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Flores v. Velocity Express, LLC

United States District Court, N.D. California

April 24, 2017

PHILLIP FLORES, ET AL., Plaintiffs,
v.
VELOCITY EXPRESS, LLC, et al., Defendants.

          ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT Re: ECF No. 241

          JON S. TIGAR United States District Judge

         Before the Court is Plaintiffs' motion for partial summary judgment as to misclassification and willfulness. ECF No. 241. The Court will grant the motion in its entirety.

         I. BACKGROUND

         In this collective action, Plaintiffs allege that Defendants violated the Fair Labor Standards Act (“FLSA”) and California law by misclassifying their drivers as independent contractors. The following facts are undisputed except where noted.

         A. Defendants

         Beginning in December 2009, Defendant Velocity Express, LLC (“Velocity”) began operating its delivery logistics, freight forwarding, and brokering business. Wheeler Decl., ECF No. 44-1 at 3, ¶ 3. In its standard services proposal to its customers, Velocity described itself as “America's largest national ground shipping provider dedicated exclusively to regional delivery.” ECF No. 242-6 at 2. Velocity's managerial employees testified that Velocity was primarily a delivery business. See Curcuru Depo., ECF No. 242-12 at 70-71 (characterizing Velocity's business as “[d]elivering product to the end user”); Healey Depo., ECF No. 242-16 at 4-5 (affirming that “the general operation of [Velocity] is just to move products from one destination to the next destination”). Velocity went defunct in December 2013. ECF No. 150 at 5.

         Defendant TransForce, Inc. (“TransForce”) is a transportation logistics company. ECF No. 150 at 6-7. Defendant Dynamex, Inc. (“Dynamex”) is a transportation service provider and a subsidiary of TransForce. Id TransForce and Dynamex purchased Velocity in 2012, before Velocity went defunct. ECF No. 147 at 6.

         B. Velocity's Driver Requirements

         Velocity did not own its own vehicles, but rather hired drivers as independent contractors to perform delivery services. Wheeler Decl., ECF No. 44-1 ¶ 6.

         To qualify as a driver, an individual had to meet the minimum age requirements, have a car and a valid driver's license, speak English, and pass the required background and drug screens. ECF No. 242-59; Odud Depo., ECF No. 242-7 at 126-128; see also, ECF No. 242-34 at 3. Drivers were also required to successfully complete a Department of Transportation-required road rest and obtain insurance that complied with Velocity's insurance requirements (at least an A- rating) or, alternatively, enroll in Velocity's insurance program. ECF No. 242-59; Healey Depo., ECF No. 242-16 at 18-20. Velocity penalized drivers who did not meet its insurance requirements by deducting $50 per week from their pay. ECF No. 242-23. An individual did not need to have any particular level of education, specialized training, or special license to be a driver for Velocity. Healey Depo., ECF No. 242-16 at 36-37.

         C. Independent Contractor Agreement

         Before a driver began working for Velocity, he or she was required to sign the “Independent Contractor Agreement for Transportation Services.” ECF No. 242-9; Odud Depo., ECF No. 242-7 at 108-09; Wheeler Depo., ECF No. 242-8 at 7. All three bellwether Plaintiffs[1]signed this agreement. See ECF Nos. 242-78, 242-27, 242-30 at 3.

         Pursuant to that agreement, the driver “shall provide and use for the performance of his services hereunder a lawfully registered and safe vehicle capable of satisfying [Velocity's] and its customers' Control and Custody standards.” Id ¶ 8(a). Drivers are also “required to satisfy customer contractual requirements regarding drivers' qualifications, such as minimum age, experience, good driving records, criminal history, drug screening, etc.” Id In addition, drivers “shall obtain appropriate signage for its motor vehicle” consistent with customer expectations. Id. ¶ 8(d). Drivers were also required to “wear the appropriate uniform at all times while performing services under this Agreement.” Id ¶ 12. Drivers and any substitute drivers that they employed were required to comply with Velocity's substance abuse policy, Velocity's drivers' qualification policy, and all similar customer qualification requirements. Id ¶ 16.

