Benjamin Orozco v. Pane E. Vino, Incorporated ( 2014 )


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  •      Case: 13-50632   Document: 00512686561     Page: 1   Date Filed: 07/03/2014
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    United States Court of Appeals
    Fifth Circuit
    FILED
    No. 13-50632                         July 3, 2014
    Lyle W. Cayce
    BENJAMIN OROZCO,                                                         Clerk
    Plaintiff-Appellee,
    v.
    CRAIG PLACKIS,
    Defendant-Appellant.
    Appeal from the United States District Court
    for the Western District of Texas
    Before STEWART, Chief Judge, and HIGGINBOTHAM and ELROD, Circuit
    Judges.
    CARL E. STEWART, Chief Judge:
    Benjamin Orozco worked in a Craig O’s Pizza and Pasteria (“Craig O’s”)
    franchise owned by Sandra and Arnold Entjer. After Sandra made changes to
    Orozco’s salary, he quit and filed suit against the Entjers, alleging multiple
    violations of the Fair Labor Standards Act (“FLSA”). Orozco settled with the
    Entjers, and Craig Plackis, the founder of Craig O’s, was added as a defendant.
    A jury trial was held and the jury found in favor of Orozco. Thereafter, Plackis
    filed a motion for judgment as a matter of law, which the magistrate judge
    (“MJ”) denied. For the following reasons, we REVERSE the denial of the
    motion for judgment as a matter of law and RENDER judgment in favor of
    Plackis.
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    FACTUAL AND PROCEDURAL BACKGROUND
    A. Factual Background
    Plackis owns Roxs Enterprises, Inc. (“Roxs”), the franchisor of Craig O’s,
    with his wife, Roxana.     Craig O’s currently consists of five restaurants,
    including a location owned by Plackis in southwest Austin, Texas (hereinafter,
    “Southwest location”). In 2005, Pane e Vino, Inc., which is owned by the
    Entjers, entered into a Franchise Agreement with Roxs and purchased a Craig
    O’s franchise. The Entjers opened their restaurant in San Marcos, Texas
    (hereinafter, “San Marcos location”). Sandra hired Orozco as a cook for the
    restaurant. Initially, Orozco was paid $1,200 bi-weekly; however, in 2007, his
    salary was changed to $1,050. Then, in 2011, Sandra changed Orozco’s salary
    to $10 per hour. Thereafter, Orozco quit.
    B. Procedural Background
    Orozco initially filed suit against the Entjers and Pane E Vino, Inc.,
    alleging that, during his employment from 2008 through 2011, he was not paid
    overtime or minimum wage as required under the FLSA. Orozco settled with
    the Entjers and added Plackis as a defendant. The parties agreed to a jury
    trial conducted by the MJ. The jury returned a verdict in favor of Orozco,
    finding that: (1) Plackis was Orozco’s employer; (2) Plackis was part of an
    enterprise covered by the FLSA; (3) Orozco did not fall within any of the
    exemptions to coverage under the FLSA; and (4) Plackis willfully violated the
    FLSA. Plackis moved for judgment as a matter of law, which the MJ denied.
    Plackis subsequently renewed his motion for judgment as a matter of law,
    which the MJ again denied. Plackis timely appealed. On appeal, Plackis
    challenges the first two findings by the jury—specifically, whether he was
    Orozco’s employer and whether Orozco sufficiently established enterprise
    coverage.   In addition, Plackis contends that the jury instructions were
    improper. We will address each argument in turn.
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    DISCUSSION
    A. Standard of Review
    We review de novo the MJ’s denial of Plackis’s motion for judgment as a
    matter of law. See Arsement v. Spinnaker Exploration Co., 
    400 F.3d 238
    , 248
    (5th Cir. 2005). “A motion for judgment as a matter of law . . . in an action
    tried by jury is a challenge to the legal sufficiency of the evidence supporting
    the jury’s verdict.” SMI Owen Steel Co. v. Marsh USA, Inc., 
    520 F.3d 432
    , 437
    (5th Cir. 2008) (per curiam) (citation and internal quotation marks omitted).
    “A motion for judgment as a matter of law should be granted if there is no
    legally sufficient evidentiary basis for a reasonable jury to find for a party.” 
    Id. (citation and
    internal quotation marks omitted). “[T]he evidence, as well as all
    reasonable inferences from it, are viewed in the light most favorable to the
    verdict.” 
    Arsement, 400 F.3d at 249
    (citation and internal quotation marks
    omitted). Moreover, we may not engage in “credibility determinations or weigh
    evidence.” 
