CASE NO. 13-16364 UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JUAN PABLO ORQUIZA and MAXIMINO BUENAVENTURA, et al., Plaintiffs/Appellants,

v.

MICHAEL BELLO, et al., Defendant/Appellee

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA Case No. 2:11-cv-1374-JCM-CWH

BRIEF OF AMICUS CURIAE SOUTHERN NEVADA LABOR MANAGEMENT COOPERATION

COMMITTEE, WORKSAFE, INC., ASIAN AMERICANS ADVANCING JUSTICE—ASIAN LAW CAUCUS, LA RAZA CENTRO LEGAL, LEGAL

AID SOCIETY—EMPLOYMENT LAW CENTER, NATIONAL EMPLOYMENT LAW PROJECT, AND NATIONAL LAWYERS’ GUILD

LABOR AND EMPLOYMENT COMMITTEE In Support of Reversal

Catherine K. Ruckelshaus Eunice Hyunhye Cho Tsedeye Gebreselassie National Employment Law Project National Employment Law Project 405 14th St. Suite 401 75 Maiden Ln., Suite 601 Oakland, CA 94612 New York, NY 10038 (510) 663-5707 (202) 285-3025 echo@nelp.org cruckelshaus@nelp.org

Attorneys for Amici Curiae

 

  

Appeal No.: 13-16364 JUAN PABLO ORQUIZA, et al. v. MICHAEL BELLO, et al.

Motion for Leave to File Brief in Support of Plaintiffs-Appellants

Proposed Amici, Southern Nevada Labor Management Cooperation Committee, Worksafe, Inc., Asian Americans Advancing Justice—Asian Law Caucus, La Raza Centro Legal, Legal Aid Society—Employment Law Center, National Employment Law Project, and National Lawyers’ Guild Labor and Employment Committee, with this motion, respectfully move for leave to file a brief in support of the Plaintiffs-Appellants under Federal Rules of Appellate Procedure 29. A true and correct copy of the proposed brief is attached to this motion.

Identity and Interest of Amici Amici are organizations dedicated to ensuring that the Fair Labor Standards Act (“FLSA”) is enforced consistently with its broad remedial nature so that workers are paid fairly and fully for all work performed. Amici Southern Nevada Labor Management Cooperation Committee, Worksafe, Inc., Asian Americans Advancing Justice—Asian Law Caucus, La Raza Centro Legal, Legal Aid Society—Employment Law Center, National Employment Law Project, and National Lawyers’ Guild Labor and Employment Committee have members residing in Ninth Circuit states who would be adversely impacted by a ruling against the Plaintiffs-Appellants. Amici submit this brief not to repeat the arguments made by the parties, but to bring the Court’s attention to our unique perspectives of low-wage workers’ experiences and the costs inherent in those abuses, and to shed light on the public policies embodied in the FLSA. Amici urge the Ninth Circuit Court of Appeals to reverse the district court’s decision granting the defendants’ motion for summary judgment. An Amicus Brief is Desirable and the Matters Asserted Are Relevant to the Disposition of the Case. As long-time employer associations and membership groups and advocates on behalf of low-wage workers in the Ninth Circuit and workers throughout the United States, amici are in a position to provide an analysis of the importance of enforcement of the FLSA, in particular against all responsible parties when one or

 

  

more parties is insolvent, its impact on unfair competition, and the public policies embodied in the statute.

Amici write to shed light on the intended breadth of the FLSA, historical understanding of the definition of “employer,” and the test used to determine the existence of an employer’s liability. Amici propose strong public policy reasons that support a broad application of the FLSA to ensure that employers do not abuse work arrangements for their own gain.

For the foregoing reasons, amici respectfully request that this Court grant their motion to file the attached brief amicus curiae. Dated: October 18, 2013

By: /S/ Catherine K. Ruckelshaus

Catherine K. Ruckelshaus Tsedeye Gebreselassie

National Employment Law Project 75 Maiden Lane, Suite 601

New York, NY 10038 (212) 285-3025 x 306

Eunice Hyunhye Cho National Employment Law Project 405 14th St. Suite 401 Oakland, CA 94612 (510) 663-5707

Attorneys for Amici Curiae

 

 

Appeal No.: 13-16364-ccv JUAN PABLO ORQUIZA, et al. v. MICHAEL BELLO, et al.

Pursuant to Federal Rule of Appellate Procedure 29(c)(5), amici state that no party’s counsel authored the brief in whole or in part; no party’s counsel contributed money that was intended to fund preparing or submitting the brief; and no person other than amici curiae or their counsel contributed money that was intended to fund preparing or submitting the brief. Dated: October 18, 2013 Respectfully Submitted,

By: /S/ Catherine K. Ruckelshaus

Catherine K. Ruckelshaus Tsedeye Gebreselassie National Employment Law Project

75 Maiden Lane, Suite 601 New York, NY 10038 (212) 285-3025 x 306

Eunice Hyunhye Cho National Employment Law Project 405 14th St. Suite 401 Oakland, CA 94612 (510) 663-5707

Attorneys for Amici Curiae

 

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TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................... i 