         The agreement was for a monthly term that automatically renewed unless terminated by either party. ECF No. 242-9 ¶ 2; Wheeler Depo., ECF No. 242-8 at 7-8. The agreement could be terminated at any time and for any reason by either party with fourteen days prior written notice to the other party. ECF No. 242-9 ¶ 18. Velocity also had the right to terminate the agreement at any time with five days notice if it determined in its sole discretion that the route was no longer profitable. Id If either party committed a material breach of the agreement, the other party could immediately terminate the agreement. Id

         D. Velocity's Right to Control Drivers' Work

         Velocity negotiated directly with potential customers, designed the delivery routes, and determined what the route would pay before they hired a driver to perform the route. Wheeler Depo., ECF No. 242-8 at 67-68, 5-6; Curcuru Depo., ECF No. 242-12 at 11-12; Healey Depo., ECF No. 242-16 at 2 (testifying that the operations manager “design[s] the routes”). Once the route was established, Velocity advertised to find a driver to work the route. Wheeler Depo., ECF No. 242-8 at 66-68.

         Velocity required its drivers to wear a Velocity uniform and an identification badge. See ECF No. 242-9 at 5; ECF No. 242-31.[2] Several of Velocity's managerial employees admit that Velocity required drivers to wear uniforms pursuant to customer requirements. Healey Depo., ECF No. 242-16 at 21; Odud Depo., ECF No. 242-7 at 25; Curcuru Depo., ECF No. 242-12 at 41-42. Certain customers also required the drivers to place signage on their vehicles. ECF No. 245 1 at 266; Odud Depo., ECF No. 242-7 at 95- 104 (discussing signage requirements). For example, one of Velocity's customers expected drivers to comply with best practices regarding “[s]ignage” and “[professional appearance Both Driver & Vehicle.” ECF No. 242-40 at 13.

         Velocity gave its drivers a manifest each day that told them what packages to deliver by what time. Healey Depo., ECF No. 242-16 at 38.[3] And Velocity's drivers were required to deliver their packages by a certain time pursuant to customer requirements. Odud Depo., ECF No. 242-7 at 55-56, 73; Healey Decl., ECF No. 245-1 at 262, ¶ 4; Curcuru Depo., ECF No. 242-12 at 26-27. Before making their deliveries, drivers had to arrive at Velocity's warehouse to scan and load parcels, which could take up to two or more hours. Odud Depo., ECF No. 242-7 at 48, 50, 55-61, 48. Some drivers were also required to return to the warehouse at the end of the day. Id at 29, 79.

         Velocity required drivers to follow a series of rules when delivering products to its customers. Odud Depo., ECF No. 242-7 at 23. Some of these “standard operating procedures” were developed by Velocity's customers, and Velocity enforced its own standard operating procedures as well. See Curcuru Depo., ECF No. 242-12 at 59-63 (discussing standard operating procedures regarding building security). Drivers were expected to comply with standard operating procedures regarding building security and, in some cases, best practices regarding customer service. ECF No. 242-37; ECF No. 242-40. Velocity also briefed its drivers on “the Velocity Promise” regarding customer service expectations. Odud Depo., ECF No. 242-7 at 22-23. Regardless of whether drivers elected to purchase separate insurance or enroll in Velocity's insurance program, they were required to report even minor accidents to Velocity. Wheeler Depo., ECF No. 242-8 at 71-72.

         E. Plaintiff James Mack

         Plaintiff James Mack worked for Velocity in San Diego for approximately four or five years. Mack Depo., ECF No. 242-28 at 1-3, 7-8, 41, 61. While he was working for Velocity, Mr. Mack worked five or six days a week, depending on the time of year, from around 4:00 a.m. until 7:00 p.m. Id at.61-63, 21-24.

