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Alvarado v. Corporate Cleaning Service

June 21, 2010

RAMON ALVARADO, JAVIER ALVARADO, RICARDO ALVARADO, JAIME BANUELOS, ARTURO BANUELOS, RUBEN BANUELOS, IGNACIO JAVIAN, JOSE LARIOS, PEDRO CASTRO, ABEL CASTRO, TAURINO GUZMAN, HENRY MARTINEZ, LUCIO POLANCO, SERGIO POLANCO, JUAN POLANCO, FERNANDO CASTRO, HORACIO CASTRO, ERICK RAMIREZ, JOSE VALDEZ, ANTONIO GUZMAN, FRANCISCO GUZMAN, CARLOS BANUELOS, FELIPE BERUMEN AND JOSE GARCIA, PLAINTIFFS,
v.
CORPORATE CLEANING SERVICE, INC., AND NEAL ZUCKER, INDIVIDUALLY, DEFENDANTS.



The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge

Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiffs, twenty-four current and former employees of Defendant Corporate Cleaning Service, Inc. ("CCS"), a window washing business, have filed suit against CCS and its President and Chief Executive Officer, Neal Zucker, seeking overtime pay allegedly due to them under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and the Illinois Minimum Wage Law ("IMWL"), 820 ILCS 105/1 et seq. Defendants contend that Plaintiffs are exempt from the overtime provisions of both statutes because they are commissioned employees. Currently before the Court is Defendants'motion for summary judgment [60]. For the reasons stated below, Defendants' motion for summary judgment [60] is denied.

I. Background

The Court takes the relevant facts primarily from the parties'Local Rule ("L.R.") 56.1 statements*fn1 Defendants'Statement of Facts ("Def. SOF") [63], Plaintiffs'Response to Defendants' Statement of Facts ("Pl. Resp.") [97], Plaintiffs' Statement of Additional Facts ("Pl. SOF") [98], and Defendants'Response to Plaintiffs'Statement of Additional Facts ("Def. Resp.") [107].*fn2

A. The Nature of CCS's Business

Defendant CCS has provided professional interior and exterior window washing services to commercial and residential customers in the Chicago area since 1994. Def. SOF ¶ 6. CCS's customers include office and residential high rises, hotels, hospitals, schools and universities, cultural facilities, clubs, shopping centers, and stadiums. Def. SOF ¶ 7. Nearly 100% of CCS's revenues are payments for the window washing services that it provides. Def. SOF ¶ 11.

The majority -- perhaps even more than 75% -- of CCS' s gross sales are attributable to window washing performed on high rise buildings. Def. Resp. ¶ 1. Between 2004 and 2008, approximately 40% of CCS' s gross sales were made to commercial customers, consisting almost exclusively of commercial office buildings. Pl. SOF ¶ 3a. In 2006, at least 31.8% of CCS's total gross sales were made to high rise commercial buildings. Pl. SOF ¶ 4. In many cases, professional management companies were invoiced for those jobs. Pl. SOF ¶ 4. In no case were the individual building tenants invoiced.

Between 2004 and 2008, about 39% of CCS's gross sales were made to condominium and apartment buildings. Pl. SOF ¶ 3b. In 2006, at least 32.6% of CCS' s total gross sales were made to such residential buildings. Pl. SOF ¶ 5. In most cases, condominium associations or professional management companies were invoiced for those jobs; no individual unit owners or tenants were billed. Pl. SOF ¶ 5. Less that 1% of CCS's gross sales for the years 2004-2008 were made to individual homeowners. Pl. SOF ¶ 3h.

According to Plaintiffs'building management expert, Arthur C. West, tenants in commercial and residential high rises generally are not permitted to hire contractors like CCS to perform building maintenance. Pl. SOF ¶ 18. Rather, according to West, a property management firm or condominium association typically arranges for contractors to perform maintenance work, including window washing. Pl. SOF ¶¶ 10-11. The cost of such work is passed through to tenants or residents in the form of rent, property management fees, or assessments. Pl. SOF ¶¶ 13-14.

In 2006, CCS sold 54% of its window washing services to entities requiring window washing services on more than one building. Pl. SOF ¶ 7.

