Orozco v. Plackis

• Decision Date: 03 July 2014
• Docket Number: No. 13–50632.,13–50632.
• Citation: 757 F.3d 445
• Parties: Benjamin OROZCO, Plaintiff–Appellee, v. Craig PLACKIS, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

757 F.3d 445

Benjamin OROZCO, Plaintiff–Appellee,

v.Craig PLACKIS, Defendant–Appellant.

No. 13–50632.

United States Court of Appeals, Fifth Circuit.

July 3, 2014.

Aaron Johnson, Austin, TX, for Plaintiff–Appellee.

Mark Alan Keene, Keene & Seibert, Guillermo Ochoa–Cronfel, Cronfel Firm, Austin, TX, for Defendant–Appellant.

Appeal from the United States District Court for the Western District of Texas.

Before STEWART, Chief Judge, and HIGGINBOTHAM and ELROD, Circuit Judges.

CARL E. STEWART, Chief Judge:

Benjamin Orozco worked in a Craig O's Pizza and Pasteria (“Craig O's”) franchise owned by Sandra and Arnold Entjer. After Sandra made changes to Orozco's salary, he quit and filed suit against the Entjers, alleging multiple violations of the Fair Labor Standards Act (“FLSA”). Orozco settled with the Entjers, and Craig Plackis, the founder of Craig O's, was added as a defendant. A jury trial was held and the jury found in favor of Orozco. Thereafter, Plackis filed a motion for judgment as a matter of law, which the magistrate judge (“MJ”) denied. For the following reasons, we REVERSE the denial of the motion for judgment as a matter of law and RENDER judgment in favor of Plackis.

FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

Plackis owns Roxs Enterprises, Inc. (“Roxs”), the franchisor of Craig O's, with his wife, Roxana. Craig O's currently consists of five restaurants, including a location owned by Plackis in southwest Austin, Texas (hereinafter, “Southwest location”). In 2005, Pane e Vino, Inc., which is owned by the Entjers, entered into a Franchise Agreement with Roxs and purchased a Craig O's franchise. The Entjers opened their restaurant in San Marcos, Texas (hereinafter, “San Marcos location”). Sandra hired Orozco as a cook for the restaurant. Initially, Orozco was paid $1,200 bi-weekly; however, in 2007, his salary was changed to $1,050. Then, in 2011, Sandra changed Orozco's salary to $10 per hour. Thereafter, Orozco quit.

B. Procedural Background

Orozco initially filed suit against the Entjers and Pane E Vino, Inc., alleging that, during his employment from 2008 through 2011, he was not paid overtime or minimum wage as required under the FLSA. Orozco settled with the Entjers and added Plackis as a defendant. The parties agreed to a jury trial conducted by the MJ. The jury returned a verdict in favor of Orozco, finding that: (1) Plackis was Orozco's employer; (2) Plackis was part of an enterprise covered by the FLSA; (3) Orozco did not fall within any of the exemptions to coverage under the FLSA; and (4) Plackis willfully violated the FLSA. Plackis moved for judgment as a matter of law, which the MJ denied. Plackis subsequently renewed his motion for judgment as a matter of law, which the MJ again denied. Plackis timely appealed. On appeal, Plackis challenges the first two findings by the jury—specifically, whether he was Orozco's employer and whether Orozco sufficiently established enterprise coverage. In addition, Plackis contends that the jury instructions were improper. We will address each argument in turn.

DISCUSSION

A. Standard of Review

We review de novo the MJ's denial of Plackis's motion for judgment as a matter of law. See Arsement v. Spinnaker Exploration Co., 400 F.3d 238, 248 (5th Cir.2005). “A motion for judgment as a matter of law ... in an action tried by jury is a challenge to the legal sufficiency of the evidence supporting the jury's verdict.” SMI Owen Steel Co. v. Marsh USA, Inc., 520 F.3d 432, 437 (5th Cir.2008) (per curiam) (citation and internal quotation marks omitted). “A motion for judgment as a matter of law should be granted if there is no legally sufficient evidentiary basis for a reasonable jury to find for a party.” Id. (citation and internal quotation marks omitted). “[T]he evidence, as well as all reasonable inferences from it, are viewed in the light most favorable to the verdict.” Arsement, 400 F.3d at 249 (citation and internal quotation marks omitted). Moreover, we may not engage in “credibility determinations or weigh evidence.” Id. (citation and internal quotation marks omitted). Our review of jury verdicts “is especially deferential.” See Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 498–99 (5th Cir.2012) (citation and internal quotation marks omitted). Nonetheless, “we will not sustain a jury verdict based only on a ‘mere scintilla of evidence.’ ” SMI Owen Steel Co., 520 F.3d at 437 (citation omitted).

