Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-5_05-cv-05091/USCOURTS-arwd-5_05-cv-05091-2/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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AO72A

(Rev. 8/82)

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION

MARTIN GILZOW PLAINTIFF

v. Case No. 05-5091

LENDERS TITLE COMPANY, an Arkansas

Corporation DEFENDANT

O R D E R

Now on this 3rd day of March, 2006, comes on for

consideration Plaintiff’s Motion For Partial Summary Judgment

(document #25) and defendant’s Motion For Summary Judgment

(document #26), and from said motions, the responses thereto,

and the supporting documentation, the Court finds and orders

as follows:

1. Plaintiff claims that he was subjected to

retaliation for reporting allegations of sexual harassment, in

violation of the Arkansas Civil Rights Act (“ACRA”); that

defendant failed to pay him overtime compensation as required

by the Fair Labor Standards Act (“FSLA”); and that defendant

wrongfully denied him various benefits under the Employee

Retirement Income Security Act (“ERISA”) by erroneously

classifying him as an independent contractor rather than an

employee.

Defendant denied these allegations, and both parties now

move for summary judgment, each opposing the motion of the

other. 

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2. Summary judgment should be granted when the record,

viewed in the light most favorable to the nonmoving party, and

giving that party the benefit of all reasonable inferences,

shows that there is no genuine issue of material fact and the

movant is entitled to judgment as a matter of law. Walsh v.

United States, 31 F.3d 696 (8th Cir. 1994). Summary judgment

is not appropriate unless all the evidence points toward one

conclusion, and is susceptible of no reasonable inferences

sustaining the position of the nonmoving party. Hardin v.

Hussmann Corp., 45 F.3d 262 (8th Cir. 1995). The burden is on

the moving party to demonstrate the non-existence of a genuine

factual dispute; however, once the moving party has met that

burden, the nonmoving party cannot rest on its pleadings, but

must come forward with facts showing the existence of a

genuine dispute. City of Mt. Pleasant, Iowa v. Associated

Electric Co-op, 838 F.2d 268 (8th Cir. 1988).

3. Pursuant to Local Rule 56.1, the parties have filed

statements of facts which they contend are not in dispute.

From those statements, the following significant undisputed

facts are made to appear: 

* Plaintiff Martin Gilzow has specialized education

and experience in the field of computers, and has

worked since about 1980 in the computer field.

* In 1986, Gilzow began operating a company called

Martin’s Computer Repair, which later changed its

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name to Martin’s Computer Services. From 1994 to

2002, Martin’s Computer Services provided computer

services to defendant Lenders Title Company

(“Lenders”) on an “as needed” basis.

* Lenders has its corporate offices in Little Rock,

Arkansas, and maintains branch offices in thirteen

other locations, including Rogers, Arkansas. Its

Chief Executive Officer, Mike Pryor; Chief Operating

Officer, Teana Bradford; and Director of Human

Resources, Kevin Robinson, are officed in Little

Rock.

* While operating as Martin’s Computer Repair and

Martin’s Computer Services, Gilzow did not work set

hours for Lender, but would come into Lenders’

facilities to work on weekends.

* On several occasions before 2002, Pryor and Bradford

tried to hire Gilzow as a Lenders employee to take

care of their computer needs. Pryor and Gilzow

discussed the benefits that would be available to

Gilzow as an employee of Lenders, but Gilzow had

similar benefits available to him without becoming

an employee, and he declined to become an employee.

* Sometime before February, 2002, Pryor and Gilzow

discussed the computer projects that Lenders would

need to have done in the coming year, and agreed

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that Lenders would pay Gilzow $67,000 per year

beginning in February, 2002. This agreement was not

reduced to writing.

* After this agreement was reached, Gilzow was to

perform his services on the same basis as he had

before. 

* At the same time, Lenders hired, as employees, two

people who had formerly been employees of Martin’s

Computer Services, Jenny Fletcher and Steve Hubbard.

* While Lenders and Gilzow offer dramatically

different descriptions of Gilzow’s job

responsibilities after February, 2002 - Lenders

making Gilzow sound like a key member of the

management team and Gilzow describing himself as

basically a maintenance/repair person - there is no

dispute that Gilzow’s job was exclusively computeroriented, and did not include any title work. 

