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Serrano v. Republic Services, Inc.

United States District Court, S.D. Texas, Corpus Christi Division

June 12, 2017

MAURO SERRANO III, et al., Plaintiffs,
REPUBLIC SERVICES, INC., et al., Defendants.



         Plaintiffs filed this collective action for unpaid wages and overtime premium pursuant to the Fair Labor Standards Act (FLSA) against their employers, Republic Services, Inc., BFI Waste Services of Texas, L.P., Republic Waste Services of Texas, Ltd., and Allied Waste Services, Inc. (jointly Republic). The parties agreed to a bifurcated bench trial of this matter in which the first phase would cover liability issues. The Court tried that phase on April 25 to 27, 2017.

         The liability issues are:

(1) Whether the FLSA requires that the employer and employee come to an agreement or understanding regarding compensation for non-production time;
(2) Whether there was an agreement or understanding between Plaintiffs and Republic that the piece rate by which they were paid compensated Plaintiffs for both production and non-production work;
(3) Whether Plaintiffs' on-the-clock work was unpaid non-production time;
(4) Whether Republic violated the maximum hour overtime provision by paying an incorrect regular rate for the first 40 hours in a workweek and, therefore, an incorrect overtime premium for all hours worked over 40 in a workweek;
(5) Whether Republic acted in good faith so as to avoid liquidated damages;
(6) Whether any FLSA violation was willful so as to extend the statute of limitations to three years; and
(7) Whether the collective action should be decertified.

         The Court issues the following as its findings of fact and conclusions of law and DENIES Defendants' Motion for Judgment on Partial Findings (D.E. 230).

         I. The Work and Method of Driver Compensation A Driver's Typical Day.

         Plaintiffs are Roll-Off Drivers[1] in Republic's industrial division. In a typical day, they clock in upon arrival at Republic's yard by 5:00 a.m. On some days, they are required to attend safety, OSHA, or training meetings. Bradley, D.E. 234, p. 68. Those meetings are held approximately two or three times a month for fifteen to twenty minutes each. Bradley, D.E. 234, p. 69. They then check in with the dispatchers and get route sheets that list their tasks for the day, which they are ordinarily free to accomplish in any order they choose. Those tasks include any combination of: (a) delivering a box to a new customer; (b) dropping an empty box and hauling an existing customer's filled box to the landfill and dumping it, taking the now-empty box to the next customer and repeating the process; (c) hauling an existing customer's box to the landfill and dumping it, and then returning the same box to that same customer; and (d) hauling a box, dumping it, and taking the box back to Republic for a terminating customer. The assignments are unpredictable and are revised daily such that the drivers do not have regular routes that they service exclusively; each driver may be assigned to any customer on a given day. They average about 6-8 hauls per day when circumstances permit.

         The dispatcher also provides an activity sheet (for logging certain events of the day), along with truck assignments, a fuel card, and keys. The drivers then conduct Department of Transportation (DOT) mandated pre-trip inspections of their vehicles and retrieve any necessary trash boxes before heading out to their first customers. If all goes smoothly, the driver picks up a full trash box, hauls it to the landfill, gets the haul weighed, dumps the trash from the box into the landfill, gets a ticket evidencing completion of that dump, then proceeds to the next task. The drivers refer to this as a “bump and dump.”

         It is not unusual, however, for drivers to encounter impediments to completing the bump-and-dumps. Sometimes a box would be overflowing with trash or have trash stacked unevenly such that the driver has to reposition the load for safe hauling. Climbing on top of the box and redistributing the trash for safe transport can take about twenty to thirty minutes. Rincon, D.E. 234, p. 126. The drivers also testified to frequent blockages, in which something under the customer's control blocks their access to the box they are to pick up. When these customer service issues arise, which happens two to three times a day on average, the drivers have to alert dispatch so that dispatch can contact the customer to resolve the issue. See generally, Baca, D.E. 234, p. 205; Sanchez, D.E. 234, p. 232.

