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Dyal v. Pirtano Construction, Inc.

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

March 27, 2018

Joshua Dyal, Christopher Popp, Jason Panico, Richard Weber, Robert Weichmann, Dean Zervas, and Marcos Campos, Plaintiffs,
v.
PirTano Construction, Inc., Installation Professionals, L.L.C., Mike Piraino, Joe Pantano, Jack Horn, and Mike Moreau, Defendants.

          MEMORANDUM OPINION AND ORDER

          HONORABLE THOMAS M. DURKIN, UNITED STATES DISTRICT JUDGE.

         Defendant PirTano Construction, Inc. has a contract with Comcast Cable to provide cable installation work to Comcast customers. It provides those services through a separate entity and operating division called Installation Professionals, LLC. Plaintiffs were employed by Installation Professionals between 2010 and 2013 as cable installation technicians. Plaintiffs allege that PirTano, Installation Professionals, and various principals of those two companies, [1] processed deductions from their wages in violation of the Illinois Wage Payment and Collection Act (“IWPCA”) (Count I), and failed to pay overtime as required by the Illinois Minimum Wage Law (“IMWL”) (Count II) and the Fair Labor Standards Act (“FLSA”) (Count III). A fourth count of the amended complaint alleges violations of the Uniformed Services Employment and Reemployment Rights Act (“USERRA”) on behalf of Plaintiff Dyal only. The parties have filed cross-motions for summary judgment. For the reasons that follow, Defendants' motion is denied in part and granted in part and Plaintiffs' cross-motion is denied.

         Legal Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The Court considers the entire evidentiary record and must view all of the evidence and draw all reasonable inferences from that evidence in the light most favorable to the nonmovant. Ball v. Kotter, 723 F.3d 813, 821 (7th Cir. 2013). To defeat summary judgment, a nonmovant must produce more than “a mere scintilla of evidence” and come forward with “specific facts showing that there is a genuine issue for trial.” Harris N.A. v. Hershey, 711 F.3d 794, 798 (7th Cir. 2013). Ultimately, summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         Background

         Plaintiffs worked for Installation Professionals as “installation technicians” at various points between 2010 and 2012.[2] Installment Professionals is an operating division of PirTano, which has a contract with Comcast to install and service cable television, internet, and telephone services for Comcast. R. 123, Resp. to Plaintiffs' Statement of Material Facts (“PSMF”), ¶¶ 7, 9. When Comcast needs installation services, it generates work orders and conveys them to Installment Professionals. The technicians who work for Installment Professionals receive a route each morning when they report to work consisting of three to eight Comcast work orders. Id. at ¶ 21. Each work order describes the work needed to be done, the customer's name, address, and contact number, and the time frames when the technician needs to arrive at the customer's location. Id. The technicians are then dispatched to the addresses on their route to complete the work. The number of stops or jobs each technician receives each day varies on the day's workload, the type of job, and the technician's skillset. Id. at ¶ 23. At the end of the day, the technicians turn in a worksheet showing the jobs they completed and what work was done for each job. The worksheets are reviewed by Michael Pocasangre, PirTano's office manager, who compares the work listed as having been completed with Comcast records. Id. at ¶¶ 27-29. The manager then totals up the allowable tasks and the information is recorded and conveyed to Comcast, which then pays PirTano for the work done by the technicians. The technicians, in turn, get paid a set amount per task. The set amounts are listed on a rate sheet, which is applied to the worksheets. R. 123, Resp. to PSMF, ¶ 31.

         The amounts technicians are paid for each item of service varies based on the value of that service, but the technicians generally receive 40%-60% of the amount Comcast paid for the service. For example, a technician would earn $38.74 for a “G-6 CDV & HSD Installation (Sep. Trip)” and Comcast was invoiced $80.74, which means the technician earned about 48% of what Comcast was invoiced for that service. If the technician installed an “F-3b Additional Outlet (New)(Same Trip), ” it had a value of $10.17 and Comcast was invoiced $18.35, so the technician received about 55% of the amount billed to Comcast for that service. R. 128, Resp. to Defendants' Statement of Additional Facts (“DSAF”), ¶ 30. The amounts owed to the technician for each task listed on the worksheets are totaled up, and the technician is paid accordingly. Thus, the technicians' pay was based on what they billed no matter how many hours they worked. R. 123, Resp. to PSMF, ¶ 35.