TABLE OF AUTHORITIES .................................................................................... ii 

INTEREST OF THE AMICI CURIAE ..................................................................... 1 

SUMMARY OF ARGUMENT ................................................................................. 5 

ARGUMENT ............................................................................................................. 8 

I. A Broad Reading of “Employer” Under 29 U.S.C. 203(d) Is Necessary and Fair Given Persistent Barriers to Recovery of Unpaid Wages for Low-Income Workers. .................................................................................................................. 8 

A. Rampant Workplace Violations Persist in the Construction Industry. ........... 8 

B. Low-Wage Workers Face Numerous Challenges in Collecting Unpaid Wages from Employers; Allowing Defendants Such as Bello to Evade Individual Liability Ensures Continued Non-Payment. .................................... 10 

II. Individual Liability Under 29 U.S.C. 203(d) Is Expansive, Consistent with the Broad Remedial Purpose of the Fair Labor Standards Act (“FLSA”). ................ 13 

III. Michael Bello, Sole Owner and Manager of Walldesign, Inc., Is Properly an “Employer” and Is Individually Liable for the Laborers’ Unpaid Wages............ 15 

A. Bello Maintained Economic and Operational Control over Walldesign and Controlled the Nature and Structure of the Employment Relationship with the Laborers. ............................................................................................................ 17 

B. In Its Mechanical Application of Factors, the District Court Failed to Consider the Economic Realities of the Laborers’ Employment. ..................... 19 

CONCLUSION ........................................................................................................ 21 

CERTIFICATE OF COMPLIANCE ....................................................................... 23 

CERTIFICATE OF SERVICE ................................................................................ 24 

 

 

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TABLE OF AUTHORITIES

Cases

A.H. Phillips v. Walling, 324 U.S. 490 (1945) ........................................................ 13 Ansoumana v. Gristede’s Operating Corp., 255 F. Supp. 2d 184 (S.D.N.Y. 2003)

............................................................................................................................... 20 Barrentine v. Arkansas Best Freight System, Inc., 450 U.S. 728 (1981). ............... 13 Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d 668 (1st Cir. 1998). ..................... 20 Bonnette v. California Health and Welfare Agency, 704 F.2d 1465 (9th Cir. 1983)

.......................................................................................................................... 6, 15 Boucher v. Shaw, 572 F.3d 1087 (9th Cir. 2009) ................................. 16, 17, 18, 19 Chao v. Hotel Oasis, Inc., 493 F.3d 26 (1st Cir. 2007); .......................................... 16 Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962 (6th Cir. 1991) .................. 17, 18 Dole v. Solid Waste Servs., Inc., 773 F. Supp. 895 (E.D. Pa. 1989) ....................... 18 Gilbreath v. Cutter Biological, Inc., 931 F.2d 1320 (9th Cir. 1991) ............ 6, 16, 20 Gray v. Powers, 673 F.3d 352 (5th Cir. 2012) ................................................... 6, 16 Irizarry v. Catsimatidis, 722 F.3d 99 (2d Cir. 2013) ............................ 11, 12, 16, 20 Lambert v. Ackerley, 180 F.3d 997 (9th Cir. 1999) ...................................... 7, 16, 17 Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318 (1992). ................................ 14 Roland Elec. Co. v. Walling, 326 U.S. 657 (1946) .................................................. 14 Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947) ...................................... 14 Smith v. Cheesecake Factory Rests., No. 3:06-00829, 2010 WL 441562 (M.D.

Tenn. Feb. 4, 2010) ............................................................................................... 18 U.S. Dep’t of Labor v. Cole Enterprises, Inc., 62 F.3d 775 (6th Cir. 1995). ... 16, 18 United States v. Ron Pair Enters., Inc., 489 U.S. 235 (1989) ................................. 15 United States v. Rosenwasser, 323 U.S. 360 (1945) ............................................... 14 Walling v. Portland Terminal Co., 330 U.S. 148 (1947) ......................................... 15

Statutes

Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. ................................................. 1 29 U.S.C. § 202(a) .............................................................................................. 6, 13 29 U.S.C. § 202(b ....................................................................................................... 8 29 U.S.C. § 203(d). ............................................................................................. 6, 15 29 U.S.C. § 203(g) ................................................................................................... 14

 

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Other Authorities

Annette Bernhardt, et al., BROKEN LAWS, UNPROTECTED WORKERS: VIOLATIONS OF

EMPLOYMENT AND LABOR LAWS IN AMERICA’S CITIES (2009) .............................. 9 Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook

Handbook, Janitors and Building Cleaners (2013) ................................................. 8 Francois Carre & J.W. McCormack, Const. Policy Research Ctr., THE SOCIAL AND

ECONOMIC COST OF EMPLOYEE MISCLASSIFICATION IN CONSTRUCTION (2004) .... 9 Eunice Cho, Tia Koonse, and Anthony Mischel, HOLLOW VICTORIES: THE CRISIS

IN COLLECTING UNPAID WAGES FOR CALIFORNIA’S WORKERS (2013) ................. 12 Bruce Goldstein, et al., Enforcing Fair Labor Standards in the Modern American

Sweatshop: Rediscovering the Statutory Definition of Employment, 46 UCLA L. REV. 983 (1999) .................................................................................................... 11