* Gilzow used his own vehicle in traveling between the

various Lenders locations. Initially, he was not

reimbursed for his travel expenses, instead taking

deductions for those expenses on his 2002 and 2003

federal income tax returns. At some point, Gilzow

started submitting expense reports to Lenders, which

reimbursed him for his expenses incurred on Lenders’

behalf.

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* Gilzow made more than $455 per week, and was paid

twice a month. His check was always in the amount

of $2,791.67, regardless of the number of hours he

had worked. 

* Lenders reported its payments to Gilzow on 1099-MISC

tax forms (as “nonemployee compensation”), rather

than on W-2 tax forms, and Gilzow was responsible

for payment of his own income taxes.

* Lenders did not provide Gilzow with health

insurance, disability insurance, or access to a

401(k) account, which were benefits it made

available to its employees.

* After February, 2002 - the time period is not

specified - Bradford and Robinson had “internal

discussions” to the effect that Lenders needed to

talk about Gilzow being an employee rather than an

independent contractor.

* In the spring of 2004, Gilzow conveyed to Bradford

certain complaints of employees in Lenders’ Rogers

branch office, regarding Lynden Polk, manager of

that office, and Sharon Tyra, an employee. Bradford

conveyed that information to Pryor. The details of

the information conveyed are disputed, Gilzow

asserting that the complaints had to do with sexual

harassment in the Rogers office and Lenders

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asserting that they had only to do with Tyra getting

easier job assignments than co-workers.

* Gilzow subsequently told Pryor that he thought

something should be done about the concerns that he

(Gilzow) had brought to Pryor’s attention concerning

the Rogers office. Pryor responded that the details

of any investigation he made about the matter could

not be discussed with Gilzow because of privacy

concerns.

* Gilzow and Polk had had a long-running dispute for

years, and did not seem to like each other.

* On May 5, 2004, Pryor and Gilzow met in Little Rock,

and the situation in the Rogers office came up for

discussion. Pryor told Gilzow that management would

handle the matter, and that Gilzow should stay out

of it. Gilzow insisted that Bradford be made a part

of their discussion, but Pryor refuse to include

Bradford. In spite of this, Gilzow went to

Bradford’s office in an attempt to bring her into

the discussion.

* In going from Pryor’s office to Bradford’s office,

Gilzow had to pass through an open area of the

corporate offices, where other employees work. At

the time, the two men were talking loudly to each

other as they continued their dispute.

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* Gilzow was subsequently terminated.

* Gilzow applied for, and received, unemployment

benefits from the Arkansas Employment Security

Division, which determined that Lenders had

incorrectly classified him as an independent

contractor.

* Lenders’ employee handbook states that “[n]on-exempt

employees may be either Salaried or Hourly, but are

entitled to overtime pay at a rate of one and one

half times their normal hourly rate of pay for any

hours actually worked over 40 during a work week.”

4. The central issue raised by both pending motions is

whether there is a genuine issue of material fact as to

Gilzow’s status when he was performing work for Lenders: was

he an employee or an independent contractor? If Gilzow was an

employee, he was entitled to overtime for hours worked over 40

per week and to ERISA benefits, and he is in that class of

persons with standing to sue for retaliation for reporting

employment discrimination. If he was an independent

contractor, his claims cannot survive.

5. The determination of employee/independent contractor

status, under all three theories of recovery, is a fact

intensive inquiry, although the relevant facts are not

precisely the same as to each theory of recovery. 

(a) For purposes of the ACRA claim, the relevant factors

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to consider are those listed in Blankenship v. Overholt, 301

Ark. 476, 786 S.W.2d 814 (1990). Couched in the factual

setting of the case at bar, those factors are as follows:

* the extent of control which, by agreement, Lenders

could exercise over the details of Gilzow’s work;

* whether or not Gilzow was engaged in an occupation

or business distinct from that of Lenders;

* whether the type of work done by Gilzow is usually

done under the direction of an employer or by a

specialist without supervision;

* the level of skill required for Gilzow’s work;

* whether Gilzow or Lenders supplied the

instrumentalities, tools, and place of work;

* the length of time Gilzow worked for Lenders;

* whether Gilzow was paid on the basis of a unit of

time or a unit of work;

* whether Gilzow’s work was part of Lenders’ regular

business;

* whether the parties believed they were creating the

relationship of employee independent contractor; and

* whether Lenders was “in business.”