    Id. (citation and
    internal quotation marks omitted). Our review of
    jury verdicts “is especially deferential.” See Baisden v. I’m Ready Prods., Inc.,
    
    693 F.3d 491
    , 498–99 (5th Cir. 2012) (citation and internal quotation marks
    omitted). Nonetheless, “we will not sustain a jury verdict based only on a ‘mere
    scintilla of evidence.’” SMI Owen Steel 
    Co., 520 F.3d at 437
    (citation omitted).
    B. Applicable Law
    Under the FLSA, an employer is defined as “any person acting directly
    or indirectly in the interest of an employer in relation to an employee.” 29
    U.S.C. § 203(d). We rely on the economic reality test when determining a
    party’s status as an employer under the FLSA. Gray v. Powers, 
    673 F.3d 352
    ,
    354 (5th Cir. 2012). Under the economic reality test, we evaluate “whether the
    alleged employer: (1) possessed the power to hire and fire the employees, (2)
    supervised and controlled employee work schedules or conditions of
    employment, (3) determined the rate and method of payment, and (4)
    3
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    maintained employment records.” 
    Id. at 355
    (citation and internal quotation
    marks omitted). However, a party need not establish each element in every
    case. 
    Id. at 357.
    “The dominant theme in the case law is that those who have
    operating control over employees within companies may be individually liable
    for FLSA violations committed by the companies.” Martin v. Spring Break ’83
    Prods., LLC, 
    688 F.3d 247
    , 251 (5th Cir. 2012) (citation and internal quotation
    marks omitted). Moreover, “[t]he remedial purposes of the FLSA require the
    courts to define ‘employer’ more broadly than the term would be interpreted in
    traditional common law applications.” McLaughlin v. Seafood, Inc., 
    867 F.2d 875
    , 877 (5th Cir. 1989) (per curiam), modifying 
    861 F.2d 450
    (5th Cir. 1980).
    In joint employer contexts, each employer must meet the economic reality test.
    
    Gray, 673 F.3d at 355
    .
    C. Analysis
    Plackis argues that it is improper to find an employer/employee
    relationship when none of the factors in the economic reality test are met. In
    addition to testimony adduced at trial, Plackis relies on the Franchise
    Agreement which demonstrates, in his view, that Sandra retained control over
    the San Marcos location. We agree that the MJ should have granted Plackis’s
    motion for judgment as a matter of law because there was legally insufficient
    evidence for a reasonable jury to find that Plackis was Orozco’s employer under
    the FLSA.
    As an initial matter, we note that Orozco concedes that he failed to
    provide any evidence suggesting that Plackis maintained Orozco’s employment
    records—the fourth element of the economic reality test. However, this failure
    is not fatal to the jury’s finding that Plackis was Orozco’s employer under the
    FLSA. As we stated in Gray, “each element need not be present in every case.”
    
    Gray, 673 F.3d at 357
    . We therefore proceed to analyze the evidence in support
    of the remaining elements of the economic reality test.
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    To satisfy the first element of the economic reality test, Orozco had to
    present evidence that Plackis possessed the power to hire and fire him. There
    was testimony that some employees at the Southwest location also worked at
    the San Marcos location. Sandra explained that she hired employees from the
    Southwest location because they would not need training.                     Furthermore,
    Plackis testified that he met with Sandra to advise her on how to improve the
    profitability of the San Marcos location. After that meeting, Sandra removed
    her dishwashers from her weekday schedule. However, Plackis testified that
    he merely gave Sandra non-binding advice and Sandra testified that she made
    the decision to adjust the schedule.
    The MJ erred when it held that the jury could reasonably conclude that
    Plackis had the authority to hire or fire Orozco. The testimony that some
    employees worked at the Southwest location and the San Marcos location does
    not show that Plackis possessed the power to hire or fire Orozco. 1 Contrary to
    the MJ’s conclusion otherwise, the jury could not reasonably infer “that Plackis
    hired employees for one Craig O’s location and directed them to work at
    another.” There is no indication that Plackis ordered Sandra to hire those
    employees. Similarly, the mere fact that Sandra hired employees from the
    Southwest location does not prove that Plackis hired or fired employees. At
    most, this testimony merely explains why employees from other Craig O’s
    locations were desirable candidates for the Southwest location. Indeed, this
    testimony supports Plackis’s contention that this element is not met because
    it suggests that Sandra had an independent reason for hiring employees from
    the Southwest location. As for Plackis’s meeting with Sandra, Plackis and
    Sandra testified that he merely provided her with advice on improving the
    profitability of the San Marcos location. This is conduct we would expect a
    1   In fact, Sandra testified that some of her employees also worked at McDonald’s.
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    franchisor to engage in with a franchisee, especially a struggling franchisee.
