Schmidt v. Directv, LLC
| Decision Date | 22 January 2016 |
| Docket Number | CIV. NO. 14-3000 (JRT/JSM) |
| Parties | GEORGE SCHMIDT, JR., et. al., Plaintiffs, v. DIRECTV, LLC, et. al., Defendants. |
| Court | U.S. District Court — District of Minnesota |
The above matter came before the undersigned on Defendant DIRECTV, LLC's Motion to Dismiss Plaintiffs' Second Amended Complaint [Docket No. 101]; Defendant DirectSat USA, LLC's Motion to Dismiss Plaintiffs' Second Amended Complaint [Docket No. 102]1 and Plaintiffs' Conditional Motion for Time Within Which to Seek Leave to Amend Should Court Grant Defendants' Motions to Dismiss Plaintiffs' Second Amended Complaint [Docket No. 112]. Ryan D. O'Dell, Esq. appeared on plaintiffs' behalf. Colin D. Dougherty, Esq. and David W. Asp, Esq. appeared on defendants' behalf.
This matter has been referred to the undersigned Magistrate Judge for a Report and Recommendation by the District Court pursuant to 28 U.S.C. §636(b)(1)(A), (B), and Local Rule 72.1(c). [Docket No. 125].
This is a suit by fourteen Minnesota satellite television installation technicians, who claim they were employed by DIRECTV, and where applicable, by DirectSat, and consequently, are entitled to the overtime and minimum wage protections of the Fair Labor Standards Act ("FLSA") and damages under Minnesota law governing the construction industry.2 Defendants disagree and have moved to dismiss plaintiffs' Second Amended Complaint ("SAC") [Docket No. 99] in its entirety.
Plaintiffs install and repair DIRECTV satellite television service. SAC, ¶ 24. Plaintiffs alleged that defendants were their employers and to avoid the FLSA, engaged in a "fissured employment" scheme by treating them as independent contractors or employees of subordinate entities not named in the instant suit. SAC, ¶¶ 1, 44. A "fissured employment" scheme arises when an entity attempts to shield its role as a direct employer, while at the same time retaining tight control over the method, manner, quantity and quality of production of its "non-employees." Id., p. 2, n.1.
DIRECTV controls and manages its nationwide corps of service technicians by directly employing them as W-2 employees, and through an employment network of service providers ("Provider Network") consisting of Home Service Providers ("HSPs"), including DirectSat, and Secondary Service Providers ("Secondary Providers"),subcontractors, and service technicians. Id., ¶ 25. DIRECTV was the primary, if not the only, client of the HSPs and Secondary Providers (referred collectively in the SAC as "Providers") and was the source of substantially all of each Provider's income. Id., ¶ 27. The Provider Network is organized and operated as a top-down structure, with DIRECTV at the top, controlling employment through contracts with the HSPs and Secondary Providers. Id., ¶ 29. The HSPs and Secondary Providers, in turn, enter into contracts with a patchwork of entities DIRECTV refers to as subcontractors, and the subcontractors enter into contracts with the technicians who install the satellite television equipment, although at times, the HSPs or Secondary Providers contract directly with the technicians. Id.
DirectSat performed similar, middle-management functions between DIRECTV and those plaintiffs who have asserted claims against DirectSat. Id., ¶ 30. DirectSat passed along the scheduling from DIRECTV and supervised the technicians. Id. DIRECTV established the hiring criteria and how the work was to be performed for the employees and contractors of DirectSat, and DirectSat implemented, monitored and enforced those qualifications and requirements. Id.
DirectSat maintained a contractor file for each ostensible 1099 subcontractor or "independent contractor," which was the equivalent of a personnel file on each technician, and these files were regulated and audited by DIRECTV. Id., ¶ 31. DirectSat had the power to enter into and terminate the contracts of the 1099 technicians who worked for it, and therefore, had the power to fire and hire those technicians. Id., ¶ 32. DirectSat maintained warehouses and other facilities where thetechnicians had to go to pick up DIRECTV's equipment and to receive training required by DIRECTV. Id., ¶ 33.
Regardless of how they were employed, either directly or as part of the Provider Network, each DIRECTV technician was required to install equipment pursuant to DIRECTV's policies, procedures, practices, and performance standards, all of which were described and mandated through the Provider Agreements, Secondary Provider Agreements, and Services Provider Agreements. Id., ¶¶ 34-36. The Provider Agreements enabled DIRECTV to control nearly every facet of the technicians' work, down to the DIRECTV shirts they wore and the DIRECTV identification card they were required to show customers. Id., ¶ 37. Installation methods and procedures were mandated by DIRECTV to assure that its equipment was installed consistent with its policies and procedures. Id., ¶ 38.
