Court Opinion

ID: 7801141
Source: CourtListenerOpinion
Date Created: 2022-08-17 00:00:17.244817+00
Date Added: 2024-06-11T16:29:14.500471
License: Public Domain

Case: 20-30815     Document: 00516434536         Page: 1     Date Filed: 08/16/2022

           United States Court of Appeals
                for the Fifth Circuit                                   United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                                                         August 16, 2022
                                  No. 20-30815                            Lyle W. Cayce
                                                                               Clerk

   Byron Taylor, on behalf of himself and on behalf of all others similarly
   situated; Lonnie Treaudo; Kendall Matthews; Kenneth
   Hunter; Terraine R. Dennis; John Edmond; George
   Triche; Alfred Edmond,

                                                           Plaintiffs—Appellants,

                                      versus

   HD and Associates, L.L.C.; John Davillier,

                                                        Defendants—Appellees.

                  Appeal from the United States District Court
                     for the Eastern District of Louisiana
                           USDC No. 2:19-CV-10635

   Before Higginbotham, Willett, and Duncan, Circuit Judges.
   Per Curiam:
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                                         No. 20-30815

   Cable technicians working for HD and Associates (HDA) alleged that they
   did not receive overtime pay, in violation of the Fair Labor Standards Act
   (FLSA). Granting summary judgment to HDA, the district court ruled that
   the technicians and HDA were not covered by the FLSA, and that even if
   they were covered, the technicians qualified for the bona fide commission
   exemption and thus were exempt from the overtime provisions. The
   technicians appealed. We affirm.
                                              I.
          HDA, a subcontractor of Cox Communications (Cox), installs and
   repairs cable and telephone equipment for Cox’s residential customers in
   Louisiana. 1 HDA technicians are assigned work directly by Cox, based on
   service requests from customers. HDA is located in Louisiana and all of the
   work that HDA performed for Cox in the relevant period was in Louisiana.
   Cox creates work orders for customer service requests in a digital platform,
   CX Connect; Cox then bundles the work orders for a given day and creates
   routes for the technicians, with arrival times for each work order assigned
   based on the time estimate for that type of work order. Cox and HDA also
   use CX Connect to track technicians’ location and completion of
   assignments, and to update technicians’ routes and assignments as needed.
   Each work order is allocated a point-value between zero and fifty which
   dictates how much a technician is paid for each work order. 2 If a technician
   does not finish their route, incomplete jobs are reassigned to technicians who
   have completed their assignments. Due to fluctuations in customer demand,
   the number of work orders fluctuates.

          1
              John Davillier is the sole managing member of HDA.
          2
            Cox pays HDA $4 per point, and HDA pays technicians $1.80 per point if the
   technician uses an HDA vehicle or $2.05 if they use their own vehicle.

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                                            No. 20-30815

           Byron Taylor filed this collective action on behalf of himself and all
   others similarly situated, alleging that he and other technicians worked over
   40 hours per week but did not receive overtime pay as required by the FLSA.
   The district court granted conditional certification of the collective action for
   cable technicians who had worked at HDA in the one year prior to the filing
   of the collective action. 3 HDA moved for partial summary judgment, arguing
   that HDA was not covered by the FLSA, or alternatively that it was exempt
   from the FLSA’s overtime requirement based on the bona fide commission
   exemption. The district court granted summary judgment, finding HDA was
   not covered by the FLSA and that even if it were, the technicians would still
   be exempt from the overtime requirement due to the bona fide commission
   and Motor Carrier Act exemptions. The technicians timely appealed.
                                                  II.
           We review a grant of summary judgment de novo, viewing all evidence
   and drawing reasonable inferences in favor of the non-moving party. 4
   Summary judgment is proper “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.” 5 “[A] factual dispute is genuine if the evidence is such that a
   reasonable jury could return a verdict for the nonmoving party.” 6 We may

           3
             Plaintiffs worked for HDA as technicians between May 22, 2018, and May 22,
   2019. Still at issue below is whether the HDA technicians are independent contractors or
   employees. For the sake of clarity, we will refer to the plaintiffs as technicians, however if
   they are independent contractors, FLSA overtime protections do not apply.
           4
               Ratliff v. Aransas Cnty., 948 F.3d 281, 287 (5th Cir. 2020).
           5
               Fed. R. Civ. P. 56(a).
           6
               Harville v. City of Houston, 945 F.3d 870, 874 (5th Cir. 2019) (internal quotations
   omitted).