Of these, the extent of control is “the principal factor

in determining the relationship.” This factor was elucidated

by this quotation in Blankenship:

where the contractor is to produce a certain result,

according to specific and definite contractual

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directions, agreed upon and made a part of the

contract, and the duty of the contractor is to

produce the net result by means and methods of his

own choice, and the owner is not concerned with the

physical conduct of either the contractor or his

employees, then the contract does not create the

relation of master and servant. This court has

consistently accepted and stated the settled rule

that even though control and direction be retained

by the owner, the relation of master and servant is

not thereby created unless such control and

direction relate to the physical conduct of the

contractor in the performance of the work with

respect to the details thereof.

301 Ark. at 479-80.

(b) The standard is virtually the same in an ERISA case. 

See Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318

(1992), quoting with approval from Community for Creative NonViolence v. Reid, 490 U.S. 730 (1989):

“In determining whether a hired party is an

employee under the general common law of agency, we

consider the hiring party’s right to control the

manner and means by which the product is

accomplished. Among the other factors relevant to

this inquiry are the skill required; the source of

the instrumentalities and tools; the location of the

work; the duration of the relationship between the

parties; whether the hiring party has the right to

assign additional projects to the hired party; the

extent of the hired party’s discretion over when and

how long to work; the method of payment; the hired

party’s role in hiring and paying assistants;

whether the work is part of the regular business of

the hiring party; whether the hiring party is in

business; the provision of employee benefits; and

the tax treatment of the hired party.”

(c) In an FLSA claim, a more inclusive standard governs. 

The FLSA defines “employee” as “any individual employed by an

employer,” 29 U.S.C. §203(e), and includes in the meaning of

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“employ” the concept “to suffer or permit to work,” 29 U.S.C.

§203(g). Finding this a more sweeping approach than that

taken by other social legislation, the Supreme Court

determined that it was appropriate to apply an “economic

realities” test to the evaluation of whether an individual was

an employee or an independent contractor. Goldberg v. Whitaker

House Co-op., Inc., 366 U.S. 28 (1961).

The “economic realities” test is somewhat of a hybrid

test, applying particularly relevant factors from the common

law and Restatement tests of agency, but in a less technical

and more “economically realistic” manner. As in the ACRA and

ERISA evaluations, the totality of the circumstances controls,

and the question is a fact-sensitive one.

For example, the Tenth Circuit said, in Baker v. Flint

Engineering & Construction Co., 137 F.3d 1436 (10th Cir.

1998), that

[i]n applying the economic reality test, courts

generally look at (1) the degree of control exerted

by the alleged employer over the worker; (2) the

worker’s opportunity for profit or loss; (3) the

worker’s investment in the business; (4) the

permanence of the working relationship; (5) the degree of

skill required to perform the work; and (6) the extent to

which the work is an integral part of the alleged employer’s

business.

In Tenth Circuit analysis, the focus is on whether the

individual is “economically dependent on the business to which

he renders service” or is, “as a matter of economic fact, in

business for himself.” Henderson v. Inter-Chem Coal Co.,

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Inc., 41 F.3d 567 (10th Cir. 1994). To the same effect, cf.

Robicheaux . Radcliff Material, Inc., 697 F.2d 662 (5th Cir.

1983).

6. As can be seen from the stipulated facts, the

parties were not in agreement on many of the factors relevant

to the employee/independent contractor question. They did not

agree on the level of control that could be exercised by

Lenders over Gilzow’s work, the level of control Gilzow had

over when and how many hours he devoted to the job, the level

of skill it required, or even who furnished the

instrumentalities of the work. They certainly did not agree

on the degree to which Gilzow was “economically dependent” on

Lenders, as opposed to being, “as a matter of economic fact,

in business for himself.” The Court finds, therefore, that it

would be inappropriate to grant summary judgment on the

employee/independent contractor issue to either party.

7. An ancillary argument made by Lenders is its

contention that, even if Gilzow is found to have been its

employee, it has no liability under the FLSA because Gilzow

was exempt from coverage under that Act. In response, Gilzow

points out that exempt status under the FLSA is an affirmative

defense, citing Fife v. Harmon, 171 F.3d 1173 (8th Cir. 1999),

and that Lenders failed to plead it as such. Gilzow contends

that defendant has, therefore, waived the defense. Failure to

plead an affirmative defense “results in a waiver of that

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defense and its exclusion from the case.” Sayre v. Musicland

Group, Inc., 850 F.2d 350 (8th Cir. 1988).

