Flores v. Velocity Express, Inc.

PHILLIP FLORES, et al., Plaintiffs,

v.VELOCITY EXPRESS, INC., Defendant.

Case No. 12-cv-05790-JST

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Dated: June 7, 2013

AMENDED¹ ORDER

CONDITIONALLY CERTIFYING

COLLECTIVE ACTION, APPROVING

PROPOSED CLASS NOTICE, AND

APPOINTING INTERIM CLASS

COUNSEL

Re: ECF No. 26

Plaintiffs Phillip Flores and Darah Doung move to conditionally certify a collective action of Defendant Velocity Express, Inc.'s delivery drivers pursuant to the Fair Labor Standards Act (FLSA). After considering the moving papers, the arguments of the parties at the hearing held on May 16, 2013, and good cause appearing, the Court will grant the motion, approve the proposed class notice, and designate interim class counsel.

I. BACKGROUND

Plaintiffs filed this FLSA collective action on November 9, 2012, on behalf of a proposed class of delivery drivers employed by Velocity who Plaintiffs allege were misclassified as independent contractors. ECF No. 1. The operative First Amended Complaint, ECF No. 15 ("FAC"), asserts five causes of action: violation of FLSA, 29 U.S.C. § 201, et seq. (failure to pay minimum wage); violation of FLSA, 29 U.S.C. § 201, et seq. (failure to pay overtime wages); violation of California Labor Code §§ 510, 1194 (failure to pay minimum wage and overtime); violation of California Labor Code § 226.8 (willful misclassification of individuals as independentcontractors); and violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. The present motion requests conditional certification of the proposed FLSA collective action and not class certification pursuant to Federal Rule of Civil Procedure 23 of based on the state law claims. As of the filing of the instant motion, the parties had not yet begun taking discovery. ECF Nos. 25, 26.

A. The Independent Contractor Agreement

According to the First Amended Complaint, Velocity employs delivery drivers, including Plaintiffs, who deliver packages on routes assigned to them by Velocity. FAC ¶ 23, 29. Velocity requires delivery drivers to sign an "Independent Contractor Agreement for Transportation Services" ("IC Agreement"), which states that Velocity's delivery drivers are independent contractors. Id. ¶ 24; Ex. A. The IC Agreement submitted with the First Amended Complaint, signed by Plaintiff Doung and dated October 1, 2011, appears to be a form contract; the bottom of each page of the IC Agreement contains the footer "IC Agreement 2009 Master." The Agreement recites that the independent contractor "shall in no way and for no purpose hereunder be considered an agent, servant, employee, partner or co-venturer of" Velocity. Id. Ex. A ¶ 1 ("IC Agreement"). Velocity in turn "agrees and acknowledges that it shall have no right to direct or control the details or methods by which the Contractor performs its services hereunder, and that [Velocity] shall be concerned only with the results accomplished by the services performed by the Contractor and not with the means with which those results are accomplished." Id.

In a paragraph titled "Contractor's Control of Services Provided," the IC Agreement states that Velocity "may, from time to time in its sole discretion, based on customer requirements, request the Contractor perform courier or delivery services by advising it of the place and time of the customer requested pick-up, the destination of the delivery, and any completion schedules and specifications being requested by the customer. The Contractor shall have the right to decline or accept any such request." IC Agreement ¶ 3. That paragraph permits drivers to "select the route or routes to be taken" and leaves all other matters relating to the delivery in the discretion of the driver, provided the package is delivered within the time frame specified by Velocity and the work conforms and meets the "general contractual standards and approval of [Velocity's] customers."Id.

The IC Agreement further provides that drivers will supply their own vehicles, and shall be responsible for all costs and expenses, including the cost of liability insurance, cargo insurance, worker's compensation premiums, signage with Velocity's logo on it, Velocity uniforms, and equipment necessary to handle and deliver the packages. Id. ¶¶ 8, 9, 11-13. Each of those items may be purchased through Velocity or an existing contract Velocity has with an insurance carrier by deducting the cost of the items from the driver's pay. Id. For example, Addendum D to the IC Agreement attached to the complaint shows that Plaintiff Doung was provided with a scanner, stylus, holster, repair unit, gate card, ID Badge, vehicle signs, and a car charger, and Velocity deducted an amount not specified in the addendum from his "weekly settlement" "for the associated rental, airtime, repair and replacement costs." Drivers must also procure the necessary licenses and permits at their own expense. Id. ¶ 14.

