment should be entered on the basis of purely legal considerations." (emphasis added)).
Defendant Kim's motion for summary judgment rests entirely on the argument that there is an absence of evidence showing him to be a joint employer under Gray's four-factor test. But since evidence
The motion for summary judgment should be denied based on Defendant Kim's failure to meet his initial burden. In the interest of providing a complete report, however, the Court will also briefly explain why the motion should be denied even if the summary-judgment evidence were to be considered.
At the outset, it is important to recognize how the statutory term "employer" relates to the concept of joint employment under the FLSA. As previously noted, the term "employer" "encompass[es] one or more joint employers." Sabine Irrigation Co., 695 F.2d at 194 (emphasis added). Thus, where joint employment exists, the various "joint employers" are together considered to be the "employer" of the employees, and the entire aggregated relationship is deemed to be "one employment." Salinas, 848 F.3d at 134; 29 C.F.R. § 791.2(a). This point is analytically significant due to Lone Star Steel's requirement that courts determine joint employer status based on "the total employment situation." 405 F.2d at 669. In the context of joint employment, "the total employment situation" includes the combined total of all the joint employers' relationships with each other and with the employees, and so the Lone Star Steel framework must be applied to that total set of relationships rather than to particular subparts of it.
Because it is uncontested that JFE Franchising "employed" Plaintiffs, any joint employment relationship involving JFE Franchising and Defendant Kim necessarily satisfies the FLSA's "economic reality" test of employment. See Salinas, 848 F.3d at 150 ("Because [p]laintiffs were economically dependent on [one joint employer] alone, they were necessarily economically dependent on [both joint employers] in the aggregate."). The only question is whether Defendant Kim can be said to have been "completely disassociated" from JFE Franchising with respect to Plaintiffs' employment; if he was not "completely disassociated," then he may be held liable as a joint employer along with JFE Franchising. 29 C.F.R. § 791.2(a); Martin v. Bedell, 955 F.2d 1029, 1034 n.10 (5th Cir. 1992). After carefully reviewing the evidence presented by the parties,
One situation where putative joint employers are not "completely disassociated" is "[w]here there is an arrangement between [them] to share the employee's services, as, for example, to interchange employees." 29 C.F.R. § 791.2(b)(1); see also Hebert, 368 F.2d at 141. In this case, the existence of such an arrangement between Defendant Kim and JFE Franchising is shown by the fact that JFE Franchising's human resources manager, Christie Pak, directed Plaintiffs to perform work for Defendant Kim. E.g., ECF No. 68-12 at 28, 32 (Olvera Dep.); see also ECF No. 68-3 at 28 (Pak Dep.). Another situation demonstrating that putative joint employers are not "completely disassociated" arises "[w]here one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee." 29 C.F.R. § 791.2(b)(2). In this respect, too, the evidence that Pak acted to secure Plaintiffs as a virtually on-demand source of labor for Defendant Kim's benefit is sufficient to show that JFE Franchising acted in the interest of Defendant Kim in relation to Plaintiffs.
Assessing the summary-judgment evidence in light of the Lone Star Steel framework confirms that there is a triable issue as to whether Defendant Kim was "completely disassociated" from JFE Franchising with respect to Plaintiffs' employment.
The first Lone Star Steel consideration asks whether "the employment takes place on the premises of the [putative joint employer]." 405 F.2d at 669. Plaintiffs performed much of their work at JFE Franchising's headquarters but, pursuant to Pak's instructions, also worked on premises owned by Defendant Kim. E.g., ECF No. 71-6 (Bae Decl.); ECF No. 71-8 (Olvera Decl.); ECF No. 71-9 (Song Decl.). In addition, at least two of the plaintiffs—Olvera and Matthew Kim—were required to work on Defendant Kim's personal property. ECF No. 71-7 (Plaintiff Kim Decl.) (maintenance of vehicles that only Defendant Kim and his wife drove); ECF No. 71-8 (Olvera Decl.) (maintenance of Defendant Kim's personal cars and work on Defendant Kim's home and ranch near Austin). The fact that Pak directed Plaintiffs to do work at or on Defendant Kim's property (often during normal working hours when they would have been expected to remain on company premises) indicates that JFE Franchising and Defendant Kim were not "completely disassociated" with respect to Plaintiffs' employment.