         Analysis

         Both parties filed motions for summary judgment. Defendants argue summary judgment in their favor is appropriate in the following respects: (1) on Plaintiffs' overtime wage claims under the FLSA and the IMWL, because those claims are barred by the “retail or service establishment” exemption of the FLSA, 29 U.S.C. § 207(i) (hereinafter “Section 7(i)”); (2) on the three-year FLSA statute of limitations, because the evidence is insufficient to show willfulness; (3) on Plaintiffs' IWPCA claim, because the undisputed evidence shows that all payroll deductions were made in compliance with that statute; and (4) on Plaintiff Dyal's USERRA claim, because it is based on conclusory allegations unsupported by the evidence.

         Plaintiffs' summary judgment motion focuses on the overtime wage claims under the FLSA and the IMWL. Specifically, Plaintiffs argue that the 7(i) exemption does not apply because they were not paid based on commission, and that as a result, Defendants failed to pay them overtime wages required by the FLSA. Plaintiffs also argue that the Defendants are their joint employers and that they willfully violated the FLSA, extending the limitations period from two years to three years. Plaintiffs did not make any arguments as to the IWPCA or the USERRA claims in their affirmative summary judgment motion. Because the majority of the parties' briefings focus on the FLSA and the IMWL, the Court will begin there.

         I. FLSA and IMWL (Counts II and III)

         A. The Section 7(i) Exemption

         The FLSA and the IMWL generally require that employees be paid one and one-half times their hourly wage for every hour worked in excess of forty hours per workweek. See 29 U.S.C. § 207(a)(1); 820 ILCS 105/4a(1). Section 7(i) of the FLSA exempts employers from complying with that overtime requirement if they employ (1) employees of a retail or service establishment; (2) the regular rate of pay of such employees is in excess of one and one-half times the minimum hourly rate; and (3) more than half of the employees' compensation for a representative period represents commissions on goods or services. 29 U.S.C. § 207(i). The IMWL likewise exempts from overtime coverage “[a]ny commissioned employee as described in paragraph (i) of Section 7 of the [FLSA] and rules and regulations promulgated thereunder.” 820 ILCS 105/4a(2)(F).

         Importantly, Section 7(i)'s exemption from the FLSA's minimum wage requirements “should not be interpreted so broadly that it renders the statutory remedy ineffectual or easily evaded.” Yi v. Sterling Collision Ctrs., 480 F.3d 505, 508 (7th Cir. 2007). Exemptions under the FLSA are to be narrowly construed against the employers seeking to assert them. See Lederman v. Frontier Fire Protection, Inc., 685 F.3d 1151, 1157 (10th Cir. 2012). As a practical matter, this means that a close case will be resolved against applying the exemption. Yi, 480 F.3d at 508 (“principle of narrow interpretation of exemptions is a tie breaker” (citing Mechmet v. Four Seasons Hotels, Ltd., 825 F.2d 1173, 1177 (7th Cir. 1987))). Assuming Plaintiffs work more than 40 hours per week, for Defendants to be entitled to summary judgment on Plaintiffs' IMWL and FSLA claims based on Section 7(i), it must be clear from the undisputed facts that: (1) Installment Professionals is a “retail or service establishment”; (2) Plaintiffs' regular rate of pay is at least one and one-half times the minimum wage; and (3) more than half of Plaintiffs' compensation for the representative period is from commissions. See Alvarado v. Corporate Cleaning Serv., Inc., 782 F.3d 365, 366 (7th Cir. 2015). The exemption must also be in accordance with the FLSA's concerns about the welfare of employees. Id. at 371. The Court will address each of these required showings in turn.

         1. Is Installment Professionals a Retail Or Service Establishment?[3]

         Whether Installment Professionals “is a retail or service establishment is a matter of statutory construction and is thus a question of law to be determined by the [c]ourt.” Reynolds v. Wyndham Vacation Resorts, Inc., 2016 WL 362620, at *5 (D.S.C. Jan. 29, 2016). In Alvarado¸ the Seventh Circuit decided that a company that provided window washing services was a “retail or service establishment” using a straightforward analysis based on the language of the statute:

[T]o prevail CCS must show . . . that the company is a retail or service establishment, terms not defined in the statute. A “retail establishment” sounds like a store, which CCS is not; “service establishment” is much broader. CCS is selling a service, not goods, and that as we've seen is supportive of the exemption. . . .
As a service establishment CCS meets the “retail or service establishment” requirement in section 207(i). If that weren't enough (though it is), CCS is probably best described as a retail service establishment.

