Wake Forest Law Review

By Katie Baiocchi

On January 25, 2017, the Fourth Circuit published Marlon Hall v. DIRECTV, LLC, a civil case. Plaintiffs Marlon Hall, John Wood, Alix Pierre, Kashi Walker and John Albrecht (“Plaintiffs”) appealed the order granting defendants’ DIRECTV, LLC, DIRECTSAT USA, LLC and DIRECTV, INC. (“Defendants”) motion to dismiss under Federal Rules of Civil Procedure 12(b)(6). Plaintiffs alleged that defendants were joint employers and therefore are jointly and severally liable for any violations under the Fair Labor Standards Act (“FLSA”). The Fourth Circuit found the district court relied on out-of-circuit authority that has been rejected in the Fourth Circuit in analyzing the relationship between the parties. The district court also failed to construe plaintiffs’ allegations liberally as required by a motion to dismiss. Accordingly the Fourth Circuit reversed and remanded the case.

Facts and Procedural History

Defendant DIRECTV employs technicians through the DIRECTV “Provider Network.” Each plaintiff alleged that between 2007 to 2014 they worked as a technician for defendant, an intermediary provider, a subcontractor, or a combination of all three. Defendant DIRECTSAT enforced the hiring criteria of DIRECTV for technicians. DIRECTV also provided a centralized work-assignment system, and regulated and audited personnel files. Plaintiffs were required to wear DIRECTV uniforms, carry DIRECTV identification cards, and display the DIRECTV logo on their vehicles. Technicians who did not meet DIRECTV hiring criteria could not install or repair DIRECTV equipment. Plaintiffs claim that they each regularly worked in excess of forty hours per week without receiving overtime pay while working as technicians. Plaintiffs specifically allege that the defendants qualify as joint employers and their failure to provide overtime pay violated FLSA overtime and minimum wage requirements. Defendants each moved to dismiss plaintiffs’ complaint pursuant to F.R.C.P. 12(b)(6). The district court granted this motion in its entirety because they concluded that the Complaint did not allege facts sufficient to establish that defendant DIRECTV jointly employed plaintiffs.

The Fourth Circuit reviewed the district court’s dismissal de novo and accepted as true all the factual allegations contained in the complaint and drew all reasonable inference in favor of plaintiffs.

The District Court Applied an Improper Legal Test for Determining Joint Employment Under the FLSA

Under the FLSA, 29 C.F.R. § 791.2(a), “joint employment” exists when “employment by one employer is not completely disassociated from employment by the other employer(s).” Courts are split on the appropriate test for distinguishing separate employment from joint employment in relation to the FLSA. The district court’s analysis was flawed because it concluded that a worker must be an employee as to each putative joint employer when considered separately for the entities to constitute joint employment under the FLSA. Additionally, the district court relied on the test no longer employed by the Fourth Circuit in determining joint employment of the plaintiffs.

Under the Fourth Circuit two-step framework for determining whether a defendant may be liable for an alleged FLSA violation under the joint employment theory the court must first determine whether the defendant and one or more entities shared, agreed to allocate responsibility for, or otherwise co-determined the key terms and conditions of plaintiffs’ work. The second step relies heavily upon the answer to the first part of the analysis and asks whether a worker was an employee or independent contractor under FLSA. The district court erred in considering the second step before the first.

The Fourth Circuit determined that under the first part of the two-part framework that the allegations sufficiently demonstrate defendants were not completely disassociated. The district court erred by failing to follow the new standard employed by the Fourth Circuit to determine joint employment. The Fourth Circuit has held that the fundamental question is whether the entities are “not completely disassociated” with respect to the worker. The Fourth Circuit identified a non-exhaustive list of six factors to assist lower courts in determining if joint employment exists. The court emphasized that no single factor is determinative.

