Noll v. Flowers Foods Inc.

442 F.Supp.3d 345

Timothy NOLL, individually and, on behalf of similarly situated individuals, Plaintiff,

v.FLOWERS FOODS INC., Lepage Bakeries Park Street, LLC., and CK Sales Co., LLC, Defendants

1:15-cv-00493-LEW

United States District Court, D. Maine.

Signed January 29, 2020

Scott A. Moriarity, Christopher D. Jozwiak, Pro Hac Vice, Shawn J. Wanta, Pro Hac Vice, Baillon Thome Jozwiak & Wanta LLP, Brian D. Clark, Pro Hac Vice, Rachel A. Kitze Collins, Pro Hac Vice, Susan E. Ellingstad, Pro Hac Vice, Lockridge Grindal Nauen PLLP, David M. Cialkowski, Pro Hac Vice, J. Gordon Rudd, Jr., Pro Hac Vice, Zimmerman Reed LLP, Minneapolis, MN, Amy P. Dieterich, Skelton, Taintor & Abbott, Auburn, ME, Charles E. Schaffer, Pro Hac Vice, Levin Fishbein Sedran & Berman, Philadelphia, PA, for Plaintiff.

A. Craig Cleland, C. Garner Sanford, Jr., Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Atlanta, GA, Margaret S. Hanrahan, Pro Hac Vice, Kevin P. Hishta, Pro Hac Vice, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Charlotte, NC, Timothy H. Powell, Littler Mendelson, PC, Frederick B. Finberg, Peter Bennett, The Bennett Law Firm, Portland, ME, for Defendants.

SUMMARY JUDGMENT ORDER

Lance E. Walker, UNITED STATES DISTRICT JUDGE Plaintiff Timothy Noll, on behalf of himself and similarly situated individuals ("Plaintiffs") filed suit against Flowers Foods Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC, ("Defendants"), claiming Defendants misclassified Plaintiffs as independent contractors. Plaintiffs allege the classification is contrived, and that Defendants have failed to pay them overtime as required by the Fair Labor Standards Act ("FLSA") and analogous provisions of Maine state law. Plaintiffs seek damages and equitable relief.

Now pending are Defendants' Motion for Partial Summary Judgment (ECF No. 224) and Plaintiffs' Motion for Partial Summary Judgment (ECF No. 230). Through their motion, Defendants primarily seek judgment as a matter of law on certain claims based on the motor carrier and outside sales exemptions to the overtime laws, and dismissal of certain individual Plaintiffs. For their part, Plaintiffs seek dismissal of Defendants' FLSA outside sales exemption defense, and a finding that a three-year limitation period and liquidated damages are appropriate on the FLSA claim.

For the reasons discussed below, Plaintiffs' motion is denied, and Defendants' motion is granted in part and denied in part.

LEGISLATIVE BACKDROP

In 1938, Congress passed the Fair Labor Standards Act ("FLSA"), now codified, as amended, at 29 U.S.C. Ch. 8, §§ 201 - 219. Congress enacted the FLSA "with the goal of ‘protect[ing] all covered workers from substandard wages and oppressive working hours.’ " Christopher v. SmithKline Beecham Corp. , 567 U.S. 142, 147, 132 S.Ct. 2156, 183 L.Ed.2d 153 (2012) (quoting Barrentine v. Arkansas–Best Freight Sys., Inc. , 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) ; see also 29 U.S.C. § 202(a) ).

Among the FLSA's provisions is the requirement that employers "compensate employees for hours in excess of 40 hours per week at a rate of 1 1/2 times the employees' regular wages." Hall v. U.S. Cargo & Courier Serv., LLC , 299 F. Supp. 3d 888, 894 (S.D. Ohio 2018) (quoting Christopher, supra , and citing 29 U.S.C. § 207(a) ). This is the federal "overtime pay" requirement that employers and employees are familiar with to this day. The FLSA confers the right to receive overtime pay on "employees," not on all workers generally. 29 U.S.C. § 207(a). Independent contractors, for example, are not covered. Nor are employees in a host of occupations, such as school teachers, agricultural and fishery workers, telephone switchboard operators, certain computer programmers, border patrol agents, and others whom Congress has exempted from the benefit of federal overtime law. Id. § 213. Whether a given worker is a covered employee entitled to overtime is a case-specific inquiry. Bolduc v. Nat'l Semiconductor Corp. , 35 F. Supp. 2d 106, 114 (D. Me. 1998) ; Hart v. Rick's Cabaret Int'l, Inc. , 967 F. Supp. 2d 901, 912 (S.D.N.Y. 2013).

