Sued for unpaid overtime under the FLSA

Federal District Court Opinions

SANDOVAL v. SCONET, INC., (S.D.Tex. 12-5-2006) ANTHONY
SANDOVAL, Plaintiff v. SCONET, INC. and MICHEL YAMMINE,
Defendants. CIVIL ACTION NO. 4:05-cv-03065. United States
District Court, S.D. Texas, Houston Division. December 5,
2006

MEMORANDUM OPINION AND ORDER

MELINDA HARMON, District Judge

Pending before the Court in this Fair Labor Standards Act
(“FLSA”) case are Plaintiff’s motion for summary judgment as
to liability under the FLSA (Doc. 11) and Defendants’
response in opposition to the Plaintiff’s motion for
summary judgment (Doc. 15). For the reasons articulated
below, the Court ORDERS that Plaintiff’s motion is DENIED.

I. BACKGROUND

Anthony Sandoval (“Sandoval”) sued ScoNet Inc. and Michel
Yammine (collectively “ScoNet”) for unpaid overtime under
the Fair Labor Standards Act (“FLSA” or “Act”), 29 U.S.C.
§ 201, et seq. Sandoval claims that he is entitled
to overtime pay because he was an “employee” under the Act.
ScoNet refutes this position and argues that Sandoval was
merely an independent contractor, not an employee.
Alternatively, ScoNet claims that even if the Court finds
Sandoval to be an employee for FLSA purposes, Sandoval is
exempt because of his work as a computer professional. At
the very least, ScoNet asserts, genuine issues of material
fact exist as to both Sandoval’s employee and exemption
status, making summary judgment for the Plaintiff improper.
This Court agrees that genuine issues of material fact
remain and that Plaintiff’s motion for summary judgment
should accordingly be denied.

II. LEGAL STANDARD ON MOTION FOR SUMMARY JUDGMENT

A party moving for summary judgment must inform the court
of the motion’s basis and identify those portions of the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
that show that there is no genuine issue as Page 2 to any
material fact and that the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the party
moving for summary judgment bears the burden of proof on an
issue, either as a plaintiff or as a defendant asserting an
affirmative defense, then that party must establish that no
dispute of material fact exists regarding all of the
essential elements of the claim or defense to warrant
judgment in his favor. Fontenot v. Upjohn, 780 F.2d 1190,
1194 (5th Cir. 1986) (the movant with the burden of proof
“must establish beyond peradventure all of the essential
elements of the claim or defense to warrant judgment in his
favor”) (emphasis in original). If the moving party fails to
meet its initial burden, the motion must be denied,
regardless of the adequacy of any response. Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). The
substantive law governing the suit identifies the essential
elements of the claims at issue and therefore indicates
which facts are material. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986).

Once the burden of proof has shifted, the non-moving party
“must do more than simply show that there is some
metaphysical doubt as to the material facts.” Matsushita
Electric Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574, 586 (1986), citing U.S. v. Diebold, Inc., 369 U.S.
654, 655 (1962). Instead, the non-moving party must produce
evidence upon which a jury could reasonably base a verdict
in its favor. Anderson, 477 U.S. at 248. The non-movant
must “go beyond the pleadings and by [its] own affidavits
or by depositions, answers to interrogatories and
admissions on file, designate specific facts that show there
is a genuine issue for trial.” Webb v. Cardiothoracic
Surgery Assoc. of North Texas, P.A., 139 F.3d 532, 536 (5th
Cir. 1998). Unsubstantiated and subjective beliefs and
conclusory allegations and opinions are not competent
summary judgment evidence. Grimes v. Texas Dept. of Mental
Health and Mental Retardation, 102 F.3d 137, 139-40 (5th
Cir. 1996); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.
1994), cert. denied, 513 U.S. 871 (1994); Topalian v.
Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992), cert. denied,
506 U.S. 825 (1992). Nor are pleadings summary judgment
evidence. Wallace v. Texas Tech University, 80 F.3d 1042,
1046 (5th Cir. 1996), citing Little v. Liquid Air Corp.,
Page 3 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The
non-movant cannot discharge its burden by offering vague
allegations and legal conclusions. Salas v. Carpenter, 980
F.2d 299, 305 (5th Cir. 1992); Lujan v. National Wildlife
Fed’n, 497 U.S. 871, 889 (1990). Nor is the district court
required by Rule 56 to sift through the record in search of
evidence to support a party’s opposition to summary
judgment. Ragas v. Tennessee Gas Pipeline Co., 136 F.3d
455, 458 (5th Cir. 1998), citing Skotak v. Tenneco Resins,
Inc., 953 F.2d 909, 915-16 & n. 7 (5th Cir.), cert. denied,
506 U.S. 832 (1992).