         To perform services for Velocity, Mr. Mack invested in two vans and, a rental truck, and a Velocity shirt. Id at 36-37, 55-56. Mr. Mack also purchased insurance through Velocity's insurance program, the payments for which were deducted from his weekly settlement check. Id. at 46-47. Mr. Mack hired his wife and son as helpers while working at Velocity, both of whom had to go through Velocity's hiring process. Id at 25-30, 34.

         Mr. Mack would start his work day at Velocity's San Diego warehouse, where he was required to sort and scan his packages for the day and load them onto his vehicle. Id at 9-12. Before Velocity used scanners, it provided Mr. Mack with a paper log that he was required to fill out and turn into Velocity on a weekly basis. Id at 13-15. Mr. Mack also ended his day at the warehouse, where he unloaded any returns and scanned packages back in. Id at 9-12, 17. While performing work for Velocity, Mr. Mack was required to wear a Velocity uniform and identification badge and place a magnetic sign on his vehicle. Id at 10-13, 55-56.[4]

         During the first “couple of months” that Mr. Mack provided services to Velocity, he also provided services to another company, Central Freight. Id at 1-2. In addition, Mr. Mack did a few short-term assignments for other companies during his last three months of employment with Velocity. Id at 32. Other than that, Mr. Mack testified that he did not perform work for any other company and that 100 percent of his income came from Velocity. Id at 37-38. He further testified that, although he could have worked for another company while he was working for Velocity, he “didn't have enough time.” Id Mr. Mack eventually started looking for another job because Velocity was going out of business. Id at 31.

         F. Plaintiff Claude Boconvi[5]

         Plaintiff Claude Boconvi began providing services for Velocity in January 2011. Boconvi Depo., ECF No. 242-14 at 60. Mr. Boconvi worked exclusively for Velocity for approximately six weeks, during which time he worked Monday through Friday between 6:00 a.m. and 8:00 p.m. or 9:00 p.m., and sometimes as late as 10:15 p.m. Boconvi Depo., ECF No. 242-14 at 1-2, 4-6, 9, 49-50.

         To perform services for Velocity, Mr. Boconvi purchased a used van for less than $10, 000, two dollies for less than $300 total, a uniform for under $50, and an employer identification number for approximately $9. Id at 14-17, 29; ECF No. 245-1 at 103. Mr. Boconvi also purchased insurance through Velocity's insurance program, the payments for which were deducted from his weekly settlement check. Boconvi Depo., ECF No. 242-14 at 17-18. Mr. Boconvi testified that he never hired a helper because he could not afford it. Id at 56.

         Velocity assigned Mr. Boconvi a route making deliveries between Houston and Huntsville, Texas. Id at 1-2, 39. Mr. Boconvi asked for another route during his first couple of days because his assigned route had too many stops, but he was told that there were no other routes available. Id at 39-41. Defendants also gave Mr. Boconvi a manifest each day listing all of the stops on his route. Id at 43. Mr. Boconvi followed the sequence listed on the manifest for the first two weeks, but then he began delivering out of sequence to be more efficient. Id at 44-45. At each stop, Mr. Boconvi was required to gather a signature on his manifest list. Id at 52-53. At the end of the day, Mr. Boconvi had to return to the warehouse to turn in the signed manifest and drop off any returned mail. Id at 35, 38. Mr. Boconvi was required to wear a uniform while providing services to Velocity, but he did not have any Velocity signage on his vehicle. Id at 55-56. Because Velocity had not started using scanners yet, Plaintiff Boconvi was not required to use a scanner. Id at 102.

         Mr. Boconvi testified that he could not provide services for any other companies while he was working at Velocity because he was “working all day from 6:00am to 10:00.” Id at 57. Mr. Boconvi testified that he stopped working at Velocity because he had a transmission problem with his van and did not have enough money to repair it. Id at 63.