         Republic's dispatchers who testified confirmed this. The drivers stated that it could take fifteen to thirty minutes on average to resolve those problems. Serrano, D.E. 234, p. 87; Rincon, D.E. 234, p. 127; Benavides, D.E. 234, p. 167; Sanchez, D.E. 234, p. 232 (one might be real quick and the other take “like forever, ” twenty-five to thirty minutes). Dispatcher Theresa Ortiz testified that it would take three to five minutes. Ortiz, D.E. 234, pp. 23-24. The Court FINDS that the dispatcher's call takes three to five minutes, but that the customer's resolution of the issue-removing that which blocks the trash container pickup-generally takes fifteen to twenty-five minutes.

         Occasionally, there are boxes in need of repair and the drivers have to find ways to keep the doors shut or replace missing tarps to cover the load so that the trash does not fly out in route to the landfill. Sometimes, the drivers cannot make the haul safe and they lose that haul. Rincon, D.E. 234, p. 126. If Republic agrees, the driver may still be paid for a “dry run.” And if a load was picked up too late to go to the landfill, then that (or another) driver will have to start the next day by dumping that load before proceeding with his route. All of these circumstances cause delays, making the drivers' day longer and impairing their ability to complete all of the hauls on their routes.

         Drivers are also frustrated by Republic's poor stock of empty boxes because they lose time in search of the right sized box in sufficient condition to deliver to a customer on their route. If the box is in stock at the yard, it takes ten to fifteen minutes to load it on the truck. Serrano, D.E. 234, p. 92. Sometimes-on average two to three times a week-they are required to search more than one yard to find an acceptable box, which can extend the time an additional twenty to twenty-five minutes for drive time and ten to fifteen minutes for search and load. Serrano, D.E. 234, p. 92; Rincon, D.E. 234, p. 130; Benavides, D.E. 234, p. 171; Sanchez, D.E. 234, p. 233 (looking for boxes takes about 45 minutes). And the trucks can have mechanical breakdowns and flat tires. In those situations, the drivers have to wait for a Republic mechanic to arrive and repair the truck before they can continue their routes. Last, the drivers complained that there can be extensive wait times at the landfill, particularly in bad weather, sometimes exceeding an hour in which all they can do is wait in line.

         Prisons and the ExxonMobile, Oxy, NRG Energy, and similar facilities have elaborate security clearance procedures by which the driver and the truck have to be cleared. The driver might have to wait in line to enter the inspection area; park the truck and open its hood; go inside the facility, surrender his wallet, and go through a personal safety check; then, after getting clearance, obtain an escort; drive very slowly and attend to the pick-up of the container; return through the same inspection area and have the truck re-inspected; and retrieve his wallet before exiting, all of which adds fifteen to thirty minutes on each side of the container pick-up. Serrano, D.E. 234, pp. 93-95; Rincon, D.E. 234, pp. 154-55.

         At the end of the day, the drivers return to the Republic yard, fuel up their truck (sometimes having to wait in line to do so), park it, and conduct a DOT-mandated post- trip inspection.[2] They fill out any additional DOT paperwork, such as duty logs when their work day exceeded 12 hours, and complete their route and activity sheets. They then check out with dispatch, turning in their fuel card and keys and wait for the dispatcher to review the paperwork to ensure that it is complete. Then the drivers clock out. This procedure takes, on average, forty-five minutes to an hour each day. Rincon, D.E. 234, pp. 132-33; Sanchez, D.E. 234, pp. 234-35 (post-trip activities normally take about 30 minutes; bad days can add another 20 minutes).

         The drivers' testimony regarding the nature of the work and the typical delays that frequently impair their ability to complete their bump-and-dump tasks was uncontroverted, if not corroborated, by Republic witnesses.

         The Pay Structure Disclosed to Drivers.

         Likewise, the manner in which Republic compensated the drivers is largely uncontroverted. Republic formulated a series of rates that it calls “Roll Off and Longhaul Commission Zones.” Plaintiffs' Exhibit 13 (DEF 000273, 00281). In FLSA terms, these are “piece rates.” See generally, 29 U.S.C. § 207(g). The confidential table of rates lists the amount that Republic will pay the driver for each haul. It is undisputed that this table was the only information provided to the drivers regarding Republic's pay plan when they were hired. Republic told the drivers that they were hired to work only on this commission basis.

