Scalia v. Evolution Quality Guard, Inc.

• Decision Date: 27 March 2020
• Docket Number: CIVIL NO. 17-1210 (RAM)
• Parties: EUGENE SCALIA, Secretary of Labor, United States Department of Labor Plaintiff v. EVOLUTION QUALITY GUARD, INC., E.Q.G. PROTECTION AGENCY & ORDER CORP.; EXCELLENT QUALITY GUARD CORP.; EXCELLENT QUALITY GUARD SERVICES, INC.; ORLANDO MERCED MORALES, Individually; and JOEL VELAZQUEZ CRUZ, Individually, Defendants
• Court: U.S. District Court — District of Puerto Rico

EUGENE SCALIA, Secretary of Labor, United States Department of Labor Plaintiff v. EVOLUTION QUALITY GUARD, INC., E.Q.G. PROTECTION AGENCY & ORDER CORP.;EXCELLENT QUALITY GUARD CORP.; EXCELLENT QUALITY GUARD SERVICES, INC.;ORLANDO MERCED MORALES, Individually; and JOEL VELAZQUEZ CRUZ, Individually, Defendants

CIVIL NO. 17-1210 (RAM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

March 27, 2020

OPINION AND ORDER

RAÚL M. ARIAS-MARXUACH, United States District Judge.

This matter comes before the Court on the Secretary of Labor's unopposed Motion for Default Judgment (Docket No. 70). Based on the following findings of fact and conclusions of law, the Court GRANTS the Secretary of Labor's Motion.

I. BACKGROUND

On February 10, 2017, the U.S. Secretary of Labor (the "Secretary") brought the present action against Evolution Quality Guard, Inc.; E.Q.G. Protection Agency & Order. Corp., Excellent Quality Guard Corp.; Excellent Quality Guard Services, Inc.; (the "Corporate Defendants"); Orlando Merced-Morales, and Joel Velazquez-Cruz (collectively, the "Defendants"). (Docket No. 1). The Secretary amended his Complaint on April 25, 2017. (Docket No. 13). Defendants were engaged in the business of employing and providing private security guards to commercial and residential clients in the Commonwealth of Puerto Rico. Id. ¶¶ 4-14. On behalf of Defendants' employees, the Secretary seeks to recover unpaid back wages, liquidated damages, civil money penalties, and to enjoin acts and practices that violate the provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., ("FLSA"), and to obtain other appropriate relief. Id. at 11-12.

The case was transferred to the undersigned on June 13, 2019. (Docket No. 55). The proceedings were stayed as to co-defendant Evolution Quality Guard Services, Inc. from October 3, 2018 through July 30, 2019. (Docket Nos. 49 and 56). Upon the Secretary's motion, default was entered upon Evolution Quality Guard, Inc., E.Q.G. Protection Agency & Order. Corp., Excellent Quality Guard Corp., Excellent Quality Guard Services, Inc. for failing to inform the Court of their legal representation and defend their action on July 31, 2019 and as amended on September 19, 2019. (Docket Nos. 47, 56, 58 & 63). Default was also subsequently entered as a discovery sanction against Messrs. Merced-Morales and Velazquez-Cruz on November 6, 2019 (Docket Nos. 64, 68-69).

The Secretary moved for entry of default judgment on December 20, 2019. (Docket No. 70). Defendants did not oppose despite being served with the Secretary's Motion. (Docket Nos. 72-73).

II. FINDINGS OF FACT

To make findings of fact, the Court has taken as true the well-plead allegations of the First Amended Complaint and considered the declaration under penalty of perjury of Ms. Ivonne Reyes and the documents attached to both the Complaint and Ms. Reyes' declaration. (Dockets Nos. 1, 13 and 70-1 to 70-17). Having reviewed said allegations and documents, the Court enters the following findings of fact:¹

1. The Secretary of Labor brought this suit to restrain violations of the FLSA and recover back wages and liquidated damages. (Docket No. 13 ¶ 3).

2. Defendant Evolution Quality Guard Inc. ("Evolution Quality Guard") is a corporation organized under the laws of the Commonwealth of Puerto Rico, having its last known principal office and place of business at Calle Verona #1162, Urb. Villa Capri, San Juan, P.R. 00924, where it engaged in the business of providing security services. Id. ¶ 4.

3. Defendant E.Q.G. Protection Agency & Order Corp. ("E.Q.G. Protection Agency") is a corporation organized under the laws of the Commonwealth of Puerto Rico, having its last known principal office and place of business at Carr. 860,Km 0.6 Metropolis, Carolina P.R. 00983, within the jurisdiction of this Court, where it engaged in the business of providing security services. Id. ¶ 5.

4. Defendant Excellent Quality Guard Corp. ("Excellent Quality Guard Corp.") is a corporation duly organized under the laws of the Commonwealth of Puerto Rico, having its principal office and place of business at Carr 848 Km 1.4 Bo Saint Just, Trujillo Alto, P.R. 00976, within the jurisdiction of this Court, where it is engaged in the business of providing security services. Id. ¶ 6.

