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Martinez v. Ranch Masonry Inc.

United States District Court, S.D. Texas, Houston Division

April 2, 2018

CARMEN A. MARTINEZ, Plaintiff,
v.
RANCH MASONRY, INC., RANCH MASONRY AND CAST STONE, LLC, JOSEFINA C. GARCILAZO, and ARTURO GARCILAZO, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          NANCY F. ATLAS SENIOR UNITED STATES DISTRICT JUDGE.

         Plaintiff Carmen A. Martinez filed this Fair Labor Standards Act (“FLSA”) case against Defendants Ranch Masonry, Inc. (“Ranch Masonry”), Ranch Masonry and Cast Stone LLC (“Ranch LLC”), Josefina C. Garcilazo, and Arturo Garcilazo. The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. The Court has personal jurisdiction over all parties, and venue is proper in the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. § 1391(b)(1) and (2).

         This case was tried to the Court on February 15 and 16, 2018. The parties presented evidence through live witnesses and documentary exhibits. Having considered the evidence introduced by the parties, all matters of record in this case, the arguments of counsel and applicable legal authorities, the Court makes the following findings of fact and conclusions of law.[1]

         I. GENERAL BACKGROUND

         Ranch Masonry was formed by Arturo Garcilazo, Sr., in 1998. Ranch LLC was formed in 2015 by Arturo Garcilazo, Sr.'s two children, Defendants Arturo Garcilazo and Josefina Garcilazo. Ranch LLC was formed to transition the family masonry business from Arturo Garcilazo, Sr. to his children. In 2015, Ranch Masonry's employees were transferred to the payroll of Ranch LLC. Ranch Masonry remained in business through 2016, staffing its projects, in part, with the same workers who transferred to Ranch LLC's payroll in 2015.

         Plaintiff Martinez was employed by Ranch Masonry from November 2012 through July 2016. Martinez was employed by Ranch LLC from its inception in 2015 through July 2016. Between November 2013 and the formation of Ranch LLC in 2015, Martinez was paid an hourly rate by Ranch Masonry for the first forty hours that he worked each workweek. After the formation of Ranch LLC in 2015, Martinez was paid an hourly rate of pay by that new entity, Ranch LLC, for the first forty hours that he worked each workweek. After forty hours of paid work in any workweek, Ranch Masonry paid Martinez a “piece rate” for any other work he performed during that workweek. During his employment with Ranch Masonry and Ranch LLC, Martinez performed various job duties, such as laborer, scaffolding, and stucco work.

         Plaintiff's claims and Defendants' defenses were tried to the Court for two days in February 2018. None of the witnesses at trial was disinterested. Defendants Josefina Garcilazo and Arturo Garcilazo testified, as did Plaintiff Carmen Martinez. Mario and Jose Palma, who testified on Plaintiff's behalf, are pursuing their own FLSA lawsuit against Defendants. See Palma, et al., v. Ranch Masonry, Inc., et al., Civil Action No. H-17-cv-2288. Defense witness David Chavez is a supervisor for Ranch LLC, and defense witness Matthew Chacon is Defendant Arturo Garcilazo's son-in-law.

         II. FAIR LABOR STANDARDS ACT

         The FLSA provides that “no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). “An employee bringing an action for unpaid overtime compensation must first demonstrate by a preponderance of the evidence: (1) that there existed an employer-employee relationship during the unpaid overtime periods claimed; (2) that the employee engaged in activities within the coverage of the FLSA; (3) that the employer violated the FLSA's overtime wage requirements; and (4) the amount of overtime compensation due.” Johnson v. Heckmann Water Resources (CVR), Inc., 758 F.3d 627, 630 (5th Cir. 2014).

         It is undisputed, and the Court finds, that during the years 2013 through 2016, Ranch Masonry was an enterprise engaged in commerce within the meaning of the FLSA. It is similarly undisputed, and the Court finds, that in 2015 and 2016, Ranch LLC was an enterprise engaged in commerce within the meaning of the FLSA.

         The parties dispute whether there existed an employer-employee relationship during the unpaid overtime periods claimed. Defendants assert that during any time Plaintiff worked in excess of forty hours per workweek, he worked as an independent contractor and not as an employee. Plaintiff asserts that Ranch Masonry and Ranch LLC were joint employers, and that Plaintiff was an employee during the overtime hours.

         The parties dispute whether Defendants violated the FLSA's overtime wage requirements. As noted above, Defendants assert that Plaintiff was working as an employee of Ranch LLC for the first forty hours, and then was working as an independent contractor for Ranch Masonry during the overtime hours.

