Reyes v. Remington Hybrid Seed Co., Inc.

• Decision Date: 20 July 2007
• Docket Number: No. 05-1628.,05-1628.
• Citation: 495 F.3d 403
• Parties: Daniel REYES, et al., Plaintiffs-Appellants, v. REMINGTON HYBRID SEED COMPANY, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

495 F.3d 403

Daniel REYES, et al., Plaintiffs-Appellants, v. REMINGTON HYBRID SEED COMPANY, INC., et al., Defendants-Appellees.

No. 05-1628.

United States Court of Appeals, Seventh Circuit.

Argued September 26, 2005.

Decided July 20, 2007.

As Amended August 30, 2007.

Vincent H. Beckman, Legal Assistance Foundation, Chicago, IL, Rodolfo D. Sanchez (argued), Texas Riogrande Legal Aid, Weslaco, TX, for Plaintiffs-Appellants.

Donald W. Shelmon (argued), Shelmon & Associates, Rensselaer, IN, for Defendants-Appellees.

Catherine K. Ruckelshaus, National Employment Law Project, New York, NY, Amicus Curiae.

Before EASTERBROOK, Chief Judge, and RIPPLE and ROVNER, Circuit Judges.

EASTERBROOK, Chief Judge.

Braulio Zarate, Jr., recruited members of the Reyes and Garcia families to detassel and rogue corn plants in fields under the control of Remington Hybrid Seed Company. Hybrids can be grown only if the plant's tassel is removed so that it may be fertilized by a different variety. Detasseling must be done several times per season, and though machines have been developed for this task Remington prefers hand detasseling when that is feasible. Removing unwanted plants (rogueing) to improve the average quality of a plot also is best done by hand. Zarate told the Reyeses and Garcias that they could expect to work between six and eight weeks in Remington's fields (for between 72 and 84 hours a week), followed by work in Remington's plant sheds; he promised free housing in Indiana during that time. The families accepted the offer and traveled from Texas to Indiana.

Zarate furnished only dilapidated and overcrowded housing, however, and about 20 hours' work per week for five weeks. He did not fully compensate everyone for even that limited time and failed to make appropriate payments to the Social Security system for their work. Disappointed, the Reyeses and Garcias (collectively the workers) filed this suit under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-19, and the Migrant and Seasonal Agricultural Workers Protection Act (AWPA), 29 U.S.C. §§ 1801-72. Zarate defaulted; a judgment against him for more than $100,000 has been entered. But the workers never expected to collect much from Zarate. Their main target is Remington, which they call a joint employer with Zarate. The district court, however, concluded that Zarate was the workers' only employer. Summary judgment was entered in favor of Remington and its two senior managers, who the workers propose to hold derivatively liable under 29 U.S.C. §§ 203(d), 216(b). To simplify the exposition we disregard the managers and discuss only the claims against Remington.

Remington hired Zarate to provide detasseling and rogueing services; he engaged and paid the workers. The agreement between Remington and Zarate is a standard form for creating an independent-contractor relation. Zarate had no business independent of his work for Remington and apparently lacked liquid assets. Remington advanced the money that Zarate needed to secure workers' compensation insurance, and several times during the season Remington advanced funds so that Zarate could pay his crew. Zarate did not supply any tools; even the portable toilets came from Remington. Although the workers do not contend that these facts spoil the independent-contractor classification as a matter of Indiana law, they may be significant as a matter of federal law, for reasons we discuss later. The workers' principal contention is that it just doesn't matter whether Zarate was an independent contractor, because under the FLSA the term "`[e]mploy' includes to suffer or permit to work." 29 U.S.C. § 203(g). Remington permitted Zarate's crew to work on its crops and that, plaintiffs maintain, is that. The AWPA uses the FLSA's definition of "employ," see 29 U.S.C. § 1802(5), so victory on this issue under either statute carries over to the other.

