Merrill v. Harris
| Docket Number | 21-1295 |
| Decision Date | 26 August 2022 |
| Parties | FRANKLIN MERRILL; ANTHONY GLOVER; KEITH HERRING; ANTHONY DENNIS; LARRY JURCAK; SAMI NASR; RONALD DENNIS; RODNEY LACY; JAMES NEWBERRY; TAMI POTIRALA; CRAIG WILLIAMS; ZIGMUND GUTOWSKI; JOSEPH HORION; ERIC ARD; TIM HOLLINGSWORTH, Plaintiff Counter Defendants - Appellants, v. MATTHEW HARRIS, Defendants - Appellee, and PATHWAY LEASING LLC, a Colorado limited liability company, Defendant Counterclaimant - Appellee, and XPO LOGISTICS TRUCKLOAD, INC., a Missouri corporation registered to conduct business in Colorado; TRANSFORCE, INC., a Canadian corporation; CON-WAY TRUCKLOAD, INC., a Missouri corporation registered to conduct business in Colorado, Defendants. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Before TYMKOVICH, Chief Judge, CARSON, and ROSSMAN, Circuit Judges.
This appeal involves the Fair Labor Standards Act ("FLSA"), which requires employers to pay their employees a minimum wage. See 29 U.S.C. §§ 215(a)(2), 216(b). Plaintiffs are long-haul commercial truck drivers. They leased trucks from Defendants Pathway Leasing LLC and its President, Matthew Harris, (collectively "Pathway" or "Defendants") and then used those trucks to haul freight for carrier companies, including XPO Logistics Truckload, Inc.; CFI, Inc.; and Con-Way Truckload, Inc. (collectively "XPO").[1] Plaintiffs sued Pathway and XPO under the FLSA in federal district court in Colorado, alleging the two entities were joint employers who intentionally misclassified them as independent contractors and unlawfully denied them the statutorily required minimum wage. Plaintiffs voluntarily dismissed XPO from this action before trial, but their FLSA claims proceeded against Pathway.
After a multi-day bench trial, the district court entered judgment for Pathway on Plaintiffs' FLSA claims.[2] The district court concluded Plaintiffs were correctly classified as independent contractors-regardless of whether Pathway alone was considered Plaintiffs' employer or XPO and Pathway were joint employers. Plaintiffs timely appealed, challenging the district court's classification decision and the manner in which it was determined. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
Plaintiffs' operative complaint, filed in February 2017, alleged five claims for relief against Pathway and XPO, but only Plaintiffs' FLSA minimum wage claims against Pathway are at issue in this appeal.[3] Plaintiffs claimed they leased trucks from Pathway "believing they could operate those trucks as independent contractors and improve their lives through the exercise of entrepreneurial spirit." R. vol. 1 at 63. But in reality, Pathway allegedly "controlled every aspect" of their work, id., structured a joint employment relationship with XPO "to avoid the expense of retaining employees," and willfully misclassified them as independent contractors, id. at 75. The district court conditionally certified Plaintiffs' FLSA collective action in June 2017.[4] A few months later, Plaintiffs voluntarily dismissed XPO from the case.
Plaintiffs then moved for partial summary judgment, contending Pathway and XPO were joint employers under the Fourth Circuit's test in Hall v. DIRECTV, LLC, 846 F.3d 757 (4th Cir. 2017), and Salinas v. Commercial Interiors, Inc. 848 F.3d 125 (4th Cir. 2017) ("Hall-Salinas"). The Hall-Salinas framework articulates six factors "[t]o assist lower courts in determining whether the relationship between two entities gives rise to joint employment." Hall, 846 F.3d at 769.[5] Pathway opposed summary judgment, agreeing that whether two entities are joint employers for FLSA liability is a legal question but disagreeing that Hall-Salinas should answer it. Pathway advocated for application of the "economic realities" test in Baker v. Flint Engineering &Construction Co., 137 F.3d 1436 (10th Cir. 1998) which examines "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." 137 F.3d at 1440 (alteration in original) (quotation omitted). Regardless of the test applied, Pathway argued, there was no joint employment relationship between it and XPO. Pathway also filed a cross-motion for summary judgment contending Plaintiffs were correctly classified as independent contractors under the FLSA.
