In this day and age, finding a court to deny conditional certification of a proposed FLSA class is sometimes about as difficult as successfully remaking a classic Hollywood western with modern actors and sensibilities. But, just as the Coen Brothers’ True Grit continues to surprise audiences and critics alike as one of the finest remakes in years, the recent decision in Botello v. COI Telecom, LLC, Case No. SA-10-CV-305-XR, from the Western District of Texas, has proven that not everything turns out the way you would expect.
The court in Botello considered the plight of a group of Field Service Technicians (FST) or former FSTs of the defendants. The plaintiffs opened fire with both barrels and alleged that COI and Time Warner violated the FLSA when they failed to pay overtime wages, and that they violated ERISA when they denied the plaintiffs pension, health, disability, and other benefits. Additionally, the FSTs loaded their wagon with a slew of other claims, as well, including unjust enrichment, deceptive trade practices, negligent misrepresentation, promissory estoppel, and fraud.
While the story of the FSTs and the defendants could be told in campfire tale fashion, it would be a tedious one filled with talk of direct control of duties. COI provided telecommunications and fiber optics systems integration in the Texas area. Sometime in late 2003 or early 2004, it re-characterized its relationship with FSTs from employees to independent contractors. One of COI’s customers was Time Warner, which entered into an Installation Services Agreement with COI. Included in that agreement was a paragraph requiring any disputes to be submitted to binding arbitration (a fact which, like the pursuit of Lucky Ned’s gang to the silver mine, ultimately led to a dead end).
Several pages of the court’s decision are devoted to describing the myriad ways that Time Warner exerted control over the independent contractors. In no particular order, and certainly not encompassing the entire gamut of examples provided, the plaintiffs testified that: 1) they were subject to being “fired” by Time Warner; 2) they had their homes checked for any illegal cable hookups prior to hiring; 3) FSTs could only wear headgear that had Time Warner or COI on the cap; 4) FSTs were required to wear a badge that designated them as a Time Warner contractor; 5) they were fined if they were not wearing hats that said COI when climbing utility poles; 6) they were required to display magnetic signs on their vans with COI’s logo and Time Warner’s phone number; 7) some FSTs were required to use a portable device that would transmit information directly to Time Warner regarding jobs and invoices; 8) and if someone needed to change their daily assignments, they needed approval from COI or Time Warner.
Keeping all of that (and more) in mind, the plaintiffs requested the court certify a class on their ERISA and unjust enrichment claims under Rule 23. Among other things, the defendants argued that some of the plaintiffs were bound by the aforementioned arbitration agreement, while others were not. Using the analysis provided by Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), however, the court determined that the arbitration agreements in and of themselves did not preclude plaintiffs from seeking that a court certify a class and adjudicate a class claim.
Galloping along, the court also concluded that the proposed class members were not harmed in substantially the same manner, as many of the FSTs chose not to purchase health insurance, and the plaintiffs could not agree whether the purchase of equipment from COI was optional or mandatory and whether or not financing was available.
More importantly, perhaps, to the realm of employment law was the court’s decision on the plaintiffs’ motion for conditional class certification. As mentioned above, the plaintiffs moved to allow the FLSA claim to proceed as a collective suit, and thus receive the names, addresses, and telephone numbers of the potential class members to effectively distribute notice. The court employed the Lusardi approach, and began the trademark Lusardi analysis by looking only at the pleadings and affidavits to determine whether notice should be sent out. Because so many courts, at least at times, seem to view this first stage as merely a formality on the way towards progressing into the discovery phase of the action, the court’s decision not to conditionally certify the collective action sounded like a gunshot in the middle of night, and it may prove helpful to employers defending similar lawsuits in the future.
When considering whether or not to grant conditional certification for discovery purposes, the court agreed that the plaintiffs made a “plausible” argument that they were improperly characterized as independent contractors, and that both COI and Time Warner were joint employers. The court pointed out, however, that other issues should be taken into consideration—namely, that FSTs working in San Antonio were treated differently than those working in other cities, and that the same was true for FSTs working in Austin. It therefore determined that conditional certification was not appropriate, as the collective action members would not be similarly situated. In many ways, the court’s determination sounds almost like a second stage analysis in the Lusardi paradigm, albeit only with the benefit of reading the initial pleadings and affidavits.
Ultimately, just as Mattie Ross gets her revenge on Tom Cheney (SPOILER ALERT), Time Warner had its day, as well, when the court granted it partial summary judgment on various ERISA and unjust enrichment issues. And when the dust cleared from the denial of conditional certification and the Rule 23 certification, only a handful of claims are left against the various defendants.
The Bottom Line: While it has become less common for a court to deny conditional certification, Botello now stands as a recent example that courts can (and do) find that plaintiffs are not substantially similar based solely on the pleadings and affidavits alone.