Lenders argues that it fairly raised the affirmative

defense of the exemptions, even though it did not specifically

so plead. It points out that Gilzow pled non-exempt status in

his Complaint, and that it denied that allegation. It then

cites a line of cases which it believes supports the notion

that such generalized pleading is sufficient to raise

affirmative defenses.

The Court has examined both the pleadings in this case,

and the cases cited by Lenders, and is not persuaded that,

under the particular circumstances of this case, Lenders’

position is justified. 

(a) The line of cases on which Lenders relies began with

Rochholz v. Farrar, 547 F.2d 63 (8th Cir. 1976), which dropped

the following dicta into footnote 3:

Appellants assert as a third contention of error

that the District Court improperly permitted an

advisory jury to consider the affirmative defense of

the negligence of the applicants. The point was not

argued and is without merit. The burden of proving

fraud by appellees required a showing of reasonable

reliance by appellants; thus their negligence was

not an affirmative defense required to be pleaded,

see Fed.R.Civ.P. 8(c), but was in issue from the

inception of the complaint.

The United District Court for the District of Kansas

picked this up and transformed it into the proposition Lenders

now asserts, that “[m]atters which are in issue from the

complaint’s inception need not be pleaded as affirmative

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defenses . . . as such matters will not take the plaintiff by

surprise if later raised by the defendant.” Federal Deposit

Insurance Corp. v. Renda, 692 F.Supp. 128 (D.Kan.1988). 

The District Court for the Southern District of West

Virginia looked to both Rochholz and Renda for guidance, but

hewed more closely to the spirit of Rochholz when it found,

upon a review of defenses in Clark v. Milam, 152 F.R.D. 66

(S.D.W.Va.1993) that 

the defenses do not set forth avoidances or

affirmative defenses within the meaning of Rule

8(c), Fed.R.Civ.P., but are instead mere denials of

liability and assertions that Plaintiff cannot

establish a prima facie case. As such, the matters

they raise are already in issue by virtue of the

allegations of Plaintiff’s Complaint.

The Court believes that the middle ground espoused in yet

another footnoted dictum is the proper approach to the issue:

When an affirmative defense “is raised in the trial

court in a manner that does not result in unfair

surprise, . . . technical failure to comply with

Rule 8(c) is not fatal.” Compugraphic explicitly

informed Financial Timing on two occasions that it

would seek to dismiss the action on the grounds that

all claims were barred by the one-year contractual

period of limitations: first, in Compugraphic’s

response to Financial Timing’s first set of

interrogatories served on November 12, 1987; and

second, in Compugraphic’s memorandum in support of

its motion for summary judgment on September 15,

1988. These notices were sufficient to avoid unfair

surprise.

Financial Timing Publications, Inc. v. Compugraphic Corp., 893

F.2d 936 (8th Cir. 1990)(internal citation omitted).

(b) Turning to the circumstances in the case at bar, the

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Court finds that the allegation in Gilzow’s Complaint to which

Lenders refers is as follows:

12. Plaintiff was an employee of Lenders between

February 2000 and his termination on or about May 7,

2004. He was employed under the terms of successive

one-year contracts of employment. Plaintiff was not

exempt from the overtime compensation requirements

of the Fair Labor Standards Act, 29 U.S.C. §201, et

seq.

Lenders’ response to this allegation is as follows:

12. Defendants admit that the business relationship

between Defendant Lenders Title and Plaintiff was

terminated on or about May 7, 2004. Defendants deny

each and every other allegation contained in

Paragraph 12 of Plaintiff’s Complaint.

Throughout its Answer, Lenders was careful to refer to

the “business relationship” between it and Gilzow, and to make

it clear that it did not consider its relationship with Gilzow

to be that of employer/employee. It did not, however, make

clear that it was pleading that if Gilzow were an employee, he

was an exempt employee.

The Amended Answer likewise relies heavily on the phrase

“business relationship” and is of the overall tenor that there

was no employer/employee relationship whatsoever between

Lenders and Gilzow.

During discovery, Gilzow consistently took the position

that he had been an employee of Lenders, and Lenders just as

consistently took the position that Gilzow had been an

independent contractor. Thus the battle lines were drawn on

the specific issue of whether Gilzow was an employee or an

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independent contractor, not whether he was an exempt or a nonexempt employee. It was not until Lenders filed its Motion

For Summary Judgment on January 13, 2006, that it asserted the

alternate ground that “[e]ven if Gilzow was an employee, he

was exempt from the overtime requirements of the FLSA pursuant

to the Computer Professional Exemption, the Administrative

Exemption and/or the Executive Exemption.”