Hearing on Fair Labor Standards Act Before the Subcomm. On Workforce Protections of the H. Comm on Education and the Workforce, 111th Cong. (2011) (statement of Nancy J. Leppink, Deputy Wage and Hour Administrator, Department of Labor). .......................................................................................... 10

Marc Lifsher, Many Low-Wage Workers Who Won Judgments Were Never Paid, LOS ANGELES TIMES, June 27, 2013, .................................................................... 12

Oregon Center for Public Policy, FACT SHEET: EMPLOYERS PAY ONLY A FRACTION

OF MONETARY FINDINGS IN WAGE THEFT CASES (2013) ...................................... 12 U.S. Gov’t Accountability Office, WAGE AND HOUR DIVISION’S COMPLAINT

INTAKE AND INVESTIGATIVE PROCESSES LEAVE LOW WAGE WORKERS

VULNERABLE TO WAGE THEFT 18 (2009). ............................................................ 10 David Weil & Amanda Pyles, Why Complain? Complaints, Compliance, and the

Problem of Enforcement in the U.S. Workplace, 27 COMP. LAB. L. & POL’Y J. 59 (2005) .................................................................................................................... 10

Noah Zatz, Working Beyond the Reach or Grasp of Employment Law, in THE

GLOVES OFF ECONOMY: WORKPLACE STANDARDS AT THE BOTTOM OF AMERICA’S

LABOR MARKET 31 (Annette Bernhardt ed., 2009). ............................................. 11

 

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INTEREST OF THE AMICI CURIAE  

Amici are organizations dedicated to ensuring that the Fair Labor Standards

Act, 29 U.S.C. §§ 201, et seq. (“FLSA”) is interpreted and enforced consistent with

its broad remedial nature so that workers are paid fairly and fully for all work

performed. Amici have members residing in the Ninth Circuit who would be

adversely impacted by a ruling against the Plaintiffs-Appellees. Amici submit this

brief not to repeat the arguments made by the parties, but to shed light on the

historical and statutory underpinnings of the FLSA, including the definition of

“employer” under Section 203(d) and the public policies embodied in the Act, and

to bring the Court’s attention to our unique perspectives of low-wage workers’

experiences in enforcing their wage and hour rights. We urge the Court to consider

the large numbers of workers whose right to recover their unlawfully withheld

wages would be undermined under the Appellant’s misinterpretation of the FLSA.

The Southern Nevada Labor Management Cooperation Committee

(“LMCC”) is a non-profit organization that was created in response to the concerns

of construction contractors and labor unions with the unlawful disregard for the

laws governing public works. The Southern Nevada LMCC monitors compliance

with prevailing wage, labor and public contract bidding laws to establish a level

playing field for contractors competing for public works contracts, guarantee

 

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workers are properly compensated and facilitate quality construction for public

agencies.

Worksafe, Inc. is a California-based non-profit organization dedicated to

promoting occupational safety and health through education, training, and

advocacy. Worksafe advocates for protective worker health and safety laws and

effective remedies for injured workers through the legislature and courts. Because

employers’ compliance with health and safety laws often mirror their compliance

with other labor standards, Worksafe considers it vitally important that the millions

of low-wage and immigrant workers who often toil long hours in harsh and

hazardous work environments in California have the ability to hold individuals

liable to vindicate their rights under the FLSA.

Asian Americans Advancing Justice - Asian Law Caucus (ALC) was

founded in 1972 with a mission to promote, advance, and represent the legal and

civil rights of Asian and Pacific Islanders, with a particular focus on low-income

members of those communities. Advancing Justice - ALC is part of a national

affiliation of Asian American civil rights groups, with offices in Los Angeles,

Chicago, and Washington DC. Advancing Justice - ALC has a long history of

protecting low-wage immigrant workers through direct legal services, impact

litigation, community education, and policy work.

 

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Founded in 1973, La Raza Centro Legal (“La Raza”) provides free legal

services to the Latino immigrant community throughout the Bay Area of

California. La Raza’s Worker’s Rights Unit represents hundreds of low-wage

workers each year with wage and hour claims before the California Labor

Commission as well as in state and federal court. The majority of La Raza’s clients

work in the restaurant, retail, day labor, domestic worker, construction, and

janitorial industries where violations of the FLSA are commonplace.

The Legal Aid Society - Employment Law Center (“ELC”) is a non-profit

public interest law firm whose mission is to protect and advance the workplace

rights of individuals from traditionally under-represented communities. Since

1970, ELC has represented plaintiffs in cases involving workplace rights,

particularly those cases of special import to communities of color, women, recent

immigrants, individuals with disabilities, the LGBT community, and the working

poor. ELC represents low-wage workers in wage and hour class and collective

actions. ELC enforces the FLSA on behalf of wage theft victims across California

and the issues presented in this case are of particular importance. In our

experience, holding individual owners liable is in line with the purpose of the

FLSA and often determines whether a low-wage worker will be able to recover on

their claims for inadequate compensation.

