Class action plaintiffs can proceed with overtime case under FLSA

The Second Circuit once again tells us how to distinguish between employees and independent contractors for purposes of determining whether a plaintiff can bring an overtime case under the Fair Labor Standards Act. 

The case is Perez v. Escobar Construction, a summary order issued on July 31. Plaintiff wanted to bring this case as a class action, so if the plaintiff has a case, then many others would also have a case, and that can be financially painful for the employer. The case was dismissed after the district court determined the defendants were not the plaintiffs' employers. The Court of Appeals reinstates the case. 

The Court of Appeals (Bianco, Perez and Merriam) opens its discussion this way: 

The FLSA defines “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d); see also N.Y. Lab. Law §§ 190(3), 651(6) (NYLL definitions of employer). Recognizing the “expansiveness” of this definition, Falk v. Brennan, 414 U.S. 190, 195 (1973), the Supreme Court has long instructed that employment status under the FLSA should be based on “economic reality rather than technical concepts.”

To assist in resolving these cases, the courts have devised a multi-part test in determining who is an employer. "Pursuant to the legal standard articulated in Carter v. Dutchess Community College, 735 F.2d 8 (2d Cir. 1984), we consider four factors: 'whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.'” No single factor is dispositive, which means the courts know an employer when they see one.

Plaintiffs can proceed to discovery. Defendant Escobar had power to hire and fire the plaintiffs and determine their rate of pay, among other things. The Court states:

Plaintiffs make specific factual allegations to support the Carter factors, including, inter alia, that Escobar: (1) “hired Plaintiffs”; (2) “would bring new workers to construction sites and would fire workers when there was a shortage of work at the project”; (3) “hired Vicente Pad[i]lla as assistant supervisor” and “had project supervisors manage the work schedules of each employee”; (4) “was present on a day-to-day basis at the University Project in Ithaca, New York” and “was a direct contact with Plaintiffs at [that] worksite”; (5) “had his workers work in extreme weather conditions without insulated clothes, boots, and overall[s]”; (6) “promised Plaintiff . . . Perez Perez a starting hourly wage rate of $18” and later “promised to raise . . . Perez Perez’s hourly wage rate to $25”; and (7) “promised Plaintiff . . . Sanchez Arias an hourly wage rate of $17 after a few months of employment.”

These factual allegations are enough to survive a Rule 12 motion to dismiss. It certainly helps plaintiffs' arguments that Escobar had power to hire and fire, hired at least one of the supervisors, and he controlled the allocation of workers and the conditions of employment. While plaintiffs do not make out the other Carter factors, such as that Escobar maintained time records, that does not mean they cannot prove he was an employer under the labor laws. 

The other defendants also lose the appeal and will have to defend themselves in the district court a similar analysis. And the Court of Appeals holds that other corporate defendants may be sued as well under the labor law principle that recognizes a worker may have joint-employers in bringing these cases.