The second and third Lone Star Steel considerations ask two related questions: "[h]ow much control does the [putative joint employer] exert over the employees," and "[d]oes the [putative joint employer] have the power to fire, hire, or modify the employment condition of the employees?" 405 F.2d at 669. The summary-judgment evidence shows that, on several occasions, Defendant Kim exercised significant control over Plaintiffs, the work they were required to do, and when and where they were required to perform their work. For example:
That Defendant Kim exercised this control indirectly, by having Pak relay instructions to Plaintiffs, does not lessen its importance as an indicator of joint employer status. See Griffin & Brand, 471 F.2d at 238 ("The fact that [the putative joint employer] effected the supervision by speaking to the crew leaders, who in turn spoke to the harvest workers, rather than speaking directly to the harvest workers does not negate a degree of apparent on-the-job control over the harvest workers."). In fact, Defendant Kim's utilization of Pak, who held a formal position of authority within JFE Franchising, strengthens the conclusion that he and the company were not "completely disassociated" with respect to Plaintiffs' employment.
There does not appear to be any evidence that Defendant Kim fired or hired Plaintiffs or other similarly-situated employees, but the control he exercised over important aspects of their work, described above, effected a significant modification in the conditions of their employment. Moreover, the fact that Defendant Kim was able to actually exercise such control over Plaintiffs' work tends to suggest that he also held the power to fire employees if they did not acquiesce in that control or if they did not perform the work to his satisfaction.
The fifth Lone Star Steel factor asks whether the employees can "refuse to work for the [putative joint employer] or work for others." 405 F.2d at 670. Given her position of authority within JFE Franchising, employees would have reasonably understood Pak's instructions—including those issued to Plaintiffs regarding work for Defendant Kim—as mandatory requirements upon which their continued employment at JFE Franchising was conditioned. Moreover, it is undisputed that, upon being separated from employment at JFE Franchising, Plaintiffs were also separated from their employment with Defendant Kim. See Hebert, 368 F.2d at 140. These facts demonstrate a clear link between Plaintiffs' work for Defendant Kim and their employment at JFE Franchising, and thus further support the conclusion that he and the company were not "completely disassociated."
The five considerations listed in Lone Star Steel are not exhaustive, but the fact that the summary-judgment evidence pertaining to those considerations largely supports Defendant Kim's status as a joint employer confirms that his motion for summary judgment must be denied.
For the above-stated reasons, the Court RECOMMENDS that Defendant Jim Kim's motion for summary judgment be DENIED.
Signed on August 19, 2019, at Houston, Texas.
In addition to the overtime claim, Plaintiffs Song and Bae allege that Defendants violated § 15(a)(3) of the FLSA by firing them in retaliation for complaining that they and other employees were not being paid proper overtime compensation. ECF No. 46 at ¶¶ 37-47. 47. The scope of the prohibition contained in § 15(a)(3)—which states that it is "unlawful for any person ... to discharge or in any other manner discriminate against any employee" for making a complaint under the Act, 29 U.S.C. § 215(a)(3) (emphasis added)—includes retaliators who may not qualify as an employee's actual "employer" for purposes of the Act's overtime pay requirements (as well as the statute's other substantive economic provisions, such as its minimum wage requirements). Arias v. Raimondo, 860 F.3d 1185 (9th Cir. 2017). Thus, even if Defendant Kim's argument in support of the present motion had merit—i.e., even if he does not qualify as Plaintiffs' actual "employer" or a "joint employer" under the FLSA—he could still face liability for violating § 15(a)(3) and would not be entitled to summary judgment on that claim.