    At best, Orozco can point to the sequence between the meeting and the
    personnel changes implemented by Sandra. Even accepting that inference,
    there is legally insufficient evidence to establish the first element of the
    economic reality test. 2 Notably, Orozco testified that Sandra hired him and
    had the authority to fire him. 3 As for Plackis, Orozco stated that he neither
    hired him nor possessed the power to fire him.
    Moreover, during oral argument, Orozco’s counsel admitted that there
    was no direct evidence supporting this prong. The jury was thus left to infer
    that Plackis had the authority to hire and fire employees. Such a conclusion
    was not warranted based on the testimony produced at trial. See 
    Gray, 673 F.3d at 355
    –56 (holding that the first element was not established when the
    only evidence produced was that the defendant was a member of the board that
    ran the plaintiff’s workplace and participated in a group decision to hire a
    general manager for the establishment).
    Orozco also failed to present legally sufficient evidence in support of the
    second element of the economic reality test—that Plackis supervised and
    controlled employee work schedules or conditions of employment.                       Orozco
    2  Orozco further suggests that Plackis was involved in the FLSA violation at issue in
    this case; however, he fails to point to evidence that Plackis ordered Sandra to pay Orozco a
    particular amount or work a specific number of hours.
    3 The MJ properly held that Orozco’s testimony was not dispositive of whether he
    presented legally sufficient evidence that Plackis was his employer, albeit for incorrect
    reasoning. The MJ concluded that “[g]iven [Orozco] was employed as a kitchen employee, his
    lack of awareness or understanding of the business relationship between Plackis and
    Plackis’[s] franchisor Sandra Entjer” did not pose “a legal bar” and was not dispositive of the
    legal question at issue. We do not view Orozco’s testimony as dispositive; however, that is
    because Orozco’s testimony is merely another fact to be considered in our analysis of whether
    Plackis qualified as his employer under the FLSA. See 
    Gray, 673 F.3d at 356
    –57 (analyzing
    plaintiff’s testimony that he thought another party, not the defendant, was his employer as
    just another fact to consider when determining whether the second element of the economic
    reality test was met).
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    testified that Sandra made changes to his hours and salary soon after meeting
    with Plackis. In addition, Plackis testified that he reviewed the employee work
    schedules at the San Marcos location and trained both Orozco and Sandra.
    Moreover, there was testimony suggesting that Plackis ordered Sandra to buy
    a radio for the restaurant. Orozco stated that he had to remain at work until
    an employee who worked at a restaurant owned by Plackis arrived. Orozco
    also testified that Plackis visited the San Marcos location frequently and met
    with Sandra or the shift managers. Orozco further testified that after these
    visits, the shift managers would relay messages to the employees from Plackis.
    Orozco also entered into evidence numerous e-mails from Plackis to his
    franchisees. In the e-mails, Plackis provided suggestions on how to improve
    the profitability of the restaurants, implemented changes to the menus,
    contracted with vendors for supplies for the franchise, and directed various
    advertising plans.
    We are not persuaded that there is legally sufficient evidence in support
    of the second element. The MJ failed to fully consider the legal standard that
    must be satisfied in concert with the factual record. Orozco’s best evidence is
    again the temporal proximity between Plackis’s meeting with Sandra and the
    changes implemented in the San Marcos location; however, the temporal
    proximity between the meeting and the changes does not demonstrate that
    Plackis possessed the authority to supervise or control employee work
    schedules or conditions of employment. The MJ erred by concluding that the
    jury could infer Plackis’s control over Orozco’s working conditions because of
    “the effect of Plackis’[s] advice to Sandra.” As we stated earlier, Plackis and
    Sandra testified that Plackis merely provided advice.     Moreover, Plackis’s
    other visits to the San Marcos location demonstrate, at most, that Plackis may
    have suggested improvements to Sandra and the employees. Nothing in the
    record indicated that Plackis supervised or controlled employee work schedules
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    or conditions of employment. Indeed, Orozco testified that Plackis did not set
    his work schedule and that the two never discussed Orozco’s responsibility or
    position. Orozco further testified that Sandra controlled his work schedule.
    The remaining evidence presented in support of the second element of
    the economic reality test is also inadequate.            The mere fact that Plackis
    reviewed the schedules fails to demonstrate that he actually had control over
    Orozco’s schedule or employment conditions. Similarly, training Sandra and
    Orozco does nothing to suggest that Plackis supervised or controlled the
    employees at the San Marcos location. This training occurred soon after the
    Entjers entered into the franchise agreement with Plackis. It is reasonable to
    assume that a franchisor would provide training to new franchisees and their
    employees.     Likewise, Plackis’s e-mails to his franchisees merely reveal a
    franchisor setting broad policies for the entire franchise and providing
    assistance to franchisees. Even if Plackis ordered Sandra to purchase a radio
    for the San Marcos location, we fail to see how that demonstrates that Plackis
    supervised or controlled Orozco’s schedule or employment conditions.
