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Coldwell v. Ritecorp Environmental Property Solutions

United States District Court, D. Colorado

May 4, 2017

JEFF COLDWELL, and ISAAC MERTENS, individually and on behalf of all others similarly situated, Plaintiffs,
RITECORP ENVIRONMENTAL PROPERTY SOLUTIONS, a Colorado corporation, formerly d/b/a PESTRITE, and ESG ACHIEVEMENT, INC., a Utah corporation, Defendants.



         This matter comes before the court on Plaintiffs' Motion for Equitable Tolling of the Statute of Limitations (“Motion for Tolling”) [#27, filed October 27, 2016] and Defendant ESG Achievement, Inc.'s Motion for Summary Judgment. [#32, filed December 29, 2016]. The Motions are before the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(c) and the Order of Reference dated September 16, 2016 [#15]. The court has carefully considered the Motions and related briefing, the entire case file, the applicable case law, and the comments offered by counsel during the April 27, 2017 Motion Hearing. For the following reasons, the court GRANTS the Motion for Summary Judgment and DENIES the Motion for Tolling.


         Plaintiffs Jeff Coldwell and Isaac Mertens initiated this action on August 5, 2016, by filing a Complaint asserting a collective action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b), for unpaid overtime wages on behalf of themselves and all others similarly situated. [#1]. Plaintiffs also assert a violation of the Colorado Wage Claim Act, Colo. Rev. Stat. § 8-4-101 et seq. On August 31, 2016, Defendant ESG Achievement, Inc. (“ESG”) filed an Answer. [#11]. On September 28, 2016, Defendant Burns Family Investments & Holdings (“RiteCorp”) filed an Answer. [#19]. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331.

         Plaintiffs are residents of Weld County, Colorado and allege that they are or were employed by ESG and RiteCorp (collectively, “Defendants”) as pest controllers. [#1 at ¶¶ 1, 7-8]. On September 30, 2016, the court held the first of two Scheduling Conferences, and discussed with the Parties the utility of a phased discovery plan and pursuing summary judgment on the threshold issue of whether ESG qualifies as an “employer” of Plaintiffs. See [#21]. On October 17, 2016, the court held the second Scheduling Conference, at which the undersigned set certain pre-trial dates and deadlines for a three-phrase discovery process. See [#25, #26]. Specifically, during the first phase the court would determine whether ESG is a proper defendant; during the second phase the court would determine whether the action should be conditionally certified as a collective action; and the Parties would engage in merits and damages discovery during the third phase. [Id.] The Scheduling Order permits Plaintiffs to file a motion for conditional certification no earlier than April 4, 2017.

         On October 27, 2016, Plaintiffs filed the Motion for Tolling, asking the court to toll the applicable statute of limitations from the date of the entry of the Scheduling Order until 90 days after potential opt-in plaintiffs receive notice of the lawsuit or the court denies the notice, on the basis that “potential opt-in plaintiffs are exposed to significant prejudice and risk their claims expiring during the early discovery phases.” [#27 at 2]. On November 21, 2016, RiteCorp filed its Response [#28], in which ESG joins. See [#29]. Plaintiffs did not file a Reply.

         On December 29, 2016, ESG filed the Motion for Summary Judgment, arguing that it cannot be liable under Plaintiffs' claims because it is not Plaintiffs' employer for the purposes of the FLSA. See [#32]. Plaintiffs filed a Response on January 19, 2017 [#33], and ESG filed a Reply on February 2, 2017. [#35]. This court held oral argument on the Motion on April 27, 2017. [#44].


         I. Motion for Summary Judgment

         A. Legal Standard

         Summary judgment is appropriate only if “the 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). “A ‘judge's function' at summary judgment is not ‘to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.'” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986)). Whether there is a genuine dispute as to a material fact depends upon whether the evidence presents a sufficient disagreement to require submission to a jury or conversely, is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 248-49. See also Stone v. Autoliv ASP, Inc., 210 F.3d 1132, 1136 (10th Cir. 2000); Carey v. U.S. Postal Service, 812 F.2d 621, 623 (10th Cir. 1987). A fact is “material” if it pertains to an element of a claim or defense; a factual dispute is “genuine” if the evidence is so contradictory that if the matter went to trial, a reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248. “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat. Bank of Ariz. v. Cities Service Com, 391 U.S. 253, 289 (1968)).

         In reviewing a motion for summary judgment the court views all evidence in the light most favorable to the non-moving party. See Garrett v. Hewlett-Packard Co., 305 F.3d 1210, 1213 (10th Cir. 2002). However, the nonmovant “may not rest upon mere allegation or denials of [the] pleadings, but must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. Conclusory statements based merely on speculation, conjecture, or subjective belief are not competent summary judgment evidence. See Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004). The nonmoving party's evidence must be more than “mere reargument of [its] case or a denial of an opponent's allegation” or it will be disregarded. See 10B Charles Alan Wright, et al., Federal Practice and Procedure § 2738 at 356 (3d ed. 1998). Ultimately, however, the court may not enter summary judgment unless Defendant carries its burden under Rule 56 of the Federal Rules of Civil Procedure. See Reed v. Bennett, 312 F.3d 1190, 1194-95 (10th Cir. 2002). See also Fed. R. Civ. P. 56(a).