 

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The National Employment Law Project (“NELP”) is a non-profit legal

organization with nearly 45 years of experience advocating for the employment

and labor rights of low-wage and unemployed workers. NELP seeks to ensure that

all employees, and especially the most vulnerable ones, receive the full protection

of labor standards laws, and that employers are not rewarded for skirting those

basic rights. NELP’s area of expertise includes the workplace rights of contingent

workers under state and federal employment and labor laws, with an emphasis on

wage and hour rights. NELP has litigated directly and participated as amicus in

numerous cases and has provided Congressional testimony addressing the issue of

employment and independent contractors under the Fair Labor Standards Act. In

NELP’s experience, an expansive reading of the term “employer” in the FLSA,

consistent with that statute’s broad and unique definitional language and remedial

purpose, is crucial to ensuring that low-wage workers in particular can fully

recover their unpaid wages.

The National Lawyers’ Guild was founded in 1937 as the first integrated

national organization of lawyers in the United States. Based on the premise that

the law should elevate human rights over property interests, the Guild currently

consists of approximately 6,000 lawyers, legal workers and law students.

Individually and on specific shared projects, members work nationally and

internationally on a wide range of legal concerns, especially those impacting

 

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people who are socially and politically marginalized and disenfranchised. Labor

and employment issues have been a central focus of the Guild's mission during its

seventy-year history. The Guild's Labor and Employment Committee has a long

record of action on behalf of low wage and immigrant workers in particular, both

as amicus and through strategic coordination, scholarship and advocacy. The

members of the Labor and Employment Committee also provide direct

representation to individual and organized workers in a variety of local, state,

federal and international forums.

SUMMARY OF ARGUMENT

In this case, thirty-nine laborers seek unpaid and overtime wages under the

Fair Labor Standards Act (“FLSA” or “Act”). These laborers hung sheetrock and

painted walls in new housing developments for Walldesign, a construction

contractor, but received less than the minimum wage for their long hours of work.

After the laborers filed suit for their unpaid wages, Walldesign, the corporate

entity, declared bankruptcy. The laborers now seek their unpaid wages from

Michael Bello (“Bello”), the founder, sole owner, and former president and

manager of Walldesign. However, Bello argues that he is not an employer and not

individually liable for the laborers’ wages under Section 203(d) of the FLSA.

 

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Congress enacted the FLSA in 1938 to eliminate substandard labor

conditions and to prevent such conditions from being used as an “unfair method of

competition” against reputable employers. 29 U.S.C. § 202(a). Congress thus

expansively defined “employer” in Section 203(d) to include liability of

individuals and entities in a position to ensure compliance with the Act. Under this

framework, “any person acting directly or indirectly in the interest of an employer

in relation to an employee” is considered an employer jointly and severally liable

for violations of the Act. 29 U.S.C. § 203(d). As this Circuit has noted, “the

definition of ‘employer’ under the FLSA is not limited by the common law concept

of ‘employer,’ but is to be given an expansive definition in order to effectuate the

FLSA’s broad remedial purposes.” Bonnette v. California Health and Welfare

Agency, 704 F.2d 1465, 1469 (9th Cir. 1983). Determining whether a party is an

employer under Section 203(d), moreover, “does not depend on ‘isolated factors

but rather upon the circumstances of the whole activity.’” Gilbreath v. Cutter

Biological, Inc., 931 F.2d 1320, 1324 (9th Cir. 1991) (quoting Rutherford Food

Corp. v. McComb, 331 U.S. 722, 730 (1947).

In granting summary judgment, the district court erroneously concluded that

Bello was not an employer of the Walldesign laborers. Relying on out-of-circuit

precedent, Gray v. Powers, 673 F.3d 352, 355-56 (5th Cir. 2012), and without

allowing the workers to complete discovery, the district court baldly dismissed

 

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evidence that Bello “exercise[d] ‘control over the nature and structure of the

employment relationship’ or ‘economic control’ of the relationship,” that would

establish that “the individual is an employer within the meaning of the Act, and is

subject to liability.” Lambert v. Ackerley, 180 F.3d 997, 1012 (9th Cir. 1999).

Instead, the district court engaged in a mechanical reading of factors without

regard to the economic realities of Bello’s relationship to Walldesign and the work

being performed, and did not permit the laborers to develop facts to show that

Bello is an employer under the broad definitions in the FLSA.

Holding individuals like Mr. Bello liable for violations of the FLSA leads to

a fair outcome, allowing low-wage workers to recover their unpaid wages,

particularly when a corporate employer has declared bankruptcy after the filing of

unpaid wage claims. Indeed, individual liability achieves one of FLSA’s chief

purposes: to deter violations in the first instance. Individual liability facilitates the

remedial purposes of the Act where a corporate employer, for reasons that may

include deliberate attempts to avoid paying wage claims, is unable to satisfy a

judgment. Individual liability thus provides an important alternative through which

workers can recover the unpaid wages due to them where corporate defendants file

for bankruptcy, claim insolvency, hide their assets, shut down operations, or

reorganize as a “new” entity. Given the high rates of FLSA violations in low-wage

industries like construction, and the significant barriers to enforcement and

 

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recovery for low-wage workers, it is of critical importance that aggrieved

employees have the ability to recover the wages owed from individuals like Bello.

For these reasons, amici urge this Court to reverse the district court’s decision, and

remand to allow the laborers to prove that Mr. Bello is their employer under the

FLSA.

ARGUMENT

I. A Broad Reading of “Employer” Under 29 U.S.C. 203(d) Is Necessary and Fair Given Persistent Barriers to Recovery of Unpaid Wages for Low-Income Workers.