         G. Plaintiff Charles Chambers

         Plaintiff Charles Chambers began providing services to Velocity through his company, Titan Trucking Services, in approximately April 2010. Chambers Depo., ECF No. 242-25 at 14-15. He worked for Velocity for about a year or a year and a half, during which time his routes typically ran Monday through Friday for between twelve and a half to fourteen hours each day. Id. at 82, 29, 41.

         To perform his work for Velocity, Mr. Chambers purchased two box trucks (one $3, 000 and one unknown price), uniforms, carrying straps ($40), blankets, tie down straps ($30), and safety equipment like fire extinguishers, extra fuses, flares, and a log book. Id at 12-14, 43-44, 85-87. Velocity helped Mr. Chambers to obtain the necessary insurance. Id at 72-73. Mr. Chambers hired his cousin and his friend to help him, and he testified that Velocity could have rejected his helpers if they didn't meet Velocity's requirements. Id at 32, 95.

         Velocity told Mr. Chambers which routes were available for a given day and how much each route would pay. Id at 24-25, 38. Mr. Chambers testified that he could turn down routes, but that he “didn't turn down too many” for revenue purposes. Id Mr. Chambers began his day at the warehouse, where he loaded his truck for about half an hour. Id at 42. Velocity also gave him paperwork listing all of the stops on the route and the time at which each package had to be delivered. Id at 93-94. While providing services to Velocity, Mr. Chambers was required to wear a uniform and to place Velocity signage on his vehicle. Id at 73, 8, 44-45.

         Chambers testified that he sometimes performed “freelance” work on the side for individuals while he was working for Velocity, such as moving a couch, but that he did not provide services for any other companies during his time at Velocity. ECF No. 242-25 at 45-46, 57. He further testified that the majority of his income came through Velocity and that it was “hard” to work for another company because “you're driving so many hours a day and you get back, get a little bit of rest and you're gone again.” Id at 46-47.

         H. Defendants' Knowledge of Litigation Risk Associated with Independent Contractor Classification

         As early as 2008, the Judicial Panel on Multidistrict Litigation consolidated eight different actions against Velocity that “share[d] factual questions arising from the classification of certain package delivery drivers as independent contractors rather than employees.” ECF No. 244-78.

         In 2012, when TransForce and Dynamex were in the process of acquiring Velocity, due diligence revealed that there was a significant litigation risk related to Velocity's classification of its delivery drivers as independent contractors. Leveridge Depo., ECF No. 242-11 at 5-7; Langlois Depo., ECF No. 242-71 at 1-5; Smith Depo., ECF No. 244-68 at 8; ECF No. 244-77 at 3, 54 (noting that “the issue of I/C vs Employee Status is one risk that they have to deal with on a regular basis” and that “the IC vs Employee issue is a major risk for the company”). Specifically, Velocity's disclosures revealed that Velocity was appealing two decisions in which state regulatory boards in New York and Washington concluded that Velocity's drivers were employees, not independent contractors, for the purpose of state unemployment and workers' compensation, respectively. Langlois Depo., ECF No. 242-71 at 6-17; see also, ECF No. 242-73 (disclosing pending litigation). Those disclosures further revealed that the Washington state decision prompted an audit by the Washington State Department of Labor and Industries. ECF No. 242-73 at 2-3. Defendants also knew that there was a pending collective action against Velocity in the Northern District of California. See Smith Depo., ECF No. 244-68 at 1-4, 15; Langlois Depo., ECF No. 242-71 at 16-17; ECF No. 242-73 at 2 (disclosing “[c]ollective/class action instituted by two IC drivers . . . alleging Fair Labor Standards violations in conjunction with misclassification as independent contractors”).

         I. Procedural Posture

         On November 9, 2012, Plaintiffs brought this case as a collective action under the Fair Labor Standards Act (“FLSA”) and as a class action pursuant to California's Labor Code and Unfair Competition Law. ECF No. 1, ¶ 1.