Before any of the workers arrived in Indiana, however, and thus before the statutory definition could come into play, they had dealings with Zarate in Texas. Plaintiffs maintain that Remington should be liable for Zarate's failure to supply 70 hours' work weekly for six to eight weeks and to provide decent housing. This argument can't rest on § 203(g) unless it creates liability that runs backward in time, and there is no reason to read it in that fashion. Whether Remington is bound by Zarate's promises is wholly a matter of state law (whether of Indiana or Texas is a subject the parties do not discuss). This is so even if Zarate was Remington's agent. The FLSA doesn't guarantee minimum hours; it provides only a floor under the hourly rate of pay for hours actually worked. The AWPA likewise is silent about guarantees of work. Thus the workers' claim rests on common law. Zarate's contract with Remington establishes that he lacked actual authority to promise on Remington's behalf that the workers would receive either housing or any fixed quantity of work. So did he have apparent authority to bind Remington? The district judge thought not, observing that apparent authority depends on a manifestation by the principal and cannot be created by an agent's own words. See Restatement (Third) of Agency § 2.03 & comment c (2006).

Plaintiffs do not contend that the AWPA displaces these common-law norms. It does oblige recruiters to disclose in writing a list of things, including the hourly wage and whether the workers will receive fringe benefits such as housing, 29 U.S.C. § 1821(a), but does not provide that a recruiter may impose liability on the principal by making unauthorized promises; a misbehaving agent is on his own. Remington did not do or say anything that would have led the workers to believe that Zarate could make binding commitments on its behalf with respect to housing or hours of work; until arriving in Indiana they relied entirely on Zarate's unilateral statements. An agent doubtless has implied authority to make those ancillary arrangements that are normal for implementing the task at hand. See Opp v. Wheaton Van Lines, Inc., 231 F.3d 1060, 1064 (7th Cir.2000). Yet plaintiffs do not assert that free housing was necessary (Remington itself thought not; its contract denies Zarate any power to make that promise) or that a guaranteed number of hours is essential or even common in recruiting agricultural workers. The AWPA requires disclosure of the hourly wage but not a minimum quantity of work.^* So Remington's liability depends on what it did (or permitted) after the workers arrived at fields under its control.

Although plaintiffs invite us to read § 203(g) so broadly that all or almost all employees of independent contractors would become "employees" of every firm whose premises they enter, the Supreme Court has not taken such a perspective. True, it has read the statute broadly. See Roland Electrical Co. v. Walling, 326 U.S. 657, 66 S.Ct. 413, 90 L.Ed. 383 (1946); cf. United States v. Silk, 331 U.S. 704, 712, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) (Social Security Act). But instead of holding that employees of independent contractors automatically become joint employees of the firms for which these independent contractors supply labor, the Court has held that further inquiry is essential. See Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947); see also Secretary of Labor v. Lauritzen, 835 F.2d 1529 (7th Cir.1987). One reason for this is 29 U.S.C. § 203(r), which defines the "enterprise" subject to the Act's obligations in a way that excludes "the related activities performed for such enterprise by an independent contractor." See Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985).

What, then, distinguishes the situations covered by § 203(g) from those excluded by § 203(r)? The Secretary of Labor has promulgated a regulation providing among other things, that "[i]n determining if the farm labor contractor or worker is an employee or an independent contractor, the ultimate question is the economic reality of the relationship — whether there is economic dependence upon the agricultural employer/association or farm labor contractor, as appropriate." 29 C.F.R. § 500.20(h)(4).

A reference to "economic reality" tells the court to disregard economic fantasy but does not say which aspects of "reality" have what legal consequences. "`[R]eality' encompasses millions of facts, and unless we have a legal rule with which to sift the material from the immaterial, we might as well examine these facts through a kaleidoscope." Lauritzen, 835 F.2d at 1539 (concurring opinion). The reference to "economic dependence" is scarcely more helpful. Thousands of employers compete for the services of agricultural workers; when deciding whether to accept Zarate's offer rather than someone else's, these workers were not "dependent" on Remington. Once they arrived in Indiana they were "dependent" in the sense that they relied on Zarate (and perhaps on Remington) to fulfill the deal (as both the travel and the work precede payment). They had sunk costs that may have led them to accept substandard housing and toilet facilities rather than endure transitional unemployment during a search for other work. This difference between the ex ante and ex post situations is true of all labor, however; how can it help us to determine whether to disregard a given independent contractor?

The regulation lists eight considerations such as "[w]hether the agricultural employer/association has the power, either alone or through control of the farm labor contractor to direct, control, or supervise the worker(s) or the work performed (such control may be either direct or indirect, taking into account the nature of the work performed and a reasonable degree of contract performance oversight and coordination with third parties)". 29 C.F.R. § 500.20(h)(5)(iv)(A). Another of the factors is "the degree of permanency and duration of the...