         None of Republic's management witnesses were involved in the original formulation of the zone/commission pay rates and they did not know how they had been calculated, other than that they appear to be based upon the distance of the customers' boxes to the landfill or to Republic's yard. See Map, Defendant's Exhibit 35;[3] see also Chapa, D.E. 233, pp. 54, 167-68; Bradley, D.E. 234, p. 45 (zones are from the office); D.E. 230, p. 3 (Defendants reciting that zone rates are based on distance to landfill). Plaintiffs acknowledged that Republic did not agree to pay additional monies for non-production time or make any representations to that effect. Serrano, D.E. 234, p. 99; Benavides, D.E. 234, p. 190. However, Plaintiffs provided a number of route and activity sheets detailing down time. Plaintiffs' Exhibit 43.

         Examples of uncompensated non-production time included arriving to find a customer who did not want the haul that day, a customer's location that included twenty minutes after arrival to get to the box and another twenty minutes to get the box off the property, sixty-five minutes from arrival to loading of a box at a ranch, thirty-five minutes for a flat tire, finding a container that was damaged with spray painting, ninety-five minutes having to return to the yard to replace a missing tarp, and twenty minutes spent closing a door on the container. Id. The fact that these obstacles to efficiency exist and are confronted on a daily basis was undisputed and even corroborated by the dispatchers who testified.

         Additional Provisions of the Pay Plan.

         Republic maintains a pay plan with provisions in addition to the zone commission rate sheet. The content of the full pay plan is not shared with drivers.[4] And it is not always followed. For instance, the pay plan calls for the payment of the zone rate for dry runs-where the driver gets to the customer but, for some reason, the container cannot be hauled. That dry run payment would not be made if there was a nearby customer that the driver could move on to. Serrano, D.E. 234, pp. 112-13; Baca, D.E. 234, pp. 210-11.

         The plan also states that day rates[5] apply to Roll-Off Drivers, but only if they make no hauls.[6] Republic's General Manager, Robert Bradley (Bradley) testified that, contrary to the letter of this plan, day rates were used even when a driver made hauls if the day rate exceeded the alternative zone commissions that had been earned by those hauls. Bradley, D.E. 234, p. 61. Also, contrary to the letter of the plan, Bradley testified that when drivers had completed some hauls, their day rate would be supplemented with a small amount per haul rather than the regular zone rate. Bradley, D.E. 234, p. 42.

         Bradley reasoned that a day rate compensated a driver for all hours worked. Therefore, if a driver received the greater of the day rate or his piece rate commissions (earned despite having obstacles to completing a route), either method of compensation necessarily paid the driver for all hours worked. In this manner, even if a truck breakdown kept the driver from making hauls all or part of a day, he was still paid for all of his time. Thus, without ever having disclosed the existence or amount of a day rate to the drivers prior to them beginning work, Bradley contends that Republic's safety net of the prescribed day rate (or a greater piece rate) fully compensated a driver who normally worked only on a commission or piece rate basis.

         To compare the standard zone rate potential earnings to the day rate, the Court looked at the average zone rate[7] and multiplied it by seven hauls.[8] The day rates[9] were, on average, roughly 38% of what could be earned by completed hauls. By the third haul, using the average rate, the daily rate would be exceeded. So by Republic's logic, obstacles that prevent four out of seven hauls do not require separate compensation.

         This theory appears to be put in practice by Republic's policy of not providing any day rate in addition to hauls unless the driver's down time exceeds four hours. Chapa, D.E. 233, p. 110. Jose Rincon testified that he had never seen a day rate applied where there was excessive down time caused by a mechanical breakdown or other significant loss of ability to make hauls. Rene Sanchez once turned in a route sheet showing 4.5 hours of down time. He was paid the zone commission rate for the two hauls he managed to make because they rendered a greater amount of pay than the alternative day rate would have. Sanchez testified that he had been instructed to write down all down time. He did so, but never saw any additional compensation for it.

         Republic contends that the drivers agreed to this arrangement despite never being advised of the terms of the full pay plan and its day rate (original or as applied). When a day rate was paid, it appeared on the corresponding pay stub. Republic relies on the drivers' continued work after each pay period to demonstrate actual or constructive knowledge of how they had been paid.