782 F.3d at 369 (emphasis in original).[4]

         Under the Seventh Circuit's analysis, Installment Professionals easily satisfies the “retail or service establishment” prong of the Section 7(i) exemption. Installment Professionals sells cable installation services and therefore is a “service establishment.” Plaintiffs argue otherwise, purporting to rely on a part of the Alvarado opinion addressing whether the window washing company was a “retail service establishment” because it sold its services directly to the customer without the use of any middleman. The problem with Plaintiffs' reliance on this distinguishing fact in Alvarado is that the language of Section 7(i) is in the alternative; that is, the employer must be “a retail or service establishment.” If the discussion in Alvarado is taken at face value, the alternative language in the statute is to be read literally and nothing more than being a service establishment, retail or wholesale, [5] is required. See Alvarado, 782 F.3d at 369 (before addressing whether the defendant was a “retail service establishment, ” stating that being a “service establishment” by itself was “enough”).

         Plaintiffs argue this case is different and the requirements set forth in Alvarado are not met because Installation Professionals, through PirTano,

contracted with Comcast to provide cable installation services to Comcast customers. . . . PirTano/Installation Professionals billed Comcast for the work done by its technicians. Then Comcast billed its customers, the ultimate customers. Based upon Judge Posner's reasoning and holdings in Alvarado, PirTano/Installation Professionals were wholesalers, as their services were resold by Comcast to the actual user.

         R. 135 at 5-6. But Plaintiffs admit that Installation Professionals provides cable and internet products and services directly to the end user.[6] The customer receiving the goods and services is at the end of the stream of distribution and there is no reselling by that customer of the cable or internet products and services. The fact that Installation Professionals provides the installation services to the end-user in its role as Comcast's subcontractor does not alter the analysis. Numerous courts have held that providing services directly to the end user, even through subcontractors, qualifies as a “retail or service establishment.” See In re Directech Sw., Inc., 2009 WL 10663104, * 10 (E.D. La. Nov. 19, 2009) (concluding that the fact that one entity, DirecTV, solicits and accepts payment from the customers and then pays another entity, DirecTech, for the installation work technicians perform for the satellite customers-the end users-did not make DirecTech's sale of services a sale for resale); see also Johnson v. Wave Comm Gr LLC, 4 F.Supp.3d 423, 435-36 (N.D.N.Y. 2014) (holding that cable installation company was not “reselling” services of Time Warner to Time Warner's customers and rejecting the argument that the cable installation company was a wholesaler); Jones v. Tucker Communications, Inc., 2013 WL 6072966 at *6 (M.D. Ga., Nov. 18, 2013) (defendant Tucker Communications provided cable, internet, and telephone repair and installation services for customers of Charter Communications; holding that Tucker's services were not being resold); Owopetu v. Nationwide CATV Auditing Servs., Inc., 2011 WL 4433159, at *6 (D. Vt. Sept. 21, 2011) (defendant, whose business was to install and maintain telecommunications hardware in customers' homes for Time Warner Cable and service Time Warner's customers directly was not providing services for resale and satisfied the “retail and service establishment” prong of the FLSA exemption). As the majority of courts that have considered this issue in the context of the cable/television installation industry have held, the Court agrees that Installation Professionals is a service or retail establishment within the meaning of the FLSA.[7]

         2. Was Plaintiffs' Regular Rate of Pay At Least One and One-Half Times the Minimum Wage?

         The second requirement for the Section 7(i) exemption is that the employee's regular rate of pay is at least one and one-half times the minimum wage. This requirement is explained in 29 C.F.R. § 779.419(b) as follows:

The meaning of the “regular rate” of pay under the Act is well established. As explained by the Supreme Court of the United States, it is “the hourly rate actually paid the employee for the normal, nonovertime workweek for which he is employed” and “by its very nature must reflect all payments which the parties have agreed shall be received regularly during the workweek, exclusive of overtime payments.” (Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419.) It is a rate per hour, computed for the particular workweek by a mathematical computation in which hours worked are divided into straight-time earnings for such hours to obtain the statutory regular rate (Overnight Motor Co. v. Missel, 316 U.S. 572). By definition (Act, section 7(e), the “regular rate” as used in section 7 of the Act includes “all remuneration paid to, or on behalf of, the employee” except payments expressly excluded by the seven numbered clauses of section 7(e). . . . The requirement of section 7(i) with respect to the “regular rate” of pay of an employee who may come within the exemption which it provides is a simple one: “the regular rate of pay of such employee, ” when employed “for a workweek in excess of the applicable workweek specified” in section 7(a), must be “in excess of one and one-half times the minimum hourly rate applicable to him under section 6.” The employee's “regular rate” of pay must be computed, in accordance with the principles discussed above, on the basis of his hours of work in that particular workweek and the employee's compensation attributable to such hours. The hourly rate thus obtained must be compared with the applicable minimum rate of pay of the particular employee under the provisions of section 6 of the Act. If the latter rate is $1.60 an hour, for example, then the employee's regular rate must be more than $2.40 an hour if the exemption is to apply.