The district court denied the cross-motions for summary judgment. The court agreed with the parties that joint employment was a "threshold question in this case." R. vol. 2 at 753 (quotations omitted). If a "fact-finder [determined] that [Pathway] and XPO were joint employers," the district court explained, then evidence "bearing on the relationship between [those two entities] on the one hand and Plaintiffs on the other may be examined to determine whether Plaintiffs were independent contractors or employees." Id. at 768 (emphasis omitted).
The district court observed "the Tenth Circuit Court of Appeals has not yet articulated the appropriate test to use in making [the joint employment] determination in the FLSA context." Id. at 753. In the "absence of binding precedent in this Circuit," id., the district court "agree[d] with Plaintiffs . . . that the test enunciated by the Fourth Circuit in Hall and Salinas is appropriate and should be used here," id. at 758. The court ultimately found disputed issues of material fact precluded resolving the joint employment issue on summary judgment. Id. at 765.
In considering Pathway's cross motion, the district court analyzed Plaintiffs' employment classification under Baker "as though a joint employer relationship ha[d] been established" between Pathway and XPO. Id. at 768. Assuming a joint employment relationship between Pathway and XPO, the district court reasoned, "[was] most favorable to Plaintiffs as the nonmoving party." Id. The court examined "all of the evidence bearing on the relationship between [Pathway] and XPO," id., in analyzing Plaintiffs' employment classification but, given conflicting evidence, determined the classification issue also could not be determined on summary judgment, id. at 772.
The case proceeded to a six-day bench trial in June 2018.[6] Plaintiffs called eighteen witnesses, including all named Plaintiffs. Mr. Harris, Pathway's president, testified for Pathway. To prevail on their FLSA claims, Plaintiffs needed to prove they were employees of Pathway and misclassified as independent contractors. Plaintiffs proceeded on a theory of joint employment, offering testimony that Pathway and XPO collectively exercised control over their work. Pathway defended against the notion that it was a joint employer with XPO. For example, Mr. Harris testified XPO was not involved in Pathway's formation and that XPO and Pathway did not share office space, bank accounts, or any joint policies. See R. vol. 3 at 864, 883. According to Mr. Harris, Pathway was not involved in telling Plaintiffs what type of freight they could haul, what routes to drive when hauling freight, or when to take rest breaks or time off. See id. at 917-19. Though Pathway and XPO had executed a carrier agreement, Mr. Harris testified Pathway had also entered into agreements with other carriers. See id. at 982.
The district court acknowledged the parties submitted a "lot of evidence" about the relationship between Pathway and XPO, id. at 1107, and described the joint-employment question as a "close call," id. at 1099. At the conclusion of the bench trial, the district court had yet to decide whether Pathway and XPO were joint employers. After trial, the district court determined "Plaintiffs were independent contractors, regardless of whether Defendant Pathway [was] considered independently as an employer or whether XPO and Defendant Pathway [were] considered collectively as joint employers." R. vol. 2 at 1253.[7]
The district court first described the trial evidence presented about the commercial trucking industry. In general, commercial long-haul truckers could work as company drivers for a commercial freight company or become owner-operators. Owner-operators lease or own their own trucks and sell their hauling services to the companies with whom they contract "as [they] desire[]." R. vol. 2 at 1231. Company drivers work for a specific company and are bound by its polices about when and how to haul freight.
The district court found Plaintiffs were owner-operators who leased trucks from Pathway. To lease a truck, each Plaintiff signed Pathway's "Equipment Lease Agreement." Plaintiffs could execute single-person or team leases. The terms of these fixed lease agreements stated Plaintiffs were responsible for "truck payments, maintenance and repairs, fuel costs, business liability insurance," and paying their own "business-related taxes." Id. at 1245.
The district court acknowledged Pathway and XPO had entered into a "Carrier Agreement." The Carrier Agreement generally provided that Pathway would make a lease financing program available to XPO's owner-operators, XPO would "[a]ssist in closing the lease financing arrangement between Pathway and the [owneroperators]," and Pathway would lease trucks to XPO's owner-operators. See Supp. App. at 73-74. Either entity could terminate the Carrier Agreement with 120 days' notice.
XPO offered Plaintiffs a two-year freight-hauling contract called a "Contractor Hauling Agreement." XPO required Plaintiffs to secure a lease or own a truck before they could execute a Contractor Hauling Agreement. The contract terms permitted either party to terminate the...
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