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   “affirm the . . . grant of summary judgment on any ground supported by the
   record and presented to the district court.” 7
                                                  III.
           We address whether the technicians or HDA are covered by the
   FLSA, before addressing any exemptions. There are two distinct methods
   for establishing FLSA coverage: individual and enterprise-wide coverage. 8
   The standards for each method differ, however the district court looked only
   to the requirements of individual coverage. 9
           An individual employee is covered and must be paid overtime if they
   “engage[] in commerce or in the production of goods for commerce.” 10 We
   apply a “practical test” to determine if an employee is engaged in interstate
   commerce, analyzing “whether the work is so directly and vitally related to
   the   functioning          of    an    instrumentality       or   facility     of    interstate
   commerce. . . . There is no de minimis requirement. Any regular contact with
   commerce, no matter how small, will result in coverage.” 11 The district court
   found that the technicians were not covered by the FLSA. Although we have
   not previously addressed whether cable technicians are engaged in interstate
   commerce, we are persuaded that they are. Because the technicians work

           7
               Mahmoud v. De Moss Owners Ass’n, Inc., 865 F.3d 322, 328 (5th Cir. 2017).
           8
           29 U.S.C. § 207(a)(1) (employers must pay overtime wages to any employee
   who “is engaged in commerce or in the production of goods for commerce,” or “is
   employed in an enterprise engaged in commerce or in the production of goods for
   commerce”); 29 C.F.R. § 783.19.
           9
                E.g., Mitchell v. H.B. Zachry Co., 362 U.S. 310, 320–21 (1960).
           10
             29 U.S.C. § 207(a)(1); Mitchell v. C.W. Vollmer & Co., 349 U.S. 427, 428–29
   (1955); Sobrino v. Med. Ctr. Visitor’s Lodge, Inc., 474 F.3d 828, 829 (5th Cir. 2007) (per
   curiam).
           11
                Sobrino, 474 F.3d at 829 (internal quotations and citations omitted).

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   directly on the instrumentalities of interstate commerce, including phone and
   internet service, they are individually covered by the FLSA overtime
   protections. 12
            Alternatively, HDA could be a covered enterprise under the FLSA.
   The district court briefly addressed this possibility but mistakenly relied on
   cases from our individual coverage precedent and did not develop the record
   necessary for this determination. As we have established that there is
   individual coverage of the technicians, we need not address this alternate
   basis.
                                                 IV.
            Having established that the technicians are covered by the FLSA, we
   address whether they are exempt from the overtime pay requirement due to
   the bona fide commission exemption.
            The bona fide commission exemption is an affirmative defense. 13
   Under Rule 8(c), a defendant must affirmatively state an affirmative defense
   in its response with “enough specificity or factual particularity to give the
   plaintiff ‘fair notice’ of the defense that is being advanced.” 14 Failure to do

            12
              The Department of Labor has issued regulatory guidance that employees who
   work on the “maintenance, repair, or improvement of existing instrumentalities of
   commerce,” including telephone lines, are engaged in interstate commerce. 29 C.F.R. §
   776.11(a)–(b); see also Thorne v. All Restoration Servs. Inc., 448 F.3d 1264, 1266 (11th Cir.
   2006) (holding those “working for an instrumentality of interstate commerce, e.g.,
   transportation or communication industry employees” are covered individually by
   FLSA); St. Elien v. All Cnty. Env’t Servs., Inc., 991 F.3d 1197, 1199 (11th Cir. 2021) (holding
   that regularly using the instrumentalities of interstate commerce, such as making interstate
   phone calls, is also sufficient to show that an employee is engaging in interstate commerce).
            13
              Allen v. Coil Tubing Servs., L.L.C., 755 F.3d 279, 283 (5th Cir. 2014); Klinedinst
   v. Swift Invs., Inc., 260 F.3d 1251, 1254 (11th Cir. 2001).
            14
                 Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir. 1999).