         In the operative Fourth Amended Complaint, ECF No. 140 (“FAC”), Plaintiffs allege that Defendants misclassified their delivery drivers as independent contractors when they were, in fact, employees. Id., ¶ 3. Because of this misclassification, Plaintiffs allege that Velocity Express failed to pay Plaintiffs minimum wages and overtime. Id. ¶¶ 2, 3. Plaintiffs assert the following causes of action: (1) failure to pay minimum wage under the FLSA (29 U.S.C. § 201, et seq.); (2) failure to pay overtime wages under the FLSA (29 U.S.C. § 201, et seq.); (3) failure to pay minimum wage and overtime under California law (California Labor Code §§ 510, 1194 and IWC Wage Order No. 9); (4) willful misclassification of individuals as independent contractors under California law (California Labor Code § 226.8); (5) failure to provide meal periods (California Labor Code §§ 226.7, 512 and IWC Wage Order No. 9); (6) failure to provide mileage reimbursement (California Labor Code § 2802); (7) failure to furnish accurate wage statements (California Labor Code §§ 226, 226.3 and IWC Wage Order No. 9); (8) failure to keep accurate payroll records (California Labor Code §§ 1174, 1174.5 and IWC Wage Order No. 9); (9) waiting time penalties (California Labor Code §§ 201-203); (10) violation of California Business and Professions Code, § 17200, and the Unfair Competition Act; and (11) federal common law successor liability as to Defendants Dynamex and Transforce. Id.

         On June 3, 2013, the Court conditionally certified a collective action under the FLSA. ECF No. 57. On April 16, 2015, the Court granted partial summary judgment for Plaintiffs on the issue of successor liability as to Defendants TransForce and Dynamex, but denied Plaintiffs' motion for partial summary judgment as to Defendants' joint-employer status. ECF No. 156. The parties agreed to conduct three bellwether trials. ECF No. 188.

         Plaintiffs now move for partial summary judgment as to misclassification and willfulness with respect to bellwether Plaintiffs Claude Boconvi, Charles Chambers, and James Mack. ECF No. 241.

         II. MOTION FOR PARTIAL SUMMARY JUDGMENT

         Plaintiff moves for partial summary judgment on the following three issues: (1) whether all three bellwether Plaintiffs were misclassified as independent contractors under FLSA; (2) whether bellwether Plaintiff Mack was misclassified as an independent contractor under the California Labor Code; and (3) whether Defendants willfully misclassified the bellwether Plaintiffs. ECF No. 241.

         A. Legal Standard

         Summary judgment is proper when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by” citing to depositions, documents, affidavits, or other materials. Fed.R.Civ.P. 56(c)(1)(A). A party also may show that such materials “do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(B). An issue is “genuine” only if there is sufficient evidence for a reasonable fact-finder to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248- 49 (1986). A fact is “material” if the fact may affect the outcome of the case. Id. at 248. “In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and is required to draw all inferences in a light most favorable to the non-moving party.” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997).

         Where the party moving for summary judgment would bear the burden of proof at trial, that party bears the initial burden of producing evidence that would entitle it to a directed verdict if uncontroverted at trial. See C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000). Where the party moving for summary judgment would not bear the burden of proof at trial, that party bears the initial burden of either producing evidence that negates an essential element of the non-moving party's claim, or showing that the non-moving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial. If the moving party satisfies its initial burden of production, then the non-moving party must produce admissible evidence to show that a genuine issue of material fact exists. See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). The non-moving party must “identify with reasonable particularity the evidence that precludes summary judgment.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). Indeed, it is not the duty of the district court to “to scour the record in search of a genuine issue of triable fact.” Id. “A mere scintilla of evidence will not be sufficient to defeat a properly supported motion for summary judgment; rather, the nonmoving party must introduce some significant probative evidence tending to support the complaint.” Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997) (citation and internal quotation marks omitted). If the non-moving party fails to make this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         B. ...


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