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Tomeo v. W&E Communications, Inc.

United States District Court, N.D. Illinois, Eastern Division

September 30, 2016

EDUARDO TOMEO, JERARDO CHAGOYA, JORGE A. RODRIGUEZ, and TAKEO OSHIMA, on behalf of themselves and all other similarly situated persons, Plaintiffs,



         Eduardo Tomeo, Jerardo Chagoya, Jorge Rodriguez, and Takeo Oshima brought this collective action against W&E Communications, Inc. and Jorge Chirinos, alleging that W&E's payroll policies and practices violate the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. Doc. 30. Plaintiffs further allege, only on behalf of themselves, violations of the Illinois Minimum Wage Law (“IMWL”), 820 ILCS 105/1 et seq., and the Illinois Wage Payment and Collection Act (“IWPCA”), 820 ILCS 115/1 et seq. Earlier in the case, the court conditionally certified the FLSA collective and authorized notice to employees who were similarly situated to Plaintiffs. Docs. 55-56. Defendants later filed a motion to decertify the collective, Doc. 99, which the court denied without prejudice in an oral ruling, Doc. 184.

         Now before the court are Plaintiffs' summary judgment motion, Doc. 96; Plaintiffs' motion to strike Defendants' declarations, Doc. 120; and Defendants' motion to strike Plaintiffs' Local Rule 56.1 objections and for leave to amend their Local Rule 56.1 materials, Doc. 132. Plaintiffs' motion to strike is denied, Defendants' motion to strike and for leave to amend is denied as moot, and Plaintiffs' summary judgment motion is granted in part and denied in part.


         A. Factual Background

         The following facts are set forth as favorably to Defendants, the non-movants, as the record and Local Rule 56.1 permit. See Hanners v. Trent, 674 F.3d 683, 691 (7th Cir. 2012). On summary judgment, the court must assume the truth of those facts, but does not vouch for them. See Arroyo v. Volvo Grp. N. Am., 805 F.3d 278, 281 (7th Cir. 2015).

         1.W&E's Timekeeping and Compensation Practices

         Plaintiffs worked as service technicians for W&E at various points between 2010 and 2014. Doc. 109 at ¶ 1. Tomeo's, Rodriguez's, and Oshima's jobs entailed installing and servicing cable television, phone, and Internet connections at commercial and residential locations in Illinois. Id. at ¶¶ 1, 3, 7. Chagoya did only residential installations. Id. at ¶¶ 1, 7.

         At all relevant times, Jorge Chirinos (“Jorge”) was W&E's Secretary. Id. at ¶ 4. He had the authority to: (1) hire and fire employees; (2) direct and supervise their work; (3) handle W&E's payroll accounts; and (4) make other decisions concerning employee compensation. Ibid. He was the person designated to receive notice under W&E's contracts, and he initialed and signed all contracts as “President” of W&E. Id. at ¶ 14. At times, Jorge acted as W&E's Operations Director and was in charge of its finances. Id. at ¶ 4.

         The parties dispute the typical working hours for W&E technicians. Plaintiffs assert that they were required to arrive at work between 6:30 a.m. and 7:15 a.m. in order to attend meetings, receive trainings, or pick up equipment. Doc. 98 at ¶ 8. They further assert that, after leaving their last on-site jobs at the end of the work day, they often had to return to the W&E warehouse to drop off equipment. Id. at ¶ 10. Defendants deny some of these assertions, saying that W&E employees were required to arrive by 6:30 a.m. only on certain days and that they were allowed to return equipment the following morning. Doc. 109 at ¶¶ 8, 10 (citing Doc. 109-2 at ¶ 17). They do not dispute, however, that on some days Plaintiffs had to visit the warehouse to start the day to pick up and/or drop off equipment. Ibid. Insofar as the parties' versions of the facts conflict, the court accepts Defendants' version.

         Plaintiffs assert that their busy schedules typically prevented them from taking an uninterrupted lunch hour. Doc. 98 at ¶ 9. Defendants dispute this, pointing to evidence that W&E had a policy requiring technicians to take lunch if they worked over six hours and that no technician ever complained about being unable to do so. Doc. 109 at ¶ 9 (citing Doc. 109-5 at ¶¶ 10-11). Technically, the parties' dueling narratives are consistent-W&E could have had a mandatory lunch policy but, as a practical matter, employees could rarely have had time to break from work. But on summary judgment, all reasonable inferences must be drawn in the non-movant's favor, and it is reasonable to infer that if W&E required employees to take lunch hours and nobody complained about their not being able to do so, their work schedules allowed it.