A. Rampant Workplace Violations Persist in the Construction Industry.

Although Congress declared over 75 years ago that the purpose of the FLSA

was to “correct and as rapidly as practicable [] eliminate” detrimental labor

conditions, 29 U.S.C. § 202(b), workplace violations persist across low-wage

industries, including construction.

Construction laborers typically must seek lengthy hours because of low

industry wages. In 2010, the median wages for painters, plasterers, and stucco

mason helpers was $23,290 per year.1 The construction industry, moreover, is

marked by significant rates of non-compliance with minimum wage, overtime

                                                            1 Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Construction Laborers and Helpers (2013), available at http://www.bls.gov/ooh/construction-and-extraction/construction-laborers-and-helpers.htm#tab-3.

 

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laws, and other basic labor standards protections. A recent academic survey of

low-wage workers found that at least 12.7 percent of residential construction

workers had not received minimum wage payments, and that 70.5 percent had not

received overtime pay. Over half had not received required meal breaks.2

Misclassification by employers who call their employees “independent

contractors” is also rampant in construction, touching as many as 30 percent of all

construction jobs. This misclassification compounds labor standards violations,

preventing workers from recovering unpaid wages or pursuing health and safety

claims available only to “employees.”3

Construction laborers and helpers are particularly vulnerable to dangerous

working conditions, high workplace injury rates, and low pay. As the U.S.

Department of Labor has noted, “[c]onstruction laborers have one of the highest

rates of on-the-job injuries and illnesses compared to the national average.

Workers may experience cuts from materials and tools, falls from ladders and

scaffolding, and burns from chemicals or equipment.”4

Significant barriers to enforcement and to recovery of these unpaid wages

persist. Workers’ fear of retaliation for speaking up about workplace violations

                                                            2 Annette Bernhardt, et al., BROKEN LAWS, UNPROTECTED WORKERS: VIOLATIONS OF

EMPLOYMENT AND LABOR LAWS IN AMERICA’S CITIES, 31, 34, 37 (2009), available at http://www.unprotectedworkers.org/index.php/broken_laws/index. 3 See Francois Carre & J.W. McCormack, Const. Policy Research Ctr., THE SOCIAL AND

ECONOMIC COST OF EMPLOYEE MISCLASSIFICATION IN CONSTRUCTION 1 (2004). 4 Bureau of Labor Statistics, supra note 1.

 

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hampers enforcement.5 This fear is well-founded: a 2009 report that surveyed

nearly 4,500 low-wage workers nationwide found that 43 percent of workers who

had raised complaints about workplace standards violations faced retaliation,

including firing, suspension, or threats of cuts in their hours or pay.6

Public enforcement has failed to stem this tide of violations, largely due to

lack of resources. The U.S. Department of Labor, responsible for enforcing the

FLSA, employs just over 1,000 investigators nationwide to enforce these laws in

more than 7 million workplaces, and on behalf of 130 million workers.7

Government audits from the last decade have found that the Department of Labor

frequently responded inadequately to worker complaints—particularly troubling

because FLSA’s enforcement scheme relies on workers to come forward to report

violations.8

B. Low-Wage Workers Face Numerous Challenges in Collecting Unpaid Wages from Employers; Allowing Defendants Such as Bello to Evade Individual Liability Ensures Continued Non-Payment.

                                                            5 David Weil & Amanda Pyles, Why Complain? Complaints, Compliance, and the Problem of Enforcement in the U.S. Workplace, 27 COMP. LAB. L. & POL’Y J. 59, 83 (2005) (“despite explicit retaliation protections under various labor laws, being fired is widely perceived to be a consequence of exercising certain workplace rights.”). 6 Bernhardt, supra note 3, at 3. 7 Hearing on Fair Labor Standards Act Before the Subcomm. On Workforce Protections of the H. Comm. on Education and the Workforce, 111th Cong. (2011) (statement of Nancy J. Leppink, Deputy Wage and Hour Administrator, Department of Labor). 8 U.S. Gov’t Accountability Office, WAGE AND HOUR DIVISION’S COMPLAINT INTAKE AND

INVESTIGATIVE PROCESSES LEAVE LOW WAGE WORKERS VULNERABLE TO WAGE THEFT 18 (2009).

 

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Given the widespread nature of these workplace violations, individual liability

creates an important deterrent effect by holding personally liable those who have

the power to stop violations from taking place in the first instance. As the Second

Circuit has noted, the FLSA “provides an empty guarantee absent a financial

incentive for individuals with control, even in the form of delegated authority, to

comply with the law, and courts have continually emphasized the extraordinarily

generous interpretation that the statute is to be given.” Irizarry v. Catsimatidis, 722

F.3d 99, 110 (2d Cir. 2013). In cases where corporate defendants file for

bankruptcy, claim insolvency, hide their assets, shut down operations and

reorganize as a “new” entity, individual liability provides an important alternative

through which low-wage workers can recover their unpaid wages.