The IC Agreement contains few standards relating to the handling and delivery of packages. It provides, for example, standards relating to substance abuse and driver qualification. Id. ¶ 16. It also requires the driver to "wear the appropriate uniform at all times while performing services under" the Agreement. Id. ¶ 12.

The IC Agreement advises drivers that, as independent contractors, they are responsible for paying their own income and payroll taxes; paragraph 7 of the Agreement states, in part, that the driver agrees "to maintain sufficient records to enable [Velocity] to determine that the Contractor has satisfied its obligation to pay such taxes and other payments . . . . Upon written request Contractor shall provide [Velocity] a copy, which evidences that such taxes have been promptly paid, including but not limited to, cancelled checks, receipts or government forms such as Employment Development Department Form DE-8." Id. ¶ 7.

Finally, the IC Agreement provides that it can be terminated by either party upon fourteen days prior written notice, or alternatively, upon five calendar days' notice by Velocity "in the event [Velocity] determines in its sole discretion that any route or routes being serviced by the Contractor hereunder do not meet the financial or budget objectives of [Velocity]." Id. ¶ 18(b).

B. First Amended Complaint

The First Amended Complaint alleges that Velocity signed thousands of independent contractor agreements with its delivery drivers when, in reality, they were employees. Plaintiffs allege that "[t]here are no material deviations in job duties or descriptions for [Velocity's] drivers from location to location." FAC ¶ 25. Velocity employs "uniform pay practices" with respect to each driver. Id. ¶ 26. In contrast to the requirements of the IC Agreement, Plaintiffs also allege that Velocity "deducts a percentage of each driver's income from each paycheck in order to pay the drivers' respective 'quarterly estimated Federal Income and Self-Employment Taxes.'" Id. ¶ 27.

The First Amended Complaint also alleges that Velocity exercises control over its delivery drivers in the following ways: requiring drivers to arrive one to two hours early to the package warehouse to sort the packages to be delivered that day; assigning routes to drivers based on geography or specific customers; providing drivers with "route sheets" with suggested "stop times;" requiring drivers to call a company dispatcher at certain times to verbally verify package deliveries; requiring drivers to submit written verifications of deliveries; and requiring drivers to wear uniforms and display Velocity signage on delivery vehicles. Id. ¶¶ 28-32. Plaintiffs allege that drivers "do not have a meaningful opportunity to bid for their routes or to negotiate the rates they will be paid for their routes." Id. ¶ 29. The route assignments create long, twelve to fourteen hour workdays while also preventing drivers from taking breaks as well as from working for other companies, even though the IC Agreement permits drivers to do so. Id. ¶ 33.

Plaintiffs allege these practices prompted the U.S. Department of Labor to initiate an enforcement action against Velocity's predecessor, which filed for bankruptcy in 2009, contending the company misclassified its delivery drivers as independent contractors. Id. ¶ 39 (citing Solis v. Velocity Express, Inc., No. 09-cv-0864-MO (D. Ore. 2009)).

C. Declarations

With their motion, Plaintiffs each submitted sworn declarations, both of which state that they regularly worked more than forty hours a week and more than eight hours a day; that they were required to be on call twenty-four hours a day to take additional routes; that they had nocontrol over the routes they were assigned, that they were required to wear uniforms; that Velocity deducted from their weekly paychecks quarterly estimated Federal Income and Self-Employment taxes; that they were not paid overtime wages; and that they are aware of other employees subject to the same policies and practices complained-of in suit. See ECF No. 26, Exs. C (Doung Decl.), D (Flores Decl.).²

Also attached to Plaintiffs' motion is a "VEXP [Velocity] Income Tax Deduction Authorization Form" signed by Plaintiff Doung on October 1, 2011, the day the IC Agreement was signed. The form contains an acknowledgment that independent contractors are responsible for paying all income and payroll taxes, and provides: "To assist in payment of my Federal Income and Self-Employment taxes, I authorize VEXP to deduct 3% from my gross commissions at each settlement period and to set this amount aside to my credit for the payment of my quarterly estimated Federal Income and Self-Employment taxes." The percentage is handwritten; the form recommends 8-10% deductions of "gross commissions" for courier drivers and provides that a blank form will result in a default 8% deduction. The form also states that the funds will be held in escrow and paid to the Internal Revenue Service; the driver is not permitted to withdraw funds from...