B. Applicable Law

Under the FLSA, an employer is defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). We rely on the economic reality test when determining a party's status as an employer under the FLSA. Gray v. Powers, 673 F.3d 352, 354 (5th Cir.2012). Under the economic reality test, we evaluate “whether the alleged employer: (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.” Id. at 355 (citation and internal quotation marks omitted). However, a party need not establish each element in every case. Id. at 357. “The dominant theme in the case law is that those who have operating control over employees within companies may be individually liable for FLSA violations committed by the companies.” Martin v. Spring Break '83 Prods., LLC, 688 F.3d 247, 251 (5th Cir.2012) (citation and internal quotation marks omitted). Moreover, “[t]he remedial purposes of the FLSA require the courts to define ‘employer’ more broadly than the term would be interpreted in traditional common law applications.” McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir.1989) (per curiam), modifying861 F.2d 450 (5th Cir.1988). In joint employer contexts, each employer must meet the economic reality test. Gray, 673 F.3d at 355.

C. Analysis

Plackis argues that it is improper to find an employer/employee relationship when none of the factors in the economic reality test are met. In addition to testimony adduced at trial, Plackis relies on the Franchise Agreement which demonstrates, in his view, that Sandra retained control over the San Marcos location. We agree that the MJ should have granted Plackis's motion for judgment as a matter of law because there was legally insufficient evidence for a reasonable jury to find that Plackis was Orozco's employer under the FLSA.

As an initial matter, we note that Orozco concedes that he failed to provide any evidence suggesting that Plackis maintained Orozco's employment records—the fourth element of the economic reality test. However, this failure is not fatal to the jury's finding that Plackis was Orozco's employer under the FLSA. As we stated in Gray, “each element need not be present in every case.” Gray, 673 F.3d at 357. We therefore proceed to analyze the evidence in support of the remaining elements of the economic reality test.

To satisfy the first element of the economic reality test, Orozco had to present evidence that Plackis possessed the power to hire and fire him. There was testimony that some employees at the Southwest location also worked at the San Marcos location. Sandra explained that she hired employees from the Southwest location because they would not need training. Furthermore, Plackis testified that he met with Sandra to advise her on how to improve the profitability of the San Marcos location. After that meeting, Sandra removed her dishwashers from her weekday schedule. However, Plackis testified that he merely gave Sandra non-binding advice and Sandra testified that she made the decision to adjust the schedule.

The MJ erred when it held that the jury could reasonably conclude that Plackis had the authority to hire or fire Orozco. The testimony that some employees worked at the Southwest location and the San Marcos location does not show that Plackis possessed the power to hire or fire Orozco.¹ Contrary to the MJ's conclusion otherwise, the jury could not reasonably infer “that Plackis hired employees for one Craig O's location and directed them to work at another.” There is no indication that Plackis ordered Sandra to hire those employees. Similarly, the mere fact that Sandra hired employees from the Southwest location does not prove that Plackis hired or fired employees. At most, this testimony merely explains why employees from other Craig O's locations were desirable candidates for the Southwest location. Indeed, this testimony supports Plackis's contention that this element is not met because it suggests that Sandra had an independent reason for hiring employees from the Southwest location. As for Plackis's meeting with Sandra, Plackis and Sandra testified that he merely provided her with advice on improving the profitability of the San Marcos location. This is conduct we would expect a franchisor to engage in with a franchisee, especially a struggling franchisee. At best, Orozco can point to the sequence between the meeting and the personnel changes implemented by Sandra. Even accepting that inference, there is legally insufficient evidence to establish the first element of the economic reality test.² Notably, Orozco testified that Sandra hired him and had the authority to fire him.³ As for Plackis, Orozco stated that he neither hired him nor possessed the power to fire him.

Moreover, during oral argument, Orozco's counsel admitted that there was no direct evidence supporting this prong. The jury was thus left to infer that Plackis had the authority to hire and fire employees. Such a conclusion was not warranted based on the testimony produced at trial. See Gray, 673 F.3d at 355–56 (holding that the first element was not established when the only evidence produced was that the defendant was a member of the board that ran the plaintiff's workplace and participated in a group decision to hire a general manager for the establishment).

Orozco also failed to...