5. Defendant Excellent Quality Guard Services, Inc. ("Excellent Quality Guard Services") is a corporation duly organized under the laws of the Commonwealth of Puerto Rico, having its principal office and place of business at Plaza Iturregui, 1135 Ave 65 Infanteria, San Juan, P.R. 00924, where it is engaged in the business of providing security services. Id. ¶ 7.

6. Evolution Quality Guard, E.Q.G. Protection Agency, Excellent Quality Guard Corp., and Excellent Quality Guard Services (the "corporate defendants") have regulated the employment of all persons employed by them, acted directly and indirectly in the entities' interest in relation to the employees. Id. ¶ 8. 7. Defendant Orlando Merced-Morales ("Merced-Morales") was in active control and management of all the corporate defendants. Defendant Merced-Morales regulated the employment of all persons employed by him. He had the authority to hire, fire, and supervise employees, control their hours worked, determine employee compensation, and otherwise act directly and indirectly in the interest of all the corporate defendants in relation to the employees during the relevant time. Id. ¶ 9.

8. Defendant Joel Velazquez-Cruz ("Velazquez-Cruz") is the president of E.Q.G. Protection Agency. Id. ¶ 12.

9. Defendant Velazquez-Cruz was in active control and management of E.Q.G. Protection Agency and Excellent Quality Guard Corp. Defendant Velazquez-Cruz regulated the employment of all persons employed by him. He had the authority to hire, fire, and supervise employees, control their hours worked, determine employee compensation, and otherwise act directly and indirectly in the interest of E.Q.G. Protection and Excellent Quality Guard Corp. in relation to the employees during the relevant time.

10.Co-defendants Merced-Morales and Velazquez-Cruz were residents of the Commonwealth of Puerto Rico at the time of the Complaint. Id. ¶¶ 10 and 14. 11.Defendants' employees are identified in Exhibit A to the Complaint. Id. at 14-23.

12.The corporate defendants were engaged in the business of providing security services doing business with the same initials "E.Q.G." and interchangeably as Evolution Quality Guard, E.Q.G. Protection Agency, Excellent Quality Guard Corp., and Excellent Quality Guard Services, Inc. For example, E.Q.G. Protection Agency has deposited checks made payable to Evolution Quality Guard in E.Q.G. Protection Agency's bank account, and vice versa. Id. ¶ 16.

13.The corporate defendants also shared or had overlapping clientele and employees. Whether doing business as Evolution Quality Guard, E.Q.G. Protection Agency, Excellent Quality Guard Corp., or Excellent Quality Guard Services, defendants assigned their employees to provide security at Cupey Professional Mall, Urbanización Los Arboles, and 650 Plaza, among other locations. Id. ¶ 17.

14.The corporate defendants were managed by the same individuals, including defendants Merced-Morales and Velazquez-Cruz and a manager of human resources, Michelle Velez. Milikza Santiago-Huertas, who is identified as defendant Excellent Quality Guard Services, Inc.'s president on its corporate documents, was also involved in the operations of Evolution Quality Guard, including developing and managing client relationships. Id. ¶ 18.

15.The enterprise (and each corporate defendant) had an annual gross volume of sales made or business done in an amount not less than $500,000.00 for the period covered by the First Amended Complaint. Id. ¶ 19.

16.The enterprise had employees handling and using goods or materials that have been moved in or produced for commerce, such as radios, weapons, uniforms, or vehicles. Id. ¶ 20.

17.From November of 2013 through the filing of the Complaint, Defendants employed armed and unarmed security guards to provide security to commercial and residential entities in the Commonwealth of Puerto Rico. Id. ¶ 22.

18.At all relevant times, Defendants required their employees employed as security guards to wear uniforms. Id. ¶ 23.

19.At all relevant times, Defendants prohibited their employees from working for other security guard companies or similar competitor entities. Id. ¶ 24.

20.At all relevant times, Defendants entered into contracts with their clients to provide guard services and to supply the necessary security guards at specific client locations. Id. ¶ 25.

21.At all relevant times, defendants assigned their employees to provide these services at specific client locations. Id. ¶ 26.

22.Defendants set their employees' work schedules and required them to sign-in and sign-out on daily attendance records. Id. ¶ 27.

23.Defendants set their employees' rate of pay. Id. at 28.

24.Defendants typically paid their employees a regular rate of pay of $7.25 per hour. Id. ¶ 29.

25.Defendants' employees employed as security guards have no opportunity for profit or loss. Id. ¶ 30.

26.Despite the U.S. Department of Labor's Wage and Hour Division ("Wage and Hour Division") having previously found that Evolution Quality Guard violated the FLSA from April 2012 to April 2013, Defendants continued to misclassify their security guard employees as "professional services," or independent contractors, and not as employees. Id. ¶ 31.

27.Defendants' employees employed as security guards were an integral part of their business and without them, Defendants would not be able to provide security guard services. Id. ¶ 32.

28.Between November 2013 and the present, Defendants' employees typically worked in excess of 40 hours, ranging from approximately 42 to 84 hours in a workweek. They typically worked 8-hour or 12-hour shifts, four to seven days per week. Id. ¶ 33.

29.For the workweeks that exceeded 40 hours, defendants failed to pay their

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