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Hilda L. Solis, Secretary of Labor, U.S. Department of Labor v. International Detective & Protective

May 24, 2011

HILDA L. SOLIS, SECRETARY OF LABOR, U.S. DEPARTMENT OF LABOR, PLAINTIFF,
v.
INTERNATIONAL DETECTIVE & PROTECTIVE SERVICE, LTD., WILLIAM L. LILLARD, AND ARNETT LILLARD, DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Department of Labor ("Department") brought an action under the Fair Labor Standards Act ("FLSA") to recover unpaid overtime compensation and liquidated damages against Defendants International Detective & Protective Service, Ltd. ("IDPS"), William L. Lillard and Arnett Lillard (collectively "Defendants"). The Department also seeks an injunction preventing Defendants from violating the FLSA in the future. The Department moves for summary judgment on liability and damages, or, in the alternative, partial summary judgment only on the issue of liability. For the following reasons, the Court grants the Department's Motion for Summary Judgment and request for an injunction.

STATEMENT OF UNDISPUTED FACTS*fn1

Local Rule 56.1 provides that "[a]ll material facts set forth in the statement required of the moving party will be deemed admitted unless controverted by the statement of the opposing party." L.R. 56.1(b)(3)(C). As the moving party, the Department submitted material facts supported by citations to portions of the record and affidavits, as Rule 56.1(a) requires. Defendants, however, made no Rule 56.1 submissions either disputing the Department's 56.1 statements or presenting additional material facts of their own. Under Rule 56.1, the Court deems admitted all of the Department's uncontroverted facts. L.R. 56.1(b)(3)(C).

I. The Parties

IDPS is an Illinois corporation formerly known as International Detectives and Investigators ("IDI") that provides private security services. (DoL ¶¶ 3-5.) In 2007, 2008, and 2009 its annual volume of sales surpassed $500,000: $845, 258 in 2007; $1,025,000 in 2008; and $976,747 in 2009. (Id. ¶ 7.) IDPS has long-term relationships with many of its clients. (Id. ¶ 24.) For example, it has provided services to Limited Foods for twenty years, U.S. Equities for ten years, Walsh Construction for over five years, and Gas Plus for five years. (Id.)

William Lillard ("William") is the president and sole owner of IDPS. (Id. ¶ 8.) He is responsible for payroll, accounting, and invoicing. (Id.) He splits responsibility for maintaining the time records with his son, Arnett Lillard ("Arnett"). (Id.) William also decides pay raises, signs paychecks, and has control over all of IDPS's operations and corporate activities. (Id. ¶ 9.)

Arnett has been IDPS's chief operating officer for the last six years. (Id. ¶ 10.) He reports directly to his father, William. (Id.) He manages the security guards on a daily basis, and in this capacity oversees work assignments, scheduling, hiring, firing, supervision, and pay. (Id. ¶ 11.) He is known to the security guards as "Chief Lillard." (Id. ¶ 10.)

As listed in Exhibit A of the Department's Second Amended Complaint, the Department brings this action on behalf of 57 security guards ("Guards") who worked for IDPS in providing security for IDPS's clients. (Id. ¶ 12.) The Guards were responsible for preventing and detecting intrusion and vandalism and monitoring unauthorized activity at construction sites, malls, and retail outlets. (Id. ¶ 13.)

II. Employment Relationship

According to Defendants, the Guards were its independent contractors. While IDI, the predecessor company to IDPS, employed its own security guards, Defendants contend that when IDI changed its corporate name to IDPS it began treating the Guards as independent contractors. (Id. ¶¶ 15, 16.) Defendants argue that they facilitated this change by asking the Guards if they wanted to become independent contractors, which resulted in the clients, not IDPS, having control over the manner in which the Guards performed their security tasks. (Id. ¶¶ 17, 18.)

Upon employment, IDPS required the Guards to sign an employment contract titled "Independent Contractor Contract." (Id. ¶ 20.) The contract itself contained few material terms about the compensation amount, the time period of the contract, or the type of projects that the Guards would perform. (Id. ¶ 21.) Under the terms, it was an at-will employment relationship that either the Guards or IDPS could terminate at any time. (Id.)

A. Guidelines for Performing Work

IDPS set the procedures for the Guards to follow in performing their security assignments. (Id. ¶ 27.) For example, at the 95th and Stony worksite, the Guards received a five-page "Policies and Procedures" handout that Melvin Rone, the Commander of the worksite, and Arnett jointly enforced. (Id. ¶ 38.) All of the Guards received a March 3, 2008 memorandum that provided them considerable guidance in performing their jobs, such as: (1) who to notify first in the event of an emergency; (2) the order of patrols, that is, the order to check fire extinguishers, exit lightings, safety violations, and overnight parking; (3) what to include in their written reports; and (4) how to properly check their equipment. (Id. ¶ 29.) In addition, IDPS instructed the Guards not to personally investigate suspicious activity; instead, they were trained to call 911. (Id. ¶ 30.) If during a shift any incidents occurred, the Guards were required to fill out and submit to IDPS a report; these incident reports supplemented regular reports that the Guards had to provide to IDPS. (Id. ¶ 28.) Arnett regularly visited the worksites to verify that the Guards were complying with IDPS's rules. (Id. ¶ 39.)