Nevertheless, all reasonable inferences must be drawn in
favor of the non-moving party. Matsushita, 475 U.S. at
587-88. In reviewing evidence favorable to the party
opposing a motion for summary judgment, a court should be
more lenient in allowing evidence that is admissible,
though it may not be in admissible form. See Lodge Hall
Music, Inc. v. Waco Wrangler Club, Inc., 831 F.2d 77, 80
(5th Cir. 1988). Furthermore, the party opposing a motion
for summary judgment does not need to present additional
evidence, but may identify genuine issues of fact extant in
the summary judgment evidence produced by the moving party.
Isquith v. Middle South Utilities, Inc., 847 F.2d 186,
198-200 (5th Cir. 1988). The non-moving party may also
identify evidentiary documents already in the record that
establish specific facts showing the existence of a genuine
issue. Lavespere v. Niagara Mach. & Tool Works, Inc., 910
F.2d 167, 178 (5th Cir. 1990).

III. DISCUSSION

Analyzed against the backdrop of the summary judgement
standard discussed above, the heart of this controversy
(and ultimately this motion) lies in resolving the
following two issues: (1) whether the summary judgment
evidence establishes that Sandoval was an “employee” of
ScoNet as a matter of law and (2) whether there is a fact
issue regarding whether Sandoval fell within the “computer
professional” exemption of FLSA.

(1) Whether Sandoval was an “employee” as a matter of law.
Page 4

The law controlling this case consists of a relatively
well-established line of case law explaining the factors
that a court should consider when determining whether a
plaintiff was an employee or an independent contractor.
That test is a “totality of the circumstances test” that
“must always be aimed at an assessment of the `economic
dependence’ of the putative employees.” Brock v. Mr. W
Fireworks, Inc., 814 F.2d 1042, 1043 (5th Cir. 1987), cert.
denied, 484 U.S. 924 (1987). To assess the putative
employee’s economic dependence on the employer, the Fifth
Circuit begins by examining a non-exhaustive list of
factors such as:

(1) the degree of control exercised by the alleged
employer; (2) the extent of the relative investments of
the putative employee and employer; (3) the degree to
which the `employee’s’ opportunity for profit and loss is
determined by the `employer’; (4) the skill and initiative
required in performing the job; and (5) the permanency of
the relationship.

Id. The court’s ultimate task is to decide whether or not
the individual is, considering the economic reality of the
situation, in business for himself. Herman v. Express
Sixty-Minutes Delivery Serv., 161 F.3d 299, 303 (5th Cir.
1998).

In his declaration, Sandoval begins by asserting that he
“was an employee of ScoNet from June 2002 until May 2005”
and that his title was “Systems Engineer and Zone Manager
later.” See Declaration of Anthony Sandoval (“Sandoval
Decl.”) at ¶ 2 (Doc. 11, Exh. A). He “regarded
[him]self as an employee” and asserts that “[m]any
materials issued by ScoNet, including the handbook,
referred to [Sandoval and his coworkers] as employees.”
Sandoval Decl. at § 8; see also Employee Handbook
(Doc. 11, Exh. B); Confidentiality, Non-Disclosure, and
Non-Competition Agreement (“Agreement”) at ¶¶
1 & 19 (Doc. 11, Exh. C) (containing references to him as
an “employee” and defining his status as “employment at
will”). He supplements these conclusions by stating, “at
all times, [his] work was controlled by ScoNet” and that
ScoNet’s equipment and facilities were utilized to provide
services for ScoNet employees. Sandoval Decl. at ¶ 9.
Sandoval also clarifies that he primarily used ScoNet’s
equipment and materials with the exception of a laptop
computer, which he purchased using both personal and ScoNet
funds (in the Page 5 form of a bonus).[fn1] Id. at
¶ 10. Ultimately, he denies that he owned all of the
equipment and materials necessary to perform the full range
of services to customers. Id. He believes his “opportunity
for profit and loss was solely dependent on ScoNet” and
that he “could not improve [his] `profits’ through
managerial skill or planning.” Id. at ¶ 11. He
further asserts that his services did not “require
extensive education or years of training;” indeed, he
claims that his services were of the type that is often
provided by in-house employees — but acknowledges
that his services did require some experience and
computer-related knowledge. Id. at ¶ 12. He concludes
that his employment “was permanent, in the sense that it
was [regular]” and that he had an “ongoing relationship
[with ScoNet], evidenced by the fact that [he] was required
to sign a non-competition agreement.” Id. at ¶ 13.