DIRECTV assigned the technicians a scope of work described in a work order delivered to the technician through a centralized computer software system controlled by DIRECTV, and their daily work schedule was assigned through DIRECTV's dispatching system. Id., ¶¶ 38, 39.
Throughout the work day, the technicians went to the jobs assigned to them on the daily work schedule and were required to check in by telephone with DIRECTV through its dispatching system upon arrival; at the end of the job they were required to report to DIRECTV that the installation was complete. Id., ¶ 41. Through DIRECTV's assignment of work schedules to plaintiffs, DIRECTV could effectively terminate any technician by ceasing to issue any work to those technicians. Id., ¶ 58.
Through its Provider Network, DIRECTV controlled the piece-rate compensation method by which plaintiffs were paid, and exercised significant control over what work plaintiffs performed, as well as where, when and how the work was done. Id., ¶¶ 49, 50. Through the Providers, DIRECTV determined whether plaintiffs' work merited compensation at all and through the Provider Network, DIRECTV administered its piece-rate compensation scheme, including issuing checks to plaintiffs. Id., ¶ 51.
DIRECTV required plaintiffs to purchase and wear a uniform with DIRECTV insignia on it, and display DIRECTV insignia on vehicles driven to customers' homes for installation. Id., ¶ 42. DIRECTV required plaintiffs to hold themselves out as agents of DIRECTV; controlled installation instructions and required plaintiffs to follow those instructions; published training materials that technicians such as plaintiffs were required to review; required technicians to pass pre-screening and background checks and obtain certification before DIRECTV would assign work orders. Id., ¶¶ 52-55. DIRECTV used these requirements to control who was hired to install its systems. Id., ¶ 56. DIRECTV used a network of quality control personnel and field managers to oversee plaintiffs' work. Id., ¶ 57.
Plaintiffs alleged through the Provider Network, DIRECTV imposed its policies and practices uniformly, which created an economic reality driven by its control over plaintiffs and their work, sufficient to establish that DIRECTV, and where applicable, DirectSat, were plaintiffs' employers and subject to liability under the FLSA and Minnesota law. Id., ¶ 64.
Every plaintiff was paid pursuant to a piece-rate payment scheme used throughout DIRECTV's network. Id., ¶ 66. The FLSA allows employers to pay on a piece-rate basis, provided it pays for all hours worked, including non-productive hours, and pays a premium for hours worked over forty hours in a week, based on the employer's regular rate. Id. (citing 29 U.S.C. § 207(a)(g); 29 C.F.R. § 778.318(a)). Where there is no agreement between the employer and employee that the piece-rate pay includes productive and non-productive hours, the FLSA is not satisfied. Id. (citing 29 U.S.C. ¶ 207(g); 29 C.F.R. § 207(g)). There was no agreement between the plaintiffs and defendants regarding their pay system, under which they were not paid for all of the hours they worked. Id., ¶¶ 69, 70.
DIRECTV's piece-rate system did not pay technicians for necessary work they performed. Id., ¶ 71. Plaintiffs performed many integral and indispensable tasks for which they were not paid, including assembling satellite dishes, driving to and between job assignments, reviewing and receiving schedules, calling customers to confirm installations, obtaining required supplies, helping other technicians with installations, performing required customer education, contacting DIRECTV to report or activate service, working on incomplete installations, and working on "rollback" installations where plaintiffs had to return and perform additional work on already-completed installations. Id., ¶¶ 72, 73. Although plaintiffs worked more than forty hours a week, they were not properly compensated for overtime work because these non-compensable tasks were not included in their regular pay calculations. Id., ¶ 74.
Plaintiffs were also subject to "chargebacks" by DIRECTV and DirectSat, where DIRECTV and DirectSat deducted amounts from plaintiffs' pay if there were issues with an installation or questions from a customer, generally up to 90 days after a customer's service was activated. Id., ¶ 75. The chargebacks would occur for many reasons outside plaintiffs' control, such as faulty equipment, customer calls regarding how to operate their remote or a customer's failure to give a greater than 95% satisfaction rating for the technician's services. Id. Plaintiffs were also required to purchase supplies and pay for their own gas. Id., ¶ 76.
Plaintiffs alleged that "in virtually every workweek, [they] worked more than 40 hours per week for DIRECTV;" they "were not paid the overtime premium required by applicable law for...
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