Dobrov v. Hi-Tech Paintless Dent Repair, Inc.
| Decision Date | 31 March 2021 |
| Docket Number | No. 1:20-CV-00314,1:20-CV-00314 |
| Parties | TARAS DOBROV, individually and on behalf of a class, Plaintiff, v. HI-TECH PAINTLESS DENT REPAIR, INC., and MARK TSURKIS, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Taras Dobrov, a car-repair technician, brings this proposed class action against Hi-Tech Paintless Dent Repair, Inc. and its CEO and founder, Mark Tsurkis, for misclassifying Dobrov and other technicians as "independent contractors" to avoid paying them owed overtime pay. Dobrov alleges that he "routinely" worked in excess of 40 hours per week but was not paid overtime and that the Defendants deducted unauthorized charges from his paycheck to simulate an independent-contractor relationship. He now seeks overtime wages under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 216(b), and the Illinois Minimum Wage Law (IMWL), 820 ILCS § 105/1, et seq., as well as compensation for the unauthorized deductions under the Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS § 115/1, et seq. R. 1, Compl.1 TheDefendants not only moved to dismiss Dobrov's complaint and to strike the collective and class allegations but also simultaneously filed a third-party complaint against Dobrov, alleging that Dobrov's company had impliedly indemnified them against Dobrov's charges. R. 30, Mot. Dismiss; R. 24, Third-Party Compl. Dobrov maintains that Defendants' third-party complaint is frivolous and has asked the Court to strike it and instead grant Dobrov leave to amend his original complaint to add allegations of retaliation. R. 39, Pl.'s Mot. Strike. For the reasons explained in this Opinion, the Court denies the remainder of Defendants' motion to dismiss (parts of it were already denied earlier, R. 29);2 grants Dobrov's motion to dismiss the third-party complaint; and grants Dobrov's motion to add retaliation claims to his complaint.
For purposes of the Defendants' motion to dismiss, the Court accepts as true the allegations in the Complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007). Mark Tsurkis is the CEO and founder of Hi-Tech Paintless Dent Repair, an Illinois company that employs car-repair technicians to provide paintless dent removal and hail-damage repair. Compl. ¶ 11-12. Taras Dobrov worked for Hi-Tech as a repair technician from around January 2012 through December 2018. Id. ¶ 8.
Hi-Tech hired Dobrov and other repair technicians in exchange for their agreement to receive training in paintless dent removal repair and work exclusively for Hi-Tech for at least five years. Id. ¶ 14. These technicians lacked prior knowledge or experience in those types of repairs, but Hi-Tech provided the relevant training, as well as the tools, forms, and equipment to perform the services commercially. Id. ¶¶ 16-17. Hi-Tech also provided continuing training and I-CAR educational classes to assist Dobrov and the other repair technicians with keeping their car-repair knowledge up-to-date. Id. ¶ 18.
Once trained, the repair technicians worked exclusively for Hi-Tech and were prohibited from providing services to competitors. Compl. ¶¶ 19-21. Hi-Tech exerted full control over their schedules, including "when, where, what, and how" their services were rendered to customers. Id. Hi-Tech dictated what prices were charged for services and "what and how" to bill for services rendered, and the technicians were required to enter this information into Hi-Tech's billing software directly. Id. ¶¶ 21, 24-25. Hi-Tech generated invoices based on the information supplied, and Dobrov and the other technicians were compensated based on a percentage of the amount invoiced for their services. Id. ¶¶ 15, 26. These rates were approximately as follows:
a. Year One - 50% commission of the invoiced amount;
b. Year Two - 55% commission of the invoiced amount;
c. Year Three - 60% commission of the invoiced amount;
d. Year Four - 65% commission of the invoiced amount;
e. Year Five and thereafter - 70% commission of the invoiced amount.