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   so waives the defense. 15 The technicians contend that HDA did not
   specifically plead the bona fide commission exemption and waived it.
   However, “a technical failure to comply precisely with Rule 8(c) is not fatal.
   A defendant does not waive a defense if it was raised at a pragmatically
   sufficient time and did not prejudice the plaintiff in its ability to respond.” 16
   FLSA defendants need not plead specific exemptions because plaintiffs are
   “put on notice by the very nature of the suit that these exemptions would be
   relevant to the determination of [HDA’s] liability.” 17 “[T]here is some play
   in the joints” as long as the plaintiff is not surprised by the affirmative
   defense, nor prejudiced in their ability to respond. 18 How and how much
   HDA paid technicians was clearly at issue. The technicians were on notice
   of this defense and HDA did not waive it.
          The bona fide commission exemption exempts employers from the
   FLSA overtime provisions where (1) they are retail or service
   establishments; (2) the regular rate of pay for their employees is in excess of
   one and one-half times the applicable minimum hourly rate; and (3) more
   than half of the compensation represents commissions on goods or services. 19
   Neither party disputes that HDA is a service establishment 20 and that its
   regular rate of pay for employees is in excess of one and one-half times the

          15
               Fed. R. Civ. P. 8(c); Woodfield, 193 F.3d at 362.
          16
             LSREF2 Baron, L.L.C. v. Tauch, 751 F.3d 394, 398 (5th Cir. 2014) (internal
   quotations and citations omitted).
          17
             Crofts v. DoubleBarrel Downhole Techs., No. 4:15-CV-00919, 2017 WL 11198916,
   at *3 (S.D. Tex. Aug. 16, 2017).
          18
               Rogers v. McDorman, 521 F.3d 381, 385–86 (5th Cir. 2008).
          19
               29 U.S.C. § 207(i).
          20
              See also, e.g., Jones v. Tucker Commc’ns, Inc., No. 5:11-CV-398 MTT, 2013 WL
   6072966, at *9 (M.D. Ga. Nov. 18, 2013) (finding that a cable installation company was
   service establishment).

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   applicable minimum hourly rate. At issue is only whether HDA pays
   technicians a commission. 21 Whether a payment is a commission for the
   purposes of this exception is a question of law that relies on how a payment
   works in practice, rather than what it is called. 22 Neither the text of the FLSA
   nor this Court has defined “commission.” 23 Other courts have described a
   commission as having distinct features and we adopt their definition:
           (1) whether the commission is a “percentage or proportion of
           the ultimate price passed on to the consumer;” (2) whether the
           commission is “decoupled from actual time worked, so that
           there is an incentive for the employee to work more efficiently
           and effectively;” (3) the type of work is such that its “peculiar
           nature” does not lend itself to a standard eight-hour work day;
           and (4) whether the commission system “offend[s] the
           purposes of the FLSA.” 24

           21
            Because technicians are paid based on the points system, if the points system is
   a commission, it is also undisputed that 100% of their pay would be a commission.
           22
              See Alvarado v. Corp. Cleaning Servs., Inc., 782 F.3d 365, 367 (7th Cir. 2015);
   Klinedinst, 260 F.3d at 1254.
           23
              Yi v. Sterling Collision Ctrs, Inc., 480 F.3d 505, 508 (7th Cir. 2007); Casanova v.
   Gold’s Tex. Holdings Grp., Inc., No. 5:13-CV-1, 2016 WL 1241548, at *5 (W.D. Tex. Mar.
   23, 2016).
           24
               Crawford v. Saks & Co., No. CV H-14-3665, 2016 WL 3090781, at *5 (S.D. Tex.
   June 2, 2016) (Rosenthal, J.) (alteration in original) (citations omitted) (quoting Casanova,
   2016 WL 1241548, at *8; Parker v. NutriSystem, Inc., 620 F.3d 274, 283–84 (3d Cir. 2010);
   Yi, 480 F.3d at 508; Alvarado, 782 F.3d at 368). Courts in the Second Circuit have adopted
   slightly different factors; however, the primary inquiry is the same. See, e.g., Almanzar v. C
   & I Assocs., Inc., 175 F. Supp. 3d 270, 275 (S.D.N.Y. 2016) (“(1) the employee’s
   compensation must be tied to customer demand or the quantity of sales; (2) the
   compensation plan must provide performance-based incentives for the employee to
   increase his or her income; and (3) there must be proportionality between the value of the
   goods or services sold and the rate paid to the employee.”).