The FLSA provides workers who believe they have been denied overtime compensation the right to bring a civil action in a federal or state court of competent jurisdiction. 29 U.S.C. § 216(b). FLSA plaintiffs often include workers who contend they have been "misclassified" as something other than an employee (most commonly, an independent contractor), and that, by rights, they should be compensated as employees based on the economic reality of their working relationship with the employer. In general, "[w]here the work done, in its essence, follows the usual path of an employee, putting on an ‘independent contractor’ label does not take the worker from the protection of the Act." Rutherford Food Corp. v. McComb , 331 U.S. 722, 729, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947). Workers who succeed in proving an employer misclassified them may be able to recover an award of unpaid overtime wages and additional remedies, including liquidated damages in an amount equal to the unpaid overtime wages. 29 U.S.C. § 216(b). Maine law is to like effect. See Me. Rev. Stat. ("M.R.S."), tit. 26, ch.7.

This case presents a paradigmatic "misclassification" claim. Plaintiffs allege an employment contract with all three Defendants, Complaint ¶¶ 7–9, to perform work described in distributor agreements that, Plaintiffs say, misclassify them as independent contractors. Plaintiffs contend the distributor agreements misclassify them so that the Flowers Foods enterprise can avoid the expense of paying overtime compensation for work that cannot be completed in a 40-hour work week.

SUMMARY JUDGMENT FACTS¹

Defendant Flowers Foods, Inc., is a publicly traded corporation that operates nationally in the baked foods category. Defendant Lepage Bakeries Park Street, LLC, is a wholly-owned subsidiary of Flowers Foods. Defendant CK Sales Co., LLC, is a wholly-owned subsidiary of Lepage Bakeries. Through the subsidiaries that make up its corporate tree (including additional subsidiaries other than those named here as defendants), Flowers Foods produces fresh breads, buns, rolls, and snack cakes and distributes these products to retail and foodservice customers throughout the United States. Plaintiffs' participation in this enterprise involves the Maine-based "direct-store-delivery" segment of Defendants' business, part of Defendants' nationwide bakery network involving "a highly developed reciprocal baking system (where bakeries can produce for [their] market[s] and th[ose] of other bakeries within the direct-store-delivery network)." Flowers Foods SEC Form 10-K at 5 (ECF No. 231-1).

Flowers Foods extended its network into Maine in 2012, with its acquisition of Lepage Bakeries. Starting in the fall of 2013, Flowers Foods—through its subsidiaries Lepage Bakeries and CK Sales—began selling² franchised distribution rights and, when it retained a new distributor, it did so through distributor agreements with CK Sales. The agreements entitle Plaintiffs to sell and distribute Defendants' branded products in Plaintiffs' respective geographic territories in Maine. Sample Distributor Agreement (ECF No. 225-2). An "essential term" of the agreement is that distributors are understood to be "common law independent contractor[s]." Id. § 16.1.

In addition to classifying distributors as independent contractors, the distributor agreements assign each distributor a defined geographic area, making the distributor responsible for sales, deliveries, and service within that area. The distributor agreements also include stipulations regarding the working relationship between each distributor and, nominally, CK Sales. For example, CK Sales may change the "terms and prices" of their sales to distributors "at any time"; distributors must use their "best efforts to develop and maximize" sales of "authorized products" in accordance with "good industry practice," and "cooperate" with marketing and sales efforts; CK Sales has the right to "solicit and drop delivery accounts, in whole or in part" from the distributors' territory for "legitimate business reasons"; CK Sales will determine the warehouse location where distributors collect product; distributors must provide their own delivery trucks; deliveries need not be "conducted personally," so that distributors are "free to engage" outside assistance; CK Sales may terminate the agreement if the distributor "fails to perform [the] obligations under this Agreement"; and CK Sales may issue notices where it finds a distributor to be in breach of the agreement. Sample Distributor Agreement at 3–17.

Per the agreements, Plaintiffs earn money by "purchasing" product at a specified discount and "selling" it at a higher price to customer stores. For major accounts, however, Defendants control both the price at which Plaintiffs buy and the price at which they sell products. To fulfill their obligations, Plaintiffs submit orders to LePage Bakeries on behalf of their customers' accounts, pick up the products from designated LePage warehouses shortly after the products arrive, drive the products to customers' locations, deliver products to the shelves in customers' stores, and periodically manage the inventory of products ("stock") at those stores to ensure a steady supply of fresh product.³

Plaintiffs and Defendants track orders and deliveries using handheld computers issued by Defendants, who maintain a database generated by the computers. On a weekly basis, Defendants "settle" accounts for each Plaintiff based on the margin established by the prices at which Defendants sell products to Plaintiffs and the sale price established for the products at the customer stores, subject to certain "chargebacks, credits and adjustments." Sample Distributor Agreement § 8.1. Because distributors' earnings are determined largely by the difference between the amount of sales to customers, Plaintiffs' income is primarily a function...