Hi-Tech also provided and paid for all marketing services for Dobrov and the technicians. Compl. ¶ 22. These services included handling the customer communications and complaints, providing service scheduling, and controlling the timing, type, and extent of the technicians' services. Id. The company also provided the technicians with company-branded T-shirts and uniforms that the technicians had to wear at all times while providing repair services to customers. Id. ¶ 28. Technicians were even issued branded business cards with Hi-Tech's logo and contact information. Id. ¶ 29. On an annual basis, Hi-Tech required Dobrov and the other technicians to attend Hi-Tech's annual corporate meetings and to participate in group photographs wearing Hi-Tech's branded uniforms. Id. ¶ 30. Hi-Tech also assumed the risk of loss for the technicians' services by providing written guarantees to customers for the services rendered. Id. ¶ 23.
According to Dobrov, Hi-Tech designed a scheme to create the illusion that an independent-contractor relationship existed between Hi-Tech and technicians by requiring each of them: (1) to form separate companies; (2) to obtain employer identification numbers for their companies; and (3) to purchase separate worker-compensation insurance. Compl. ¶ 33. Hi-Tech also instituted an "administrative charge" ranging from $15 to $50 that the company deducted from their paychecks as a fee for processing invoices. Id. ¶ 34. "In many instances," Hi-Tech entered into "Independent Contractor Agreements" with the technicians "that contained exclusivity, training, expense reimbursements, and five-year non-competition provisions common for employment relationships." Id. ¶ 35.
Dobrov alleges that, at the Defendants' direction, the repair technicians "routinely" worked more than 40 hours per week providing repair services but were not paid overtime wages. Compl. ¶¶ 37-38. Dobrov now brings this litigation on behalf of himself and other repair technicians to recover the unpaid overtime wages under the FLSA and the IMWL, as well as to recover for the unauthorized deductions under the IWPCA. After the Defendants moved to dismiss the Complaint and to strike the collective and class allegations, the Court denied several parts of it. R. 29. The Defendants also filed a third-party complaint against Dobrov, alleging that Dobrov's company had impliedly indemnified the Defendants against wage suits like this one. R. 24. In response, Dobrov seeks to strike the third-party complaint and seeks leave to amend the Complaint to add retaliation claims. R. 39.
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (cleaned up). The Seventh Circuit has explained that this rule "reflects a liberal notice pleading regime, which is intended to 'focus litigation on the merits of a claim' rather than on the technicalities that might keep plaintiffs out of court." Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).
"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions." Iqbal, 556 U.S. at 678-79.
As for adding to the complaint, a court may "permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed. R. Civ. P. 15(d). Such a motion is governed by the same standard as a motion to amend under Rule 15(a), and district courts "should freely give leave [to amend a complaint] when justice so requires." Fed. R. Civ. P. 15(a)(2). But leave to amend is not granted automatically. See Airborne Beepers & Video Inc. v. AT&T Mobility LLC, 499 F.3d 663, 666 (7th Cir. 2007). Indeed, "[district] courts have broad discretion to deny leave to amend where there is undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies, undue prejudice to the defendants, or where the amendment would be futile." Johnson v. Cypress Hill, 641 F.3d 867, 871-72 (7th Cir. 2011) (cleaned up); see also Foman v.Davis, 371 U.S. 178, 182 (1962).3 And while delay alone usually does not warrant denying leave to amend, the "longer the delay, the greater the presumption against granting leave to amend." Johnson, 641 F.3d at 872 (internal quotation marks and citation omitted).
Turning first to the defense's motion to dismiss, the remaining arguments are that the FLSA claims (Count 1), the IMWL claims (Count 2), and the IWPCA claims (Count 3) should be dismissed for failure to adequately state a claim for relief. The Court addresses each argument in turn.
Under the Fair Labor Standards Act, employees—unless they are subject to an exemption—are entitled to receive overtime pay at a rate of 1½ times their hourly rate for all hours worked above the standard 40-hour workweek. 29 U.S.C. §§ 207, 213. "To state a claim for failure to pay overtime, a plaintiff must sufficiently allege forty hours of...
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