IDPS also held meetings with the Guards to review its procedures. (Id. ¶ 28.) At the meetings IDPS reminded the Guards about the order of patrols and uniform code, and provided instruction on photographing accidents and checking equipment. (Id.)

There was an informal chain of command within IDPS, where Guards were able to rise within the ranks based on exemplary performance. (Id. ¶ 23.) IDPS offered title and distinctions to Guards to create incentives for them to remain with the company for the long-term. (Id.) For example, IDPS had officers (guards), sergeants, lieutenants, commanders, a captain, and a chief. (Id. ¶ 25.) In this way, IDPS was organized similar to a police organization. (Id.) All Guards, regardless of title, reported to Arnett, the "Chief," and had to contact Arnett when they reported to the worksites. (Id. ¶ 26.)

B. Equipment

The Guards used their own equipment as well as equipment supplied by IDPS. Specifically, for example, at the 95th and Stony Island worksite IDPS supplied the Guards with push-to-talk phones, cell phones, a camera, and a Chevy SUV with an IDPS logo on the driver's door. (Id. ¶ 34.) IDPS carried automobile insurance for Guards driving its vehicles and reimbursed them for gas expenses. (Id. 35.) Likewise, IDPS had liability insurance that covered the Guards for work done at the various worksites; Guards did not need to have their own liability insurance. (Id. ¶ 36.) IDPS required only that the Guards purchase their own uniform, firearm, bullets, and handcuffs. (Id. ¶¶ 47, 48.) For example, one Guard carried a Beretta pistol manufactured in Maryland and another carried a Taurus 65 handgun manufactured in Brazil. (Id. ¶ 33.) Also, each Guard had to wear an IDPS badge on his or her uniform. (Id.)

IDPS ensured that the Guards were properly licensed to work as security guards. IDPS did not require the Guards to have a private security contractor license and during the pay periods relevant to this lawsuit no Guard was licensed as a private security contractor. (Id. ¶ 53.) Rather, by registering with the Illinois Division of Professional Regulation and obtaining a permanent employee registration card, the Guards were licensed generally as private security guards. (Id. ¶ 54.)

On behalf of the Guards, IDPS applied for and obtained Firearm Authorization Cards, or "tan cards," which allowed the Guards to carry firearms. (Id. ¶ 55.) Illinois issued the tan cards only to IDPS and the Guards could not use them for other security-related employment. (Id. ¶ 57.) Only individuals and organizations with private security contractor licenses, such as IDPS, were able to obtain tan cards. (Id.) So only through IDPS were the Guards able to obtain the tan cards. (Id.)

As a private security contractor, IDPS had to maintain records for each Guard and certify that each Guard was fully updated on firearm training. (Id. ¶ 58.) Arnett was responsible for hiring the Guards and organizing the paperwork for the licenses, while William make sure that the Guards were current on their firearm training.

C. Compensation and Discipline

IDPS created the work schedules and assigned the Guards to certain worksites. (Id. ¶ 41.) The Guards had to complete weekly timesheets containing their daily and weekly hours, which were subject to Arnett's approval. (Id. ¶ 42.) The timesheets were turned in to the worksites and the Guards did not directly submit bills or invoices to IDPS. (Id. ¶ 44.) The Guards were paid every two weeks and their compensation was calculated simply by multiplying the hourly rate by the number of hours worked. (Id. ¶¶ 43, 45.) Accordingly, the Guards' skill or efficiency in completing the required duties was not linked to the amount they earned. (Id.)

If the Guards worked over 40 hours in a week, IDPS did not pay them a premium for the overtime hours. (Id. ¶ 46.) They were paid for these extra hours according to their normal hourly rate. (Id.)

Arnett closely oversaw payroll integrity. IDPS would not pay the Guards for a whole shift if Arnett believed that they were not on duty the entire time. (Id. ¶ 61.) For example, when Arnett visited a worksite on January 25, 2009 and the assigned guard had apparently abandoned his post, Arnett instructed payroll to only pay the guard for four hours of work, even though he had worked for 13 hours that day. (Id.) IDPS penalized this employee by taking six hours off his pay and subtracted an additional three hours for the time he was believed to be missing from the worksite. (Id.) Similarly, IDPS disciplined another employee by taking out of her pay the amount of the automobile insurance deductible for an accident that occurred while she was driving an IDPS vehicle. (Id. ¶ 62.)

The Guards were financially dependent upon IDPS for payment and were not in business for themselves. (Id. ¶¶ 49, 51.) In fact, accepting fees or compensation from other security agencies without IDPS's permission could have resulted in termination. (Id.) Nor could the Guards solicit outside workers to carry out their security assignments for IDPS. (Id. ¶ 50.) Finally, Guards were barred from seeking their own ...


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