         Bradley testified that the only reason to clock driver hours was to keep track of overtime. In this manner, Republic has equated the overtime premium triggered by hours over 40 in a workweek as compensation for the down time, straight time hours within the initial 40 hours. Pursuant to this logic, a driver might work 30 hours of production time and 11 hours of non-production time in a week, triggering one overtime hour. Republic's assertion is that one hour's fifty percent overtime premium pay is deemed to compensate for the ten hours of straight time worked but not productive toward a zone rate. Republic supplied no authority for conflating straight time pay and overtime premiums.

         Contrasting Pay Structures.

         Republic's Operations Manager, Elbert “Dennis” Chapa, testified to the history of driver pay at the Corpus Christi facility. He stated that, during the time that BFI owned the business, Roll-Off Drivers were paid a day rate plus $4.00 per haul. After Allied acquired BFI, they were paid a day rate or a day rate plus a per haul amount. It was only after Republic took over that Roll-Off Drivers lost the day rate component of their pay, but instead worked for the incentive/zone/commission rates.

         Roll-Off Drivers and Long-Haul Drivers handle similar loads and work for the same zone rates. However, the Long-Haul Drivers also receive a day rate along with the zone rates. Bradley, D.E. 234, p. 56. Chapa and Bradley testified that they received this combination rate because their routes included more drive time, the loads were heavier and transport was slower, and they were limited in the number of hauls they could complete in a day-their pay was supplemented for impediments to production. Chapa, D.E. 233, p. 61; Bradley, D.E. 234, p. 56.

         Internal Confusion.

         On May 20, 2013, Sally Scordato, a Division Human Resources Manager for Republic, sent an email to Chapa asking for the Corpus Christi pay plan. “Specifically, I need to know your zone pays, day rates for RO drivers, downtime pay, help pay, landfill wait time pay etc.” Plaintiffs' Exhibit 71. Chapa responded, in part, “We do not pay downtime or landfill wait time unless Supervisor approves or has efficient reasons to authorize increase.” Id. Responding to her next email, Chapa wrote,

In what situation would a supervisor approve downtime pay . . . and what would that rate be? Depending on the downtime if driver goes down more than 4 hours and there's not an available truck, driver will get his day rate which avg.118.00 per day plus his completed hauls.

Id. Scordato then forwarded the email thread to General Manager Bradley, saying,

I guess I am still confused on the downtime and landfill wait time pay. In my previous divisions, drivers were paid wait time and downtime much sooner than 4 hours. Doesn't the downtime and wait time affect the drivers' overall pay since they more than likely will not get as many hauls due to something that was not within their control? Have we ever paid downtime less than 4 hours?

Id. There is no response to this inquiry or clarification in the record.

         Republic's Senior Corporate Counsel, Kim Bullerdick, testified that in late 2012 or early 2013, he was advised by outside counsel experienced in wage and hour law about piece rates in California. He was advised that California law required a specific agreement with respect to the amount to be paid for non-production time. That discussion, Bullerdick testified, gave him the impression that California law was different from the requirements of the FLSA in that respect. D.E. 235, pp. 28-29, 31. So he believed that the FLSA does not require an agreement or understanding with respect to compensation for non-production time and no Texas law contradicted that.

         Bullerdick admitted that the specific question of the FLSA requirements was not addressed expressly. It was only implied. He testified that he did not seek any legal opinion on whether the Corpus Christi pay plan complied with the FLSA and did not recall ever seeing the pay plan prior to this lawsuit being filed. D.E. 235, pp. 38, 41. He was not aware of whether anyone at Republic ever sought or obtained an opinion regarding the Corpus Christi pay plan prior to settling the Rodriguez[10] case in San Antonio. And when an opinion was sought, it was clear that the lawyers did not have the full parameters of how the Corpus Christi area drivers were actually being paid, as opposed to what was set out in the pay plan. See Plaintiffs' Exhibit 32.

         Questions About Non-Production Time.

