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In wage suit brought by DOL, DirecTV a joint employer of cable installers

By Brandi O. Brown, J.D.

In a FLSA minimum wage and overtime suit brought by the Secretary of Labor against DirecTV and another company on behalf of a group of satellite installers, a federal district court in Washington concluded that DirecTV could be held liable for unpaid wages as a joint employer of the workers. Granting the Secretary’s motion for partial summary judgment, the court concluded that most of the factors usually considered by courts within the Ninth Circuit weighed in favor of a finding of joint employer status (Perez v. Lantern Light Corp., May 29, 2015, Martinez, R.).

The installer-technicians worked for a subcontractor that provided satellite installation and activation services in Washington under an exclusive service contract with DirecTV. They were paid biweekly for completed orders, on a percentage of the “piece work” basis used to compensate the subcontractor. The Secretary of Labor brought suit on behalf of 82 of the installers who were formerly employed by the subcontractor, a co-defendant with DirecTV, alleging that the employers violated the FLSA by paying the installers less than minimum wage and failing to pay them overtime.

On cross-motions for summary judgment, the court considered whether DirecTV was a joint employer of the installers, and concluded that it was. With “economic reality” as its touchstone, the court considered both the four regulatory factors described in Bonnette v. California Health and Welfare Agency, a Ninth Circuit case, and the eight nonregulatory factors described in Torres-Lopez v. May, another Ninth Circuit decision. First, though, the court noted the importance of the fact that the contractor in question had “near singular reliance on revenue from DirecTV,” which it deemed to be a “significant consideration” under the economic reality test.

Hiring and firing authority. Although it was undisputed that only the subcontractor had the authority to hire and fire installers DirecTV “unquestionably” played a role in those decisions, the court concluded. DirecTV “established and enforced the eligibility requirements” for the technicians, who were required to pass DirecTV’s background checks and screenings. Also, as part of the exclusivity requirement in the “Services Provider Agreement” between the subcontractor and DirecTV, the installers and the contractor were prohibited from serving companies that offered similar services and the installers worked exclusively on DirecTV work orders. DirecTV would refuse to issue work orders for installers it deemed noncompliant with performance requirements. Without work provided by DirecTV, the installer would not have any work or pay. Moreover, DirecTV would relay performance concerns to the subcontractor based on performance data it collected. Thus, this factor weighed in favor of joint employment.

Supervision and control. Similarly, the supervision and control exerted by DirecTV over the employees’ schedules and work conditions also weighed in favor of a joint employment determination. DirecTV scheduled the jobs, assigning specific workers to specific orders. It controlled the workers’ shifts and monitored and recorded their arrival times and job completion times. It also controlled work hours by scheduling installers in 10-hour shifts and six-day workweeks, and it retained the right to deny installers’ leave requests. Furthermore, installers wore DirecTV uniforms, displayed DirecTV badges, and drove vehicles with DirecTV signage. DirecTV also monitored the installers’ interactions with customers.

Payments and recordkeeping. Furthermore, the rate and method of payment to the workers weighed heavily in favor of a joint employment finding. Installer compensation was based on a percentage of what DirecTV paid to the contractor. The contractor’s fortunes “rose and fell” with DirecTV, which drove both additions and subtractions from the contractor’s labor force, and the contractor was almost solely reliant on DirecTV for its income.

Finally, the factor related to the maintenance of employment records was significant in this case, the court explained, because the FLSA required that certain records be kept and DirecTV maintained a database of information about the installers. That information was, “for all intents and purposes, payroll information.” The records kept by DirecTV “accomplished purposes of establishing work conditions” as well as payroll and performance evaluation. In fact, the court noted, the data compiled by DirecTV was used to discipline installers.

Nature of service provided. On the whole, the nonregulatory factors outlined in Torres-Lopez also weighed in favor of a joint employment finding. First, the service provided was “analogous to a specialty job on the production line” in that it was an initial, “crucial” step in the service provision process. Second, the installers’ responsibilities could pass from one labor contractor to another without material change and, in fact, had done so. Indeed, some installers had worked for several subcontractors over time, without any material changes. Again, the fact that the installers had to work exclusively on DirecTV orders weighed in favor of joint employment status under Torres-Lopez.

Other factors. Neutral factors included whether the putative employer’s premises and equipment were used for the work. Because the work was performed in customers’ homes, that factor was less consequential. However, some specialized equipment and tools were provided by the subcontractor and some highly specialized tools were supplied on consignment.

Also apparently neutral to the analysis was whether the work was “piece work” and work that did not require “initiative, judgment or foresight.” Although the installers had to be well-trained, the work was piece work that did not require the exercise of “initiative, judgment or foresight.” However, the factor considering the employee’s opportunity for profit or loss swung in favor of joint employment. The installer’s skills, the court explained, were “strictly circumscribed by the work order,” and the installer could not exercise independent judgment in that regard.

Moreover, the permanence of the working relationship suggested joint employment. Changes in “structure, management or ownership” at the subcontractor level did not act to “sever the working relationship between DirecTV and Installers.” In fact, installers typically moved from one subcontractor to the next, performing the same services. And, contrary to the strenuous argument raised by DirecTV, the subcontractor provided integral services. In fact, the court explained, “DirecTV made relentless staffing demands” of the subcontractor and even “leveled vague threats” when the subcontractor failed to meet its productivity expectations.

Retail or service establishment defense. The court denied DirecTV’s motion for summary judgment based on a “retail or service establishment defense” under FLSA, Sec. 207(i), concluding that disputed facts existed regarding the affirmative defense. The court refused to find DirecTV’s assertion of the defense untimely, however, as it was made one month before discovery closed.