         W&E required technicians to record their hours accurately, and failure to do so was grounds for termination. Id. at ¶ 12. During Plaintiffs' tenure, W&E tracked employees' hours several different ways. Technicians were always required to sign in on paper at the warehouse. Id. at ¶ 15; Doc. 109-2 at ¶ 11. From May 2013 to December 2013, they also were required to clock in using a fingerprint machine. Doc. 109 at ¶ 16; Doc. 109-2 at ¶ 13. In December 2013, W&E implemented PenguinData's mobile sign-in process, through which Plaintiffs could electronically clock in and out of work using their mobile devices. Doc. 109 at ¶ 17. W&E utilized a separate system called TechNet for technicians to log in and out when they started and finished an on-site assignment. Id. at ¶¶ 18-20.

         Before December 2013, W&E paid Plaintiffs only for time spent in training and the time they logged while on-site at customer job locations, as tracked in TechNet. Id. at ¶ 30; Doc. 98-6 at 284-285. (The parties dispute whether training time was compensated, Doc. 109 at ¶ 30, but Defendants' position that it was finds support in the record and thus is credited, Doc. 98-6 at 284-85.) Plaintiffs were not compensated for the time spent at the warehouse picking up and returning equipment. Doc. 98-5 at 234-235; Doc. 109 at ¶¶ 8, 10, 25, 30; Doc. 109-2 at ¶ 17.

         From February 2013 onward, Sandra Chirinos (“Sandra”) tended to W&E's payroll. Doc. 109 at ¶ 26. Each week, she manually altered employee time records based on an audit, which consisted of: (1) checking each technician's timesheet history; (2) comparing the hours reported by each technician with the time frames recorded in W&E's system for each job that the technician completed; and (3) reconciling each audit against the hours paid by W&E's client. Ibid. To account for the required lunch breaks, Sandra would automatically deduct one hour from an employee's daily total if that employee had worked more than six hours. Id. at ¶ 43. Sandra avers that when she adjusted a technician's hours, she typically verified (either with the technician, the dispatcher, or a manager) that those were the actual hours worked. Doc. 98-5 at 245-247. Plaintiffs, by contrast, assert that Sandra did not verify a technician's actual hours before finalizing his or her timesheet. Doc. 109 at ¶ 27. That is plausible; on many occasions, Sandra's audits conveniently resulted in eliminating all of an employee's overtime wages. Id. at ¶ 28. For instance, James Babbit initially logged 59.44 hours for the week of March 2, 2014; Tomeo logged 54.86 hours for the week of February 16, 2014; and Rayard Herron 57.19 hours for the week of January 19, 2014. Ibid. For each of these weeks, Sandra reduced their hours to 40.00. Ibid. But at this stage of the case, when credibility disputes must be resolved in Defendants' favor, the court must accept Sandra's account of how she conducted the audits.

         W&E's employee handbook provided that “employees must accurately record all work time on a daily basis unless not possible.” Doc. 122 at ¶ 52. Nonetheless, technicians often failed to clock in at W&E's warehouse (through any of the available systems). Doc. 109 at ¶ 21; Doc. 98-6 at 696-702. W&E never suspended or terminated an employee for not logging his hours properly, though it reprimanded technicians for failing to do so. Doc. 109 at ¶ 22; Doc. 98-6 at 697; Doc. 109-5 at ¶ 8. The employee handbook further provided that “[i]f an employee notices an error or discrepancy in his/her paycheck or deposit, the employee should immediately notify his/her supervisor or Human Resources Representative, ” Doc. 122 at ¶ 51, and that “[i]f any improper deductions are found to have been made, W&E Communications Inc. will reimburse the employee for those improper pay deductions, ” id. at ¶ 55.

         Plaintiffs assert that W&E told technicians they were paid “by the job” and that, as a result, they never appreciated the importance of accurately tracking their hours. Doc. 98 at ¶¶ 44-45 (citing, e.g., Doc. 98-5 at 338-339, pp. 64-65; Doc. 98-6 at 119-120, pp. 63-65). But Plaintiffs' weekly pay sheets expressly stated that employees were compensated in part by “their set hourly rate.” Doc. 109 at ¶ 35; see also id. at ¶ 41. Moreover, Tomeo testified that he knew that he was paid both by the job and by the hour. Doc. 98-6 at 19-20, pp. 72-75. Given this, and drawing all reasonable inferences in Defendants' favor, the court cannot conclude on summary judgment that employees were told they were paid only “by the job.” Nonetheless, Defendants acknowledge, and the court therefore accepts as true, that at least some Plaintiffs failed to accurately track their own hours because they (mistakenly) believed they were paid by the job. Doc. 109 at ¶ 45.