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   “No factor appears dispositive in the case law, but the first two seem to carry
   the most weight.” 25 Here, the commission paid is a percentage of the
   ultimate price passed onto Cox customers and the amount earned is tied to
   customer demand. 26 Given the nature of cable repairs, the work does not lend
   itself to a standard workday and this payment system does not offend the
   purposes of the FLSA. As Judge Posner notes, where a system of pay is
   industry-wide, it is persuasive that the whole industry is not violating FLSA
   overtime provisions. 27 The cable technician industry uses this payment
   method widely; it does not offend the purposes of the FLSA.
          The determining factor is thus whether the amount of income earned
   is decoupled from the time worked. Alternatively, this can be understood as
   whether the compensation plan incentivizes faster work—if by working
   harder, rather than longer, one earns more, the payment is a commission. 28
   For example, while a tennis pro could satisfy the other factors, they can only
   sell one hour of instruction per hour worked—the time worked is coupled to
   the amount earned. 29 By comparison, Judge Posner found that window
   washers, who were paid on a points per job system, were making a
   commission because time worked was decoupled from money earned.
   Window washing jobs were assigned a point value based on difficulty, so a
   five-point job could be finished by different window washers in varying

          25
               Casanova, 2016 WL 1241548, at *8.
          26
               The technicians’ earnings are directly proportional to HDA’s earnings.
          27
               Yi, 480 F.3d at 510–11.
          28
               Id. at 509; Almanzar, 175 F. Supp. 3d at 278.
          29
               E.g., Casanova, 2016 WL 1241548, at *9.

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   amounts of time. Because that payment system incentivized the window
   washers to work faster in order to earn more, it was a commission. 30
           Here, a technician makes the same amount for a five-point job
   regardless of how long it takes to complete, incentivizing the technician to
   work faster to receive more work orders. Although receiving more work
   orders was not guaranteed, it was clearly incentivized by the payment
   structure. Decoupling time worked from money earned, does not require a
   guarantee that the employee earn more money, only an incentive for them to
   do so. 31 Moreover, this compensation structure is not a piece-rate system,
   where one is paid by the item made and able to stock inventory. Rather the
   technicians are only paid by the service rendered, subject to customer
   demand. 32 Because compensation goes up or down by the number of work
   orders completed, not the number of hours worked, HDA technicians are
   paid a bona fide commission and are exempt from FLSA overtime
   requirements.
           Finally, the district court held that, were HDA covered by the FLSA,
   it would also fall into the Motor Carrier Act (MCA) exemption to the FLSA
   overtime provisions. 33 We note that although the district court determined
   that the MCA applied, HDA did not assert it below. Moreover, the district
   court relied solely on cases predating the Technical Corrections Act of 2008,
   and thus never considered whether the technicians used vehicles weighing

           30
                Alvarado, 782 F.3d at 366–68.
           31
                Jones, 2013 WL 6072966, at *11.
           32
             Alvarado, 782 F.3d at 367 (Posner, J.) (“Thus the scarf worker is paid for making
   scarves even if they haven’t been sold—that is, even if he’s producing for inventory—while
   the shoe salesman is paid only when he makes a sale.”).
           33
             See 29 U.S.C. § 213(b)(1); 49 U.S.C. § 31502; SAFETEA–LU Technical
   Corrections Act of 2008, Pub. L. No. 110–244, 122 Stat. 1572 (2008).

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   more than 10,000 pounds, which would make the MCA exemption
   inapplicable. As the technicians are not covered by the FLSA overtime
   provisions due to the bona fide commission exemption, we do not address
   this exemption.
                                      V.
         HDA technicians are paid a bona fide commission and are exempt
   from FLSA overtime compensation requirements. Accordingly, we
   AFFIRM the judgment of the district court.

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