ScoNet, on the other hand, denies Sandoval’s status as an
employee and provides evidence to support its contention
that Sandoval was instead an independent contractor. ScoNet
argues that it did not exercise control over the details of
Sandoval’s work. See Affidavit of Michael [sic] Yammine
(“Yammine Aff.) at ¶ 2 (Doc. 15, Exh. A). According
to Yammine’s affidavit, Sandoval was “free to select the
job” upon which he worked, and he was “responsible for
providing the solutions that fit the client’s needs.” Id.
Moreover, the client set Sandoval’s hours, and Sandoval was
free to bid on additional jobs with the client, which left
him responsible “not only for the solutions but [also] for
the amount of the bid.” Id. These bids were made on the
basis of a flat fee, and it was up to Sandoval to complete
the task for that flat fee. Id. Sandoval was not entitled
to additional revenue if the bid exceeded the time
projected. Id. at ¶ 3. Sandoval determined whether
he made or lost money depending on the extent to which
special bids were accepted and the extent to which the bid
amount was sufficient to cover the costs to perform the
project. Id. at ¶¶ 3-4. ScoNet claims it
merely monitored whether Sandoval met the needs of ScoNet’s
clients. Id. at ¶ 6. In addition to these special
bids, Sandoval did receive an excess of Page 6 $455 per
week for “normal work tickets.” Id. at ¶¶ 7-8.
ScoNet further contends that Sandoval “invested substantial
time and energy” to become qualified to perform these
services, and his success was dependent upon his skill and
initiative. Id. at ¶¶ 3 & 5. As long as
Sandoval performed services for the clients in a
“reasonable manner,” he could retain his position. Id. at
§ 6.

Applying the five factors to determine employee status
under FLSA, Sandoval’s evidence does suggest that he was
economically dependent upon ScoNet and that ScoNet
controlled a large portion of his work environment.
ScoNet’s own documentation refers to Sandoval as an
employee, creating the impression that he should behave as
if ScoNet controlled his work. However, a court cannot
decide a motion for summary judgment based on a likelihood
of prevailing at trial or its assessment of the weight that
should be given to documents that contradict sworn
statements. It must believe the evidence presented by the
party opposing the motion. It appears that ScoNet employed
a unique system in which those like Sandoval bid for
employment and compensation (at least with respect to bonus
work). In this context, Sandoval could control both the
extent and effort of his work. Furthermore, ScoNet did not
guarantee Sandoval any compensation on these jobs. The
ability to work more or work less and to bid on projects
suggests a degree of economic independence that might make
Sandoval an independent contractor. Therefore, a reasonable
jury could find that Sandoval was an independent contractor
rather than an employee, so summary judgment for Sandoval
is improper.

(2) Whether a fact issue remains regarding Sandoval’s
exemption status as a “computer professional.”

Even if Sandoval is deemed an employee rather than an
independent contractor, the inquiry into liability does not
end there. A myriad of exceptions exist to the requirements
under FLSA. FLSA specifically exempts certain “computer
professionals.” See Pellerin v. Xspedius Mgmt. Co., 432
F.Supp.2d 657, 661-62 (W.D. La. 2006). According to 29
U.S.C. § 213(a)(17): Page 7

any employee who is a computer systems analyst, computer
programmer, software engineer, or other similarly skilled
worker, whose primary duty is —

(A) the application of systems analysis techniques and
procedures, including consulting with users, to determine
hardware, software, or system functional specifications;

(B) the design, development, documentation, analysis,
creation, testing, or modification of computer systems or
programs, including prototypes, based on and related to
user or system design specifications;

(C) the design, documentation, testing, creation, or
modification of computer programs related to machine
operating systems; or

(D) a combination of duties described in subparagraphs
(A), (B), and (C) the performance of which requires the
same level of skills, and who, in the case of an employee
who is compensated on an hourly basis, is compensated at a
rate of not less than $27.63 an hour.

However, courts must narrowly construe these exceptions
against the employer, and it is ultimately the employer who
bears the burden of proof in establishing that it is
entitled to the exemption. Pellerin, 432 F.Supp.2d at 661.

Sandoval explains that “ScoNet is a company that provides
information technology services” such as “network
management, system installations, and system maintenance.”
Sandoval Decl. at ¶ 2. According to Sandoval, his
“primary duty” involved “working with clients to solve
workstation or server support issues.” Id. at
¶¶ 3-4. His primary duty did not include (by
his declaration) “the application of systems analysis
techniques and procedures” or “consulting with users to
determine hardware, software, or system functional
specifications” because ScoNet’s “clients already knew the
functional specifications of their systems.” Id.
Furthermore, he denies that his primary duty was “the
design, development, documentation, analysis, creation,
testing, or modification of computer systems or programs.”
Id. at ¶¶ 5-7.

Despite Sandoval’s claims to the contrary, ScoNet asserts
that Sandoval’s “duties [did] primarily consisted at all
times of . . . the application of systems analysis
techniques and procedures . . . [and] . . . the design,
development, documentation, analysis, creation, testing,
or Page 8 modification” of computer systems or programs,
or a combination of these duties. Yammine Aff. at ¶
9.

While the parties merely deny or assert the statutory
language, a genuine issue of material fact remains because
these contradictory declarations go to witness credibility,
the resolution of which is not appropriate for summary
judgment.

IV. CONCLUSION

Because there are outstanding questions of fact as to
Sandoval’s status, summary judgment at this juncture is not
proper. Accordingly, this Court ORDERS that Sandoval’s
motion for summary judgment is DENIED.

[fn1] The Court notes, however, that there is a discrepancy
between Plaintiff’s declaration regarding ownership of the
laptop and the employee handbook, which states that laptops
are the property of ScoNet. See Employee Handbook at 4.