         The parties dispute the number of overtime hours Plaintiff worked, and the amount of overtime compensation due, if any. There are also disputes regarding whether any violation was willful and thus the statute of limitations is extended to three years, and whether Defendants acted in good faith so that liquidated damages should be reduced or not awarded.

         III. “EMPLOYER

         The FLSA defines “employer” expansively to include any person acting directly or indirectly in the interest of an employer in relation to an employee. See 29 U.S.C. § 203(d). The parties dispute whether Martinez, when working in excess of forty hours per workweek, was an employee or an independent contractor. Additionally, Plaintiff argues that Ranch Masonry and Ranch LLC were joint employers of Plaintiff.

         A. Employee or Independent Contractor

         To determine if a worker qualifies as an employee for purposes of an FLSA claim, the focus is on “whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.” Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008); see also Gray v. Powers, 673 F.3d 352, 354-55 (5th Cir. 2012) (citing Williams v. Henagan, 595 F.3d 610, 620 (5th Cir. 2010); Watson v. Graves, 909 F.2d 1549, 1553 (5th Cir. 1990)). There are five factors relevant to this inquiry: “(1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker's opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship.” Hopkins, 545 F.3d at 343. No. single factor is determinative, and these factors are a non-exhaustive list “used to gauge the economic dependence of the alleged employee.” Id.

         Defendants' Pay Structure.- Defendants structured the work performed for them by separating work hours between Ranch LLC and Ranch Masonry. Defendants claim that for each workweek, the first forty hours an individual worked were as an “employee” of Ranch LLC, and any hours in excess of forty were worked for Ranch Masonry as an independent contractor. Defendants presented evidence that Ranch LLC's employees were allowed to work only forty hours per week. Defendants' witnesses testified that once the forty-hour limit was reached in a given week, the employee was no longer permitted to work for Ranch LLC during that week. Defendants presented evidence that, if a Ranch LLC employee wanted to perform additional work, he could request an assignment from Ranch Masonry. Ranch LLC paid its employees for the forty-hour workweek, and Ranch Masonry would issue a separate check to any worker who requested and received additional work during that workweek. Plaintiff signed neither an employment contract with Ranch LLC nor an independent contractor agreement with Ranch Masonry.

         The Court finds that there was no clear break between the work performed for Ranch LLC and any subsequent work for Ranch Masonry. The Court does not credit Defendants' evidence that the supervisors knew when an employee reached the forty-hour limit and would then refuse to allow that employee to work additional hours for Ranch LLC. The Court finds that Ranch LLC employees often continued to perform the same work at the same jobsite, regardless of whether they asked to continue working beyond the forty-hour mark.

         Hopkins Factors.- Regarding the degree of control exercised over Plaintiff in connection with his work, control is significant only to the extent that a worker has such control over a meaningful part of his work that he stands as a separate economic entity. See Hopkins, 545 F.3d at 343. The Court finds that Arturo Garcilazo gave Plaintiff the work assignments for both Ranch LLC and Ranch Masonry, and that sometimes the assignments would be at the same location. Defendants presented evidence that Plaintiff could control his work because he would not be given any work assignment beyond the forty-hour workweek unless he specifically requested additional work. However, as noted above, the Court does not find credible Defendants' evidence regarding the forty-hour limit for Ranch LLC work or the requirement that additional work be requested and be performed for Ranch Masonry. The Court finds that Plaintiff's work was supervised both when working the first forty hours and when he worked beyond the first forty hours.

         Regarding the relative investment factor, the Court compares Plaintiff's individual investment to that of the alleged employer. See Id. at 344. It is undisputed that Plaintiff (and other laborers) supplied basic work tools, with a total cost between $100 and $250. The Court finds that this is a minimal investment relative to the investment of Defendants in Ranch LLC and Ranch Masonry of substantial materials, equipment and supervisory and administrative staff.

         Regarding the degree to which Plaintiff's opportunity for profit or loss is determined by Ranch Masonry, the Court finds that Plaintiff did not share in Ranch Masonry's profits, and that Plaintiff did not perform work for any company other than Ranch Masonry and Ranch LLC. Defendants presented evidence that Plaintiff's profit on the work performed for Ranch Masonry, for which he was paid a piece rate, could increase if he worked more quickly. The Court finds, based on Arturo Garcilazo's testimony, that the inspection of workers' “piece work” was superficial and insufficient to evaluate meaningfully the pace of the work. At best, it appears Arturo Garcilazo would look at the work and “guess-timate” how much work had been performed by each worker.

         Defendants also presented evidence that Plaintiff could suffer a loss if his work was not of acceptable quality, in which case he would have to redo the work at his own expense. Defendants' witnesses described only one instance in which work may have had to be redone, and the ...


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