The foregoing scenario, in the Court’s opinion, resulted

in unfair surprise to Gilzow when he first learned, at the

summary judgment stage, after discovery had closed and shortly

before trial, that Lenders was going to assert that he was an

exempt employee. Exempt versus non-exempt status is not an

element of Gilzow’s prima facie case, and the position that he

is an exempt employee is totally at odds with Lenders’

consistent position throughout preparation of the case that

Gilzow was not an employee at all. It also is a defense, the

development of which would require an in-depth inquiry into

the specifics of Gilzow’s job, both as experienced by Gilzow

and as perceived by management. This inquiry apparently did

not take place during discovery; certainly, based on the

submissions on the pending motions, Lenders’ description of

Gilzow’s job differs radically from Gilzow’s description of

that job. It appears to the Court that the facts pertinent to

this highly fact-specific inquiry are relatively undeveloped. 

The Court, therefore, believes that Gilzow would be unfairly

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prejudiced by having to meet this defense at this point. 

8. Lenders also claims it is entitled to summary

judgment on the ERISA claim because that claim is barred by

the applicable statute of limitations. Gilzow responds that

the running of the statute of limitations is an affirmative

defense, F.R.C.P. 8(c), and that Lenders did not plead it. 

The Court agrees that Lenders has waived this defense. 

9. Lenders also contends that Gilzow cannot establish a

prima facie case that he was subjected to retaliation for

reporting protected activity, in violation of the ACRA. That

statute provides, in relevant part, as follows:

No person shall discriminate against any

individual because such individual in good faith has

opposed any act or practice made unlawful by this

subchapter or because such individual in good faith

made a charge, testified, assisted, or participated

in any manner in an investigation, proceeding, or

hearing under this subchapter. . . .

It shall be unlawful to coerce, intimidate,

threaten, or interfere with any individual in the

exercise or enjoyment of . . . any right granted or

protected by this subchapter.

A.C.A. §16-123-108.

One of the rights granted and protected by the Act is the

right to obtain and hold employment without discrimination on

the basis of gender. A.C.A. §16-123-107(a).

Lenders contends that Gilzow cannot show that he engaged

in protected activity, because all he complained of was that

Polk, the Rogers Branch Manager, showed favoritism towards

Tyra, one of the employees in the Rogers office. Gilzow,

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however, offers evidence of the following:

* that he told Human Resources Director Robinson that

Polk was “harassing the girls” in the Rogers office, and that

Robinson thought favoritism could constitute harassment,

depending on the circumstances; 

* that he reported pornography on Polk’s computer to

Bradford and also discussed it with Pryor; 

* that Deborah Reel, another employee in the Rogers

office, told Bradford that Polk and Tyra had an “improper

relationship” and “fought like husband and wife” and that Polk

showed favoritism toward Tyra; 

* that the previous year, another female employee had

complained of Polk’s treatment of her; and 

* that none of these complaints was investigated. 

The foregoing, if given its strongest inferences

favorable to Gilzow’s ACRA claim, are sufficient to establish

a genuine issue of material fact as to whether Gilzow reported

discrimination based on gender to Lenders’ management .

Lenders also contends that Gilzow cannot show that his

termination was causally related to whatever he said about

Polk. This argument is based on Lenders’ position that Pryor

was the person who terminated Gilzow and that Pryor did not

know of the complaints, only Bradford did. Gilzow counters

this with evidence that in response to an Interrogatory,

Lenders identified both Pryor and Bradford as people who took

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part in the decision to terminate Gilzow.

Gilzow also shows, and indeed it is not denied, that his

termination stemmed directly from a discussion he had with

Pryor about the situation in the Rogers office. While the

nature of that discussion is disputed, when the Court affords

Gilzow the favorable inferences to which he is entitled at

this stage of the case, it finds that summary judgment is not

appropriate as to Gilzow’s ACRA claim.

IT IS THEREFORE ORDERED that Plaintiff’s Motion For

Partial Summary Judgment (document #25) is denied.

IT IS FURTHER ORDERED that defendant’s Motion For Summary

Judgment (document #26) is denied.

IT IS SO ORDERED.

 /s/ Jimm Larry Hendren 

JIMM LARRY HENDREN

UNITED STATES DISTRICT JUDGE

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