         The drivers testified that no one ever explained to them that zone rates included any non-production time. Rincon, D. E. 234, pp. 123-24; Baca, D.E. 234, pp. 202-03. They consider their pay, based on what they have to do to earn it, to include bump-and-dump time-what it takes to get a landfill ticket on which the zone rate is earned. Serrano, D.E. 234, pp. 83-84, 107; Rincon, D.E. 234, p. 127; Baca, D.E. 234, pp. 221-22; Sanchez, D.E. 234, pp. 224-25. So when they encountered a lot of down time, they would complain to their supervisor and would be told, “I'll take care of you, ” “Talk to Dennis, ” or they would be ignored.[11]

         Jose Baca testified that he complained to Supervisor Larry Kelly and was told to ask Dennis. He had meetings with Dennis Chapa and got no resolution of the issue. Then he had an encounter with Bradley at the recycling center and asked about down time compensation. Bradley indicated that he knew they did not get extra pay for down time but did not offer any explanations for how the zone rates were supposed to compensate for that. Baca complained that they could pick up two boxes a block apart and have a smooth two-hour trip to the landfill for one and a delayed five-hour trip for the other, but get paid no more than they did for the two-hour job. Baca, D.E. 234, pp. 213-14.

         Andrew Benavidez testified that he asked two supervisors about getting paid extra compensation for hauls from refineries because of the additional time it takes to get in and out of those facilities. But he did not get clear answers about how he was supposed to be paid for that additional time. Rene Sanchez asked Supervisor Larry Kelly, who responded, “Talk to the man, ” meaning Dennis Chapa. He also asked Supervisor Ray Medrano, who said “Write it down, ” referencing the route sheet. But the time written down did not bring extra compensation.

         II. The FLSA Requires an Agreement

         Relying primarily upon 29 C.F.R. § 778.318, Plaintiffs contend that the FLSA requires that there be an agreement between the employer and employee with respect to compensation for non-productive time when the employer uses a piece rate pay structure. Republic contends that the FLSA does not require an agreement regarding payment for non-productive time and that the Department of Labor (DOL) interpretations embodied in § 778.318 are neither regulations nor binding.

         These competing positions each have their place in an FLSA analysis. It is true that, despite § 778.318, the FLSA does not require an employer to pay a certain amount for non-production time in straight-time calculations. See DOL Opinion Letter, 1981 DOLWH LEXIS 10 (July 14, 1981). These “gap time” claims are not cognizable under the FLSA. Karna v. BP Corp. North America, Inc., 11 F.Supp.3d 809, 817 (S.D. Tex. 2014); The statute does not provide a cause of action for straight-time pay unless, and to the extent that, it falls below the minimum wage. Plaintiffs do not seek straight time compensation here.

         The statement in § 778.318(a) that such non-production time must be counted and paid for has only two purposes: (1) to ensure that all time worked is paid at a rate of at least the minimum wage; and (2) to ensure that all time worked counts toward the maximum hours/overtime requirements. Those two purposes are satisfied by Republic's pay structure. The Court rejects any suggestion that Plaintiffs seek or would be entitled to damages for straight-time pay in an FLSA gap claim.

         Where § 778.318 does come into play here is with respect to determining the regular rate for purposes of calculating overtime compensation.[12] While dividing all compensation paid by all hours worked may yield the correct regular hourly rate for most pay schemes, the FLSA requires special handling where piece rates apply. Without any definition of the number of hours included in a piece rate, the mathematical conversion to an hourly rate is uncertain and vulnerable to the dangers of detrimental labor conditions that the FLSA was intended to remedy. See generally, 29 U.S.C. § 202(a) (congressional finding and declaration of policy).

         Joe Burkel highlighted the dilemma of piece rates requiring some agreement when he responded to the question whether a pre-trip inspection is non-production time:

"Q Okay, so pre-trip would be -- is that -- what is that, where does that fall?
"A It depends on -- I don't mean to answer this way, but it kind of depends on who you answer - who you ask that question. You know, in my mind that's part of the -- part of running a route.
"Q Okay, all right. What about post-trip?
"A Same answer.
"Q Okay.
"A It could be considered, you know, non-productive because it's not actually running a route but, you know, depends on -- I don't --you know, it could be included in the incentive pay rate or it could - you know, most of the time it is as being, you know, part of the incentive.

         Burkel, D.E. 234, pp. 33-34. Bullerdick also testified to the confusing concept of non-production time: “Q: So do you understand what non-production time is? A: Yes and no. I think it's a very difficult term to put your arms around, ...

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