         2.The PenguinData System

         At all relevant times, W&E compensated Plaintiffs on a weekly basis in accordance with PenguinData's “production bonus pay method.” Id. at ¶¶ 24, 31. Under that method, a technician's total compensation was divided into two components: base pay and bonus pay. Id. at ¶ 31. Base pay was calculated by multiplying a technician's set hourly pay rate by the number of hours worked. Ibid. If a technician worked more than forty hours in a given week, he received one-and-a-half of his hourly rate for all hours worked in excess of forty. Ibid. Base pay was guaranteed and not subject to any deductions. Ibid. The hourly rate paid to Plaintiffs was the Illinois minimum wage. Id. at ¶ 41.

         Determining bonus pay was more complex-and, as shown below, how it was computed changed over time. W&E assigned a dollar value to each type of job performed by technicians. Id. at ¶ 36. Those values could be adjusted based on a technician's performance in a given week. Id. at ¶ 39; Doc. 98-5 at 203-204. Multiplying the rate for each task by the quantity of those tasks performed (and then summing those amounts across different tasks) yielded a technician's total production for the week. Id. at ¶ 31. For example, if a technician conducted five service calls and one installation, and the technician's rate for each service call was $100 while the rate for each installation was $75, then the total would be $575. The parties call this figure different names. Compare Doc. 97 at 7-8 (“Gross Production”), and Doc. 98 at ¶ 36 (“Jobcodes-Gross Production”), with Doc. 112 at 13 (“total production” or “net jobcode production”). To avoid confusion, this opinion henceforth will use the term “Gross Jobcode Production.”

         Once Gross Jobcode Production was determined, the technician's total base pay (including overtime) was then subtracted arrive at the production bonus, Doc. 109 at ¶ 31-in essence making the production bonus the amount earned in excess of base pay. The production bonus was then divided by the hours worked to provide an hourly production bonus rate. Ibid. Finally, the hourly bonus rate was applied to a technician's hours in the same way that the base pay hourly rate was; that is, the technician received the bonus rate for the first forty hours of work, and one-and-a-half times the bonus rate for each hour he worked in excess of forty. Ibid. This total bonus pay was then added to the technician's total base pay to calculate final compensation. Ibid.

         Here is a hypothetical example of how the production bonus pay method worked. A technician works fifty hours in a given week. Her hourly rate is ten dollars. Accordingly, her base pay for the week is $400 for the first forty hours of work and $150 for the ten overtime hours, for a total of $550. Based on the number and types of jobs she completed that week, her Gross Jobcode Production is $1000. Her production bonus for that week is $450, the difference between her Gross Jobcode Production and her base pay. That production bonus is then divided by the fifty hours she worked, yielding a bonus hourly pay rate of $9. She then receives $360 in bonus pay for her first forty hours (forty multiplied by $9) and $135 for her ten hours of overtime (ten multiplied by $13.50), for a total of $495 in bonus pay. Her gross pay is the sum of her base pay ($550) and her bonus pay ($495), for a total of $1045. The following charts summarize the employee's hypothetical pay sheet:

         Step 1: Calculating Base Pay

Base Pay

Type Hours Rate Total
Regular 40.00 $10.00 / hr $400.00
Overtime 10.00 $15.00 / hr $150.00

Total Base Pay

         Step 2: Calculating Gross Jobcode Production

Gross Jobcode Production

Job Type Quantity Rate Total
Service call 5 $100.00 per job $500.00
Custom work 2 $250.00 per job $500.00

Gross Jobcode Production

$ 1000.00

         Step 3: Calculating Production Bonus Pay Rate

         $1000.00 (Gross Jobcode Production) - $550.00 (Total Base Pay) = $450.00 (Production Bonus)

         $450.00 (Production Bonus) ÷ 50 hours = $9.00 per hour (Bonus Pay Rate)

         Step 4: Calculating Bonus Pay

Bonus Pay

Type Hours Rate Total
Regular 40.00 $9.00 / hr $360.00
Overtime 10.00 $13.50 / hr $135.00

Total Bonus Pay $495.00

         Step 5: Calculating Total Compensation

         $550.00 (Total Base Pay) $495.00 (Total Bonus Pay) = $1045 (Total Compensation)

         Three additional points concerning the PenguinData production bonus pay method warrant discussion.