         B. Undisputed Material Facts

         The following facts are uncontroverted or viewed in the light most favorable to Plaintiffs as the nonmoving parties. RiteCorp operated a pest control and extermination business. In November 2005, RiteCorp executed a Subscriber Service Agreement with ESG (“Subscriber Agreement”). [#32 at 3, ¶ 2; #33 at 2-3, ¶ 2; see also #33-1]. ESG is a Professional Employer Organization (“PEO”).[1] [#32 at 2, ¶ 1; #33 at 2, ¶ 1; see also #32-2; #32-11]. Under the Subscriber Agreement, ESG retained certain rights including:

the right to hire, fire, and discipline employees, provide for the welfare and benefit of co-employees, assign coemployees to subscriber locations, set co-employees rates of pay, maintain employment records, provide unemployment compensation required as an employer, sponsor and administer workers compensation plans, health plans, employee benefit plans, and address co-employee's complaints, claims, or requests related to employment.

[#33 at 6; see also #33-1 at ¶ 5]. ESG has never operated a pest control business and does not know how to operate such a business. [#32 at 2, ¶ 2; #33 at 2, ¶ 2]. Rather, in its role as “administrative employer, ” pursuant to the Subscriber Agreement, ESG “handled payroll, managed and administered employment benefits such as health insurance and life insurance, managed workers compensation and unemployment insurance, managed workers compensation claims, remitted payroll taxes on behalf of its subscribers as ESG, and ensured that all relevant taxes were withheld as to the co-employees.” [#32 at 2, ¶ 1; #33 at 9, ¶ 13]. ESG performed these functions on behalf of RiteCorp for a set fee. [#32 at 3, ¶ 6(e); #33 at 4, ¶ 6(e)].

         The Subscriber Agreement specified that only ESG employees were “eligible for workers compensation insurance, benefits, terms and conditions of employments, ” and only ESG employees would receive a paycheck. [#33 at 7; see also #33-1 at ¶ 6(q)(i)-(iii)]. This eligibility was limited to employees who had completed ESG's “enrollment documents, including but not limited to, [ESG's] employment application, W-4 withholding form, and Form I-9, ” all of which ESG had to receive and acknowledge before the employee could begin working. [Id.]

         ESG presented each new employee with an “Employer Solutions Group (and Its Entities) Employee Acknowledgement Form.” [#33 at 7; see also #33-2]. The form provides that each employee is “a co-employee of ESG and [RiteCorp], ” and requires that each employee “accept the conditions of the co-employment relationship between” him or her, ESG, and RiteCorp. [#33-2 at 1]. The form also requires the employee to abide by the terms and conditions of the ESG Employment Handbook and to contact ESG within 48 hours of termination so as to explore other employment opportunities. [#33-2 at 1-2]. The form also notified the employee that employment was at will, and ESG and/or RiteCorp could terminate the employment “at any time for any reason, with or without notice, ” and that ESG and/or RiteCorp could unilaterally change the employee's salary or wages “from time to time, ” at either's discretion. [Id.] ESG required all co-employees to abide by its drug and alcohol policy and consent to random drug testing, and ESG in fact subjected co-employees to random tests. [#33 at 9, ¶¶ 14, 15; #33-8; #33-9]. ESG also required that co-employees abide by its Sexual Harassment Policy, which stated in part that co-employees could report harassment to ESG. [#33 at 9, ¶ 16; #33-10]. ESG provided Affirmations of Legal Work Status to the State of Colorado, affirming, in its position as employer, the work status of new employees. See [#33-5].

         ESG did not exercise daily control over Plaintiffs' work and did not supervise Plaintiffs' day-to-day activities. [#32 at 3, ¶¶ 6(a)-(b); #33 at 3, ¶¶ 6(a)-(b)]. Plaintiffs did not perform any jobs or services for ESG; rather, ESG could discharge its duties to its clients and other stakeholders regardless of whether Plaintiffs performed their jobs and regardless of whether RiteCorp remained ESG's client. [#32 at 4, ¶ 6(i); #33 at 5, ¶ 6(i)]. ESG made no investment in any equipment or facilities provided or available to Plaintiffs that enabled them to carry out their pest control duties. [#32 at 4, ¶ 6(j); #33 at 5, ¶ 6(j)]. ESG did not own, lease, or control any of the facilities in which Plaintiffs worked, or provide or maintain any equipment or facilities used by Plaintiffs. [#32 at 4, ¶ 6(k); #33 at 6, ¶ 6(k)]. RiteCorp terminated the Subscriber Agreement on December 27, 2014. [#32 at 3, ¶ 5; #33 at 3, ¶ 5].

         C. FLSA

         1. Applicable Law

         The FLSA governs the payment of minimum wages and overtime compensation between an employer and its employees. See 29 U.S.C. §§ 206-207. Under the FLSA, a covered employer must pay its employees for the time that it employs them; and the FLSA generally requires covered employers to compensate employees for work in excess of forty hours in a workweek. See 29 U.S.C. §§ 206(a), 207(a). The required overtime compensation is one and one-half times an employee's “regular rate” of pay. 29 U.S.C. § 207(e). The FLSA defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). The FLSA “defines the verb ‘employ' expansively to mean ‘suffer or permit to work.'” Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (quoting 29 U.S.C. § 203(g)). Separate entities that share control over an individual worker may be deemed “joint employers” under the FLSA. See 29 C.F.R. § 791.2(a). “If the facts establish that the employee is employed jointly by two or more employers…all joint employers are responsible, both individually and jointly, for compliance with all of the applicable provisions of the act, including the overtime provisions…” Id. The relevant Department of Labor regulations list the following as examples of situations in which joint employment exists:

(1) Where there is an arrangement between the employers to share the employee's services, as, for example, to interchange employees;
(2) Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in ...

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