The ability to recover fully from individual defendants is vital to low-wage

workers. However, low-wage workers who have suffered workplace violations

face serious challenges in recovering their wages, even in cases where authorities

have found in the workers’ favor and have issued a binding judgment. Many of

these workers work for fly-by-night businesses and other undercapitalized firms

where recovery against firms is difficult, if not impossible.9 As a recent academic

study of wage claims filed in California found, only 17 percent of workers who                                                             9 Bruce Goldstein, et al., Enforcing Fair Labor Standards in the Modern American Sweatshop: Rediscovering the Statutory Definition of Employment, 46 UCLA L. REV. 983, 993-1002 (1999); Noah Zatz, Working Beyond the Reach or Grasp of Employment Law, in THE GLOVES OFF

ECONOMY: WORKPLACE STANDARDS AT THE BOTTOM OF AMERICA’S LABOR MARKET 31 (Annette Bernhardt ed., 2009).

 

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prevailed in their wage claim cases and received a judgment recovered any

payment at all from their employers. This same study found that employers had

forfeited, cancelled, or dissolved their business statuses in 60 percent of cases

where judgments were issued against business entities in wage claim cases.10 A

similar study of wage claims in Oregon found virtually the same result: employers

failed to pay any assessed judgment due in more than two-thirds of all monetary

findings against employers by the Oregon Bureau of Labor and Industries. Of the

total amount of money found due for unpaid wages by the Oregon Bureau of Labor

and Industries, 69 percent went unpaid by employers.11

These stark statistics indicate that that workers who overcome the fear of

retaliation to assert their right to be paid, who file a wage claim or lawsuit, who

wait as the legal or administrative process plays out, and who finally receive a

winning judgment, may still be unable, in the end, to recover their unpaid wages.

Such a result undermines the core purposes of the Act. Indeed, “the purpose of the

FLSA is not to punish an employer but to remunerate aggrieved employees.”

Irizarry, 722 F.3d at 116. Holding individual employers jointly and severally liable

                                                            10 Eunice Cho, Tia Koonse, and Anthony Mischel, HOLLOW VICTORIES: THE CRISIS IN

COLLECTING UNPAID WAGES FOR CALIFORNIA’S WORKERS (2013), available at http://nelp.3cdn.net/b5cea6550994c2358d_15m6id1ha.pdf; see also Marc Lifsher, Many Low-Wage Workers Who Won Judgments Were Never Paid, LOS ANGELES TIMES, June 27, 2013, available at http://articles.latimes.com/2013/jun/27/business/la-fi-wage-theft-report-20130627. 11 Oregon Center for Public Policy, FACT SHEET: EMPLOYERS PAY ONLY A FRACTION OF

MONETARY FINDINGS IN WAGE THEFT CASES (2013), available at http://www.ocpp.org/2013/04/05/fs20130405-employers-pay-fraction-wage-theft/.

 

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ensures that workers can recover their unpaid wages from any who are found to

have violated the FLSA, and leaves it to those violating employers—not the

aggrieved workers—to work out amongst themselves who will ultimately bear the

cost of the non-payment.

II. Individual Liability Under 29 U.S.C. 203(d) Is Expansive, Consistent with the Broad Remedial Purpose of the Fair Labor Standards Act (“FLSA”).

In 1938, Congress enacted the Fair Labor Standards Act (“FLSA”) to eliminate

“labor standards detrimental to the maintenance of the minimum standard of living

necessary for health, efficiency, and general well-being of workers,” and to prevent

these substandard labor conditions from being used as an “unfair method of

competition” against reputable employers. 29 U.S.C. § 202(a). The FLSA was

meant to ensure “[a] fair day’s pay for a fair day’s work,” A.H. Phillips v. Walling,

324 U.S. 490, 493 (1945), and to protect workers “from the evil of ‘overwork’ as

well as ‘underpay.’” Barrentine v. Arkansas Best Freight System, Inc., 450 U.S.

728, 739 (1981).

As the Supreme Court noted soon after the Act’s passage, its expansive

coverage was key to accomplishing these purposes:

“Th[e] [Act’s] purpose will fail of realization unless the Act has sufficiently broad coverage to eliminate in large measure from interstate commerce the competitive advantage accruing from savings in cost based upon substandard

 

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labor conditions. Otherwise the Act will be ineffective, and will penalize those who practice fair labor standards as against those who do not.”

Roland Elec. Co. v. Walling, 326 U.S. 657, 669-70 (1946) (abrogated on other

grounds).

To achieve these goals, Congress adopted strikingly broad terms in the Act

to go beyond traditional common-law agency principles, and to expansively reach

those accountable for upholding required minimum labor standards. By defining

“employ” as including “to suffer or permit to work,” Congress deliberately sought

to broaden the scope of responsibility beyond the common law test for employer

liability to parties “who might not qualify as such under a strict application of

traditional agency law principles.” Nationwide Mutual Ins. Co. v. Darden, 503

U.S. 318, 326 (1992). Instead, Congress drew from well-established state child

labor laws that held liable businesses using middlemen that illegally hired and

supervised children for violations of these statutes, even where traditional agency

control factors were not present between the businesses and the children. 29 U.S.C.

§ 203(g); see Rutherford Food Corp. v. McComb, 331 U.S. 722, 728 n.7 (1947)

(detailing use of term in state child labor laws).

Similarly, the term “employee” under the Act “ha[s] been given ‘the

broadest definition that has ever been included in any one act.’” United States v.