         First, at some point in the process, W&E could reduce a technician's pay for poor performance-for instance, if he lost a piece of equipment or failed to complete a job. Although the parties agree that these financial penalties were taken out of the employee's Gross Jobcode Production prior to calculating the production bonus, Doc. 109 at ¶ 31, the employees' pay sheets show that the deductions were actually made from final gross pay, Doc. 98-6 at 706-723. For purposes of this motion, that distinction is of no consequence-all that matters is that, at some point during the calculation of pay, deductions occasionally were made to penalize employees. Sandra avers that W&E obtained written consent forms from Plaintiffs authorizing W&E to make those deductions. Doc. 109 at ¶ 49; Doc. 109-5 at ¶¶ 21-22. But her declaration states that she could not locate the authorization forms. Doc. 109-5 at ¶ 22. Those two statements are not inconsistent; therefore, the court credits both of them.

         Second, in April 2013, W&E changed how it calculated the Gross Jobcode Production value. Doc. 98-7 at 27; Doc. 109 at ¶¶ 36-38. Rather than assigning dollar values to each job type, W&E began assigning points. Doc. 98-7 at 27; Doc. 109 at ¶ 37. The sum of those points was multiplied by a dollar figure to yield Gross Jobcode Production. Doc. 98-7 at 27; Doc. 109 at ¶¶ 38-39. The dollar figure was determined by the employee's performance grade for the week. Doc. 109 at ¶ 39. If the employee received a Grade A, the dollar value per point would be $1.45; for Grade B, $1.25; for Grade C, $1.18; and for Grade D, $0.92. Ibid. Defendants assert that W&E used this method of calculating the Gross Jobcode Production for certain residential technicians only from June 2013 to October 2014, but they support that assertion by citing paragraphs 6-8 and exhibits B-D of Sandra's October 22, 2015 declaration, id. at ¶ 36, and those paragraphs and exhibits do not exist, Doc. 109-11. The court therefore rejects Defendants' assertion regarding the duration of this practice.

         Third, Defendants go to great lengths in their Local Rule 56.1(b)(3)(B) response to distinguish among certain categories of technicians-residential vs. commercial, senior vs. junior, bonus-eligible vs. non-bonus-eligible-with the implication that not all technicians were paid under the production bonus pay method. Doc. 109 at ¶¶ 1, 7, 9, 15, 36-39. But Defendants' summary judgment brief admits that Plaintiffs were paid under that system. Doc. 112 at 8 (“Plaintiffs' weekly wages are determined using a system called the PenguinData production bonus pay method.”). What is more, Plaintiffs' timesheets all indicate that they were compensated using the production bonus pay method. Doc. 98-6 at 706-726. It follows that Plaintiffs indisputably were paid according to that method.

         Plaintiffs assert that W&E implemented the production bonus pay method without any inquiry into whether it violated the law. Doc. 98 at ¶ 32. But Jorge avers that Michael Enters, PenguinData's chief operating officer, and Jeremy Peck, PenguinData's president, assured him in 2008 that they had years of experience dealing with labor laws and that the production bonus pay method was the industry standard and legally compliant. Doc. 109-2 at ¶¶ 7-8. Moreover, PenguinData CFO Scott Craine told W&E that the production bonus pay method complied with the FLSA. Doc. 109 at ¶ 34; Doc. 98-7 at 2-13. On summary judgment, the court must accept Jorge's averments. Plaintiffs cite an internal email written by Craine, which said that “W&E may not even understand how they pay their techs, ” as evidence that W&E did not adequately comprehend how the system worked. Doc. 109 at ¶ 33. Defendants do not dispute that Craine said that, but they correctly note that his statement does not suffice to indisputably establish that W&E did not, in fact, understand how the system worked. Ibid.

         B. Plaintiffs' Motion to Strike Defendants' December 15, 2015 Declarations

         Defendants' Local Rule 56.1(b)(3)(B) response and Local Rule 56.1(b)(3)(C) statement of additional facts extensively cite the December 15, 2015 declarations of Jorge, Sandra, and William Perez, another W&E higher-up. Doc. 109. Plaintiffs move to strike ...

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