The Fourth Circuit also found that under the second part of the two-part framework the plaintiffs were employees rather than independent contractors. In focusing on the economic realities of the relationship between the defendants and plaintiffs the Fourth Circuit found that the plaintiffs were economically dependent on the defendants.

The District Court Misapplied the Plausibility Standard by Subjecting Plaintiffs to Evidentiary Burdens Inapplicable at the Pleading Stage

Plaintiffs’ factual allegations establish that defendants jointly determined the key terms of plaintiffs’ conditions of employment. Per the complaint defendant DIRECTV was the principal client of the other defendants. Defendant DIRECTV had the authority to direct, control and supervise the plaintiff’s day-to-day job duties. Defendant DIRECTV had specific installation procedures implemented and controlled the uniforms and identification of technicians. The complaint is also replete with allegations that DIRECTV had control over hiring, firing and compensation. The Fourth Circuit found that at this stage of litigation the allegations are sufficient to make a plausible claim that defendants were not completely disassociated.

Conclusion

The Fourth Circuit reversed and remanded the consolidated cases for further proceedings consistent with the opinion because the district court relied on out-of-circuit authority that had been rejected in the Fourth Circuit. Furthermore, the Fourth Circuit found the district court failed to construe plaintiffs’ allegations liberally as a motion to dismiss requires.

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By Kayleigh Butterfield

On July 29, 2015, the Fourth Circuit issued its published opinion in the civil case, Jahir v. Ryman Hospitality Properties, Inc. In Jahir, the Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ FLSA claim seeking lost tips from Ryman Hospitality Properties, Inc. and Marriott International, Inc. (collectively, Defendants).

Alleged Facts and District Court’s Dismissal

Plaintiffs Mohammad Sazzad Jahir and Anthony Gomes worked as servers for hotels and restaurants owned by Defendants. Plaintiffs were also members of the UNITE HERE, Local 25 union.

According to the facts alleged in Plaintiffs’ complaint, Defendants took a portion of Plaintiffs’ tips every day and redistributed them to bartenders, server assistants, busboys, and food runners, all of whom would not normally receive tips. Plaintiffs did not voluntarily agree to such a tip-pooling arrangement, and eventually asked a union official if the arrangement was legal. The official told Plaintiffs that it was not.

Plaintiffs then filed a complaint alleging that Defendants’ tip-pooling arrangement violated the Fair Labor Standards Act (FLSA), 29 U.S.C. § 203(m), the 2009 Collective Bargaining Agreement between UNITE HERE and Defendants, and the Maryland Wage Payment and Collection Law. The district court granted the Defendants’ Rule 12(b)(6) motion to dismiss each claim. Plaintiffs appealed only the dismissal of the FLSA claim, which the Fourth Circuit reviews de novo.

Background of the FLSA

The FLSA is known as the “minimum wage/maximum hour law.” It is intended to protect covered employees from low wages and oppressive working hours. Section 203(m) addresses “tip credits,” and allows employers to credit against the minimum wage they must pay employees by classifying tips as “wages.”

Section 203(m) Does Not Apply to Plaintiffs’ Claim

The Fourth Circuit examined the plain language of § 203 and determined that it does not apply to the Plaintiffs’ situation. Plaintiffs conceded that they were paid a full minimum wage without including tips. However, they argued that § 203(m) required Defendants to inform them of FLSA’s tip-credit provision and the tip-pooling arrangement before redistributing the tips. The Fourth Circuit rejected Plaintiffs’ argument by reading the plain language of § 203(m) in the broader context of the FLSA as a whole, which clearly aims to establish fair minimum and overtime wage laws. The Fourth Circuit concluded that § 203(m) did not apply where employees are paid a full minimum wage without tip.

Dismissal Affirmed

For the foregoing reasons, the Fourth Circuit affirmed the district court’s dismissal of Plaintiffs’ claims. Judge Harris concurred, stating that plaintiffs have no cause of private action under any FLSA section except § 216(b), which is not what Plaintiffs’ brought this action under.