Rosenwasser, 323 U.S. 360, 363 n.3 (1945) (quoting the FLSA’s principal sponsor,

 

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Senator Hugo Black, 81 Cong. Rec. 7657 (1937)). As the Supreme Court

recognized, in enacting these expansive terms, Congress sought to make business

owners responsible for workers who could more easily be disclaimed under

common law. Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947) (“This

Act contains its own definitions, comprehensive to require its application to many

persons and working relationships which, prior to this Act, were not deemed to fall

within an employer-employee category.”).

The FLSA’s definition of “employer” is similarly far-reaching, and includes

“any person acting directly or indirectly in the interest of an employer.” 29 U.S.C.

§ 203(d). As this Circuit has noted, “the definition of ‘employer’ under the FLSA

is not limited by the common law concept of ‘employer,’ but ‘is to be given an

expansive definition in order to effectuate the FLSA’s broad remedial purposes.”

Bonnette, 704 F.2d 1465, 1469 (citing Real v. Driscoll Strawberry Assocs., 603

F.2d 748, 754 (9th Cir. 1979).

III. Michael Bello, Sole Owner and Manager of Walldesign, Inc., Is Properly an “Employer” and Is Individually Liable for the Laborers’ Unpaid Wages.

When determining whether an individual is an employer under Section

203(d), courts must first look to the statutory language. See United States v. Ron

Pair Enters., Inc., 489 U.S. 235, 241 (1989). Section 203(d) provides that “any

person acting directly or indirectly in the interest of an employer in relation to an

 

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employee” is individually, jointly and severally liable for violations of the Act. 29

U.S.C. § 203(d). “Where an individual exercises ‘control over the nature and

structure of the employment relationship,’ or ‘economic control’ over the

relationship, the individual is an employer within the meaning of the Act, and is

subject to liability.” Lambert v. Ackerley, 180 F.3d 997, 1012 (9th Cir. 1999)

(citing Bonnette, 704 F.2d at 1470). The court may consider several other factors

when determining an individual’s liability as an employer, including an

individual’s “significant ownership interest with operational control of significant

aspects of the corporation’s day-to-day functions; the power to hire and fire

employees; the power to determine salaries; and the responsibility to maintain

employment records.” Boucher v. Shaw, 572 F.3d 1087, 1091 (9th Cir. 2009)

(citing Lambert, 180 F.3d at 1091) (brackets omitted).12

In light of the remedial nature of the FLSA, courts should refrain from the

mechanical application of factors to exclude potential employers from liability.

“The determination of whether an employer-employee relation exists does not

depend on ‘isolated factors but rather upon the circumstances of the whole

activity.” Gilbreath, 931 F.2d 1324 (citing Bonnette, 704 F.2d at 1470). Indeed,

“these particular factors are merely guidelines; ‘they are not etched in stone and                                                             12 Circuit courts throughout the country apply similar rules. See, e.g. Irizarry v. Catsimatidis, 722 F.3d 99, 105 (2d Cir. 2013); Gray v. Powers, 673 F.3d 352, 355 (5th Cir. 2012); Chao v. Hotel Oasis, Inc., 493 F.3d 26, 34 (1st Cir. 2007); U.S. Dep’t of Labor v. Cole Enters., Inc., 62 F.3d 775, 778-79 (6th Cir. 1995) (concluding that corporate officers with operational control over a company are an “employer” under the FLSA).

 

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will not be blindly applied.’” Id. (citing Rutherford Food, 331 U.S. at 730). The

“touchstone” of the test is the “‘economic reality’ of the relationship.” Boucher,

572 F. 3d at 1091 (citing Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33

(1961)).

A. Bello Maintained Economic and Operational Control over Walldesign and Controlled the Nature and Structure of the Employment Relationship with the Laborers.

As this Court has established, “where an individual exercises ‘control over

the nature and structure of the employment relationship,’ or ‘economic control’

over the relationship, the individual is an employer within the meaning of the Act,

and is subject to liability.” Lambert, 180 F.3d at 1012. Here, the Walldesign

laborers have clearly shown Bello’s individual liability under Section 203(d).

In considering whether an individual has “economic control,” or “control

over the nature and structure over the employment relationship,” courts often look

to whether an individual had “operational control of significant aspects of the

corporation’s day-to-day functions.” Boucher, 572 F.3d at 1091 (citing Dole v.

Elliott Travel & Tours, Inc., 942 F.2d 962, 966 (6th Cir. 1991). An individual can

still be found to be an employer even if others “handled many of the day-to-day

problems associated with the operation of a corporation.” Elliott Travel, 942 F.2d

 

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at 966. “It is not required that a party have exclusive control of a corporation’s

day-to-day functions” to be found an employer. Id.

While not dispositive, courts also examine the extent of the individual’s

ownership interest in the business entity when determining an individual’s

economic control over the employment relationship. A substantial ownership

interest in a corporate entity provides a strong indicator of economic control. In

Boucher, the court noted that defendants collectively held a 100 percent ownership

interest in the corporation while finding individual liability. Boucher, 572 F.3d at

1091. This approach is broadly consistent with cases finding individual liability

where a defendant had “a significant ownership interest” in the corporate entity.