Before commencing work, CCS generally provides all new customers with a proposal stating the price of the job. Def. Resp. ¶ 16. In some instances, particularly in the case of government contracts, CCS engages in formal, competitive bidding to obtain business. Pl. SOF ¶ 17. Less than 10% of CCS's business is obtained through such formal bidding procedures. Def. Resp. ¶ 17.

B. CCS's Compensation System

CCS assigns each window washing job a number of "points" based on the complexity of the job and how much work CCS estimates is involved. Def. SOF ¶¶ 27-28. In general, the number of points assigned to a job bears a direct relationship to the number of windows washed. Pl. Resp. ¶ 28. CCS pays its window washers -- including Plaintiffs -- based on the number of points assigned to each job that they perform. Def. SOF ¶ 19. If one window washer completes a job, that window washer is allocated all of the points for that job. Def. SOF ¶ 33. Where multiple window washers are required to complete a job, the assigned points generally are allocated equally among the window washers. Def. SOF ¶¶ 34-36. To compute an individual window washer' s pay, CCS multiplies his allocated number of points by his union rate.*fn3 Def. SOF ¶ 37.

CCS's window washers are paid based on the number of points assigned to a job, regardless of the amount of time it takes to complete the job. Def. SOF ¶ 42. Therefore, a window washer may work only 5, 6, or 7 hours a day and receive credit for 8, 9, or 10 points. Def. SOF ¶ 41. Conversely, a window washer may work more hours in a day than the number of points for which he receives credit. Pl. Resp. ¶ 41. The more windows that an employee washes, the more points for which he will be paid. Pl. Resp. ¶ 28.

Plaintiffs do not receive a fixed percentage of the sales price for each job. Pl. SOF ¶ 20. Rather, the percentage of each sale that goes to compensate window washers varies. Pl. SOF ¶ 20. For example, two jobs may have the same sales price of $700, but be assigned different point values. Pl. SOF ¶ 21. As a result, the percentage of the sales price that goes to window washer compensation on each particular job fluctuates. According to CCS' s Vice President and Chief Operating Officer, Charles Adkins, CCS's plan is to allocate 48.5% of its net revenue per year to window washer compensation. Def. SOF ¶ 31; Def. Resp. ¶ 20. CCS's billing records indicate that, despite the fact that Plaintiffs do not receive a fixed percentage of the sales price on every job, on average, CCS pays its window washers close to its goal of 48.5% of net revenue per year. For example, in 2005, 45.95% of CCS's net revenue went to window washer compensation. Def. Resp. ¶ 20. That figure was 46.19% in 2006, 47.67% in 2007 and 49.48% in 2008. Def. Resp. ¶ 20.

Under the compensation system described above, Plaintiffs were paid between $32,318 and $50,998 in 2007. Def. SOF ¶ 51. Internal CCS documents refer to the compensation system as a "piece rate" plan. Pl. SOF ¶ 32. No agreement exists between the parties referring to the compensation system as a commission-based plan. Pl. SOF ¶ 31.

C. CCS's Billing Practices

Adkins testified that CCS' s customers generally are charged a fixed amount for each point assigned to a job, plus the cost of any permits, equipment rentals, and other incidental expenses associated with the particular job. Def. SOF ¶ 30; Def. Resp. ¶ 26.*fn4 CCS foreman Philip Kujawa similarly testified that CCS generally charges that fixed amount per point. Def. Resp. ¶ 27. According to Adkins, the fixed charge covers the cost of labor, overhead, and CCS's profit margin.

CCS's billing records demonstrate that customers are rarely charged the exact fixed amount per point. Pl. SOF ¶ 27. For example, in 2006, customers were charged exactly that amount per point only 6.99% of the time. Pl. SOF ¶ 28. The amount a customer is charged per point can vary widely, from as much as twice the fixed amount to as little as approximately one-fourth of the fixed amount. Pl. SOF ¶ 21.

Adkins testified that customers are not charged exactly the fixed rate per point on every job as a result of factors such as unpaid debts, competitive market pressures, customer relations, and human error. Def. Resp. ¶ 20. Despite these variations, on average, CCS generates an amount equal to approximately the fixed amount in net revenue per point. Def. Resp. ¶ 20. For example, in each of the years between 2005 and 2008, CCS' s total net revenue ...


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