29 C.F.R. § 779.419(b).

         According to Defendants, at all times relevant, the minimum hourly rate applicable under Section 206 of the FLSA was $7.25 per hour. R. 104 at 10 (citing 29 U.S.C. § 206(a)). To satisfy the second prong of the exemption, Defendants must show that Plaintiffs received an hourly equivalent exceeding $10.87. Defendants present evidence that, on average, Plaintiffs earned an hourly equivalent amount well over the $10.88 per hour threshold (ranging from $14.11 to $21.62 per hour), and annual compensation for Plaintiffs ranged from $38, 272 to $55, 273. Id. [8] While Defendants admit that “there were a few weeks where the $10.88 threshold was not met, ” they argue that “these almost all occurred outside the applicable limitations period” and “the record evidence reflects these were extremely minor discrepancies that have no material consequence under the law.” Id.

         Plaintiffs' reply brief in support of their cross-motion for summary judgment concedes that they were usually paid more than $10.88 per hour. See R. 135 at 3-4 (“All that Plaintiffs have admitted is that their ‘regular rate' usually exceeded $10.88 per hour.”). Given Plaintiffs' admission in their reply brief, the only disputed issue on this prong of the Section 7(i) exemption is a legal one-whether the de minimis doctrine applies to the relatively few weeks in which Defendants concede that Plaintiffs were not paid at least 1½ times the applicable federal minimum wage. See R. 104 at 10 (citing Mitchell v. JCG Indus., Inc., 745 F.3d 837, 841-46 (7th Cir. 2014) (recognizing the de minimis doctrine and that the court does not provide a remedy for small and insignificant harms)).

         Plaintiffs' only argument against application of the de minimis doctrine is that Defendants have failed to maintain proper paycheck and paystub information as required by federal and state law, and that therefore “there is no important data to determine whether the underpaid weeks were ‘trifles.'” R. 126 at 8. By this argument Plaintiffs apparently concede the applicability of the de minimis doctrine to the current situation, and only take issue with whether the factual predicate for application of that doctrine has been established. Neither party cites to 29 C.F.R. § 778.104, pursuant to which “each workweek stands alone such that an employee who works 30 hours one week and 50 hours the next would be entitled to overtime compensation the second week even though the average between the two weeks is 40 hours per week.” Roeder v. Directv, Inc., 2017 WL 151401, at *32 (N.D. Iowa Jan. 13, 2017).

The Act takes a single workweek as its standard and does not permit averaging of hours over 2 or more weeks. Thus, if an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the overtime hours worked beyond the applicable maximum in the second week, even though the average number of hours worked in the 2 weeks is 40. This is true regardless of whether the employee works on a standard or swing-shift schedule and regardless of whether he is paid on a daily, weekly, biweekly, monthly or other basis. The rule is also applicable to pieceworkers and employees paid on a commission basis. It is therefore necessary to determine the hours worked and the compensation earned by pieceworkers and commission employees on a weekly basis.

29 C.F.R. § 778.104; see Johnson, 4 F.Supp.3d at 445 (holding that estimated hours provided by the plaintiffs in interrogatory answers could not be used to determine compensation because the regular rate of pay had to be calculated on a weekly basis). Defendants have offered no argument for why this regulation does not apply or should not be followed.[9]

         Mitchell and the cases on which it relies for the de minimis doctrine determined what was compensable working time for purposes of calculating the number of hours an employee worked each week. See Mitchell, 745 F.3d at 843. Defendants cite no relevant authority that applies the same doctrine to override the weekly computation requirement of 29 C.F.R. § 778.104. Under that regulation, Defendants can rely on the Section 7(i) exemption only for the weeks in which they have not conceded that Plaintiffs did not earn the equivalent of $10.88 per hour.

         As for the other weeks in question, Plaintiffs' concession ends the matter. Plaintiffs attempt to defeat summary judgment by arguing Defendants failed to keep adequate records of the total hours worked. The Eleventh Circuit reversed the district court's entry of summary judgment on that issue in Klinedinst v. Swift Investments, Inc., 260 F.3d 1251(11th Cir. 2001), because neither party kept records of the number of hours worked, and thus it ...


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