U.S. Dep’t of Labor v. Cole Enterprises, Inc., 62 F.3d 775 (6th Cir. 1995) (finding

sufficient a 50 percent ownership stake). See also Dole v. Solid Waste Servs., Inc.,

773 F. Supp. 895, 900-01 (E.D. Pa. 1989) (finding three corporate officers jointly

and severally liable as employers where they collectively owned and controlled the

corporation); compare with Smith v. Cheesecake Factory Rests., No. 3:06-00829,

2010 WL 441562, at *13 (M.D. Tenn. Feb. 4, 2010) (concluding that a 4.8 percent

ownership interest was not sufficient to show economic control).

Here, the Walldesign laborers have demonstrated beyond question Bello’s

control over the nature and structure of their employment relationship, and his

significant economic control. Bello was the founder, sole owner, President,

 

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Secretary, Treasurer, and Director of Walldesign. He wielded all control over the

company. He has declared his responsibility for overseeing the day-to-day business

operations and financial performance of the company. He worked full-time at

Walldesign, where he maintained responsibility for managing the company’s cash

flow. He considered himself the “boss” of the company and the one who “steered

the ship.” He described his daily responsibilities as including management of his

staff. He negotiated collective bargaining agreements with Walldesign workers.

Such evidence clearly establishes Bello’s central role in determining the laborers’

employment relationship, and his individual liability.

B. In Its Mechanical Application of Factors, the District Court Failed to Consider the Economic Realities of the Laborers’ Employment.

In light of Section 203(d)’s strikingly broad definition of “employer” and the

FLSA’s remedial intent, courts have repeatedly counseled against a mechanical

analysis of the employment relation. In its grant of summary judgment, however,

the district court did just that, instead of considering the “‘economic reality’ of the

relationship.” Boucher, 572 F. 3d at 1091.

In its grant of summary judgment, the district court heavily credited that

Bello had not directly hired or fired the specific laborers in this lawsuit himself—

but that Walldesign foremen, crew supervisors, and superintendents had instead

 

20  

performed these tasks. However, the district court clearly missed the point. The

laborers need only show that Bello had the power to hire and fire—not that he

actually performed the tasks himself. Ansoumana v. Gristede’s Operating Corp.,

255 F. Supp. 2d 184, 192-93 (S.D.N.Y. 2003) (“The Court emphasized that the

overarching concern is whether the alleged employer possessed the power to

control the workers in question . . . . it did not matter that the putative employer did

not directly hire workers, but only managerial staff”); Irizarry, 722 F.3d at 114

(finding individual liability where defendant “possessed, but rarely exercises, the

power to hire or fire anyone he chooses.”). Likewise, the district court concluded

that Bello made no individual or specific rate or payment determinations, and

highlighted that lower- or mid-level managers explained pay rates. However, the

court ignored that Bello ultimately determined bid estimates and labor outlays on a

cents-per-square formula that resulted in a piece-rate of pay well below the

minimum wage. Indeed, the economic reality analysis requires the court to focus

on “the role played by the corporate officers in causing the corporation to

undercompensate employees.” Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d

668, 678 (1st Cir. 1998).

As this Court has concluded, “the determination of whether an employer-

employee relation exists does not depend on ‘isolated factors but rather upon the

circumstances of the whole activity.’” Gilbreath, 931 F.2d 1324. As the sole

 

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owner, founder, and director of Walldesign, Bello maintained clear power and

control over all aspects of the business. He possessed 100 percent of the interest in

Walldesign. He implemented and oversaw policies that directly affected the

working conditions and payment of the laborers. Given the weight of this evidence,

the laborers should at least have the opportunity to prove Bello’s status as an

employer liable for their unpaid wages.

CONCLUSION

For the foregoing reasons, this Court should reverse the district court’s grant

of summary judgment, and remand for further discovery and trial to allow the

aggrieved workers the opportunity to demonstrate Mr. Bello’s individual liability

as an employer.

Dated: October 18, 2013

Respectfully submitted,

By: /S/ Catherine K. Ruckelshaus

Attorneys for Amici Curiae Catherine K. Ruckelshaus

Tsedeye Gebreselassie National Employment Law Project

75 Maiden Lane, Suite 601 New York, NY 10038 (212) 285-3025 x 306

 

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Eunice Hyunhye Cho

National Employment Law Project 405 14th St. Suite 401 Oakland, CA 94612 (510) 663-5707

 

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CERTIFICATE OF COMPLIANCE

Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(B), I hereby

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This brief complies with the typeface requirements of Federal Rule of

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Respectfully submitted,

By: /S/ Catherine K. Ruckelshaus Catherine K. Ruckelshaus

National Employment Law Project 75 Maiden Lane, Suite 601

New York, NY 10038 (212) 285-3025 x 306

Dated: October 18, 2013

 

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CERTIFICATE OF SERVICE

I hereby certify that on October 18, 2013, I electronically filed the foregoing

Amicus Brief with the Clerk of the Court of the U.S. Court of Appeals for the Ninth

Circuit by using the Appellate CM/ECF system. All participants are registered

CM/ECF users, and will be served by the Appellate CM/ECF system.

 

By: /S/ Catherine K. Ruckelshaus Catherine K. Ruckelshaus

National Employment Law Project 75 Maiden Lane, Suite 601

New York, NY 10038 (212) 285-3025 x 306 cruckelshaus@nelp.org