    Moreover, the fact that Orozco could not leave work until an employee arrived
    from the Southwest location does not satisfy this element of the economic
    reality test. 4 To conclude, based on this evidence, that Plackis controlled or
    supervised Orozco’s schedule or employment conditions is unreasonable. See
    
    id. at 356–57
    (noting that the second element was not established when, during
    social visits to the workplace, the defendant merely complimented the
    4  The MJ reasoned that “[a]s the Southwest location was run by Plackis, a jury could
    reasonably infer Plackis’[s] control over [the employee] at the Southwest location affected
    [Orozco’s] work schedule and effective rate of pay.” We disagree. Such a conclusion would
    be unreasonable. Rather, the evidence merely showed that an employee at the San Marcos
    location arrived to work late sometimes because the employee did not leave his other job
    timely.
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    plaintiff’s work and “twice asked [the plaintiff] to serve specific individuals”
    and the plaintiff stated that another party “defined his job duties”).
    Orozco also failed to adduce legally sufficient evidence in support of the
    third element—that Plackis determined Orozco’s rate and method of payment.
    The MJ erroneously concluded that because Plackis was aware of Orozco’s
    salary, “the jury could reasonably infer Plackis was in effect advising Sandra”
    regarding Orozco’s salary, especially in light of the testimony regarding the
    meeting between Plackis and Sandra. As we previously noted, that meeting
    does not demonstrate that Plackis decided Orozco’s rate or method of pay. In
    fact, Orozco testified that Plackis did not control his rate of pay. Sandra and
    Orozco testified that Sandra set his rate and method of payment. The MJ also
    reasoned that the jury could infer that this element was satisfied based on the
    testimony that Orozco had to remain at work until an employee from the
    Southwest location arrived. We fail to see how this evidence suggests that
    Plackis determined Orozco’s rate and method of pay. Accordingly, we hold that
    Orozco did not produce legally sufficient evidence of the third element. See
    
    Martin, 688 F.3d at 252
    (holding that the third element is not satisfied when
    the defendant merely stated that he would ensure employees were
    compensated and there was evidence that a third party handled the employees’
    payroll).
    The Franchise Agreement also fails to support the jury’s verdict. When
    interpreting a contract, we “must examine and consider the entire writing and
    give effect to all provisions such that none are rendered meaningless.” See
    Gonzalez v. Denning, 
    394 F.3d 388
    , 392 (5th Cir. 2004) (per curiam) (“The
    terms . . . are given their plain, ordinary meaning unless the [contract] itself
    shows that the parties intended the terms to have a different, technical
    meaning.” (alteration in original) (citation and internal quotation marks
    omitted)). Section 8a of the Franchise Agreement reads, in relevant part, as
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    follows: “Franchisee shall at all times comply with all lawful and reasonable
    policies, regulations, and procedures promulgated or prescribed from time to
    time by Franchisor in connection with Franchisee’s shop or business.” Indeed,
    section 8a also states, “Franchisee shall, irrespective of any delegation of
    responsibility, reserve and exercise ultimate authority and responsibility with
    respect to the management and operation of Franchisee’s shop.”
    Section 8a demonstrates that Plackis had at least a certain degree of
    control over the San Marcos location; nonetheless, it fails to provide legally
    sufficient evidence in support of the jury verdict. Citing 29 C.F.R. § 791.2(b),
    the MJ reasoned that the jury could have concluded that Plackis controlled
    Sandra and Orozco. However, Orozco concedes that the Franchise Agreement
    is insufficient, by itself, to establish that Plackis qualifies as Orozco’s employer
    under the FLSA. Moreover, the agreement does not indicate that Plackis had
    sufficient authority to satisfy the economic reality test, especially in light of
    the negligible evidence presented at trial in support of the test. See 
    Gray, 673 F.3d at 355
    (noting that defendants “held liable as FLSA employers . . . exerted
    actual operational control”). We find it notable that the MJ relied on the
    provision of the Franchise Agreement stating that Sandra had to follow
    “policies and procedures promulgated by the franchisor for ‘selection,
    supervision, or training of personnel.’” We fail to see how this innocuous
    statement suggests that Plackis hired or fired employees, supervised or
    controlled employee work schedules or employment conditions, or determined
    Orozco’s rate and method of payment.
    We do not suggest that franchisors can never qualify as the FLSA
    employer for a franchisee’s employees; rather, we hold that Orozco failed to
    produce legally sufficient evidence to satisfy the economic reality test and thus
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    failed to prove that Plackis was his employer under the FLSA. 5 See 
    Gray, 673 F.3d at 357
    (“While each element need not be present in every case, finding
    employer status when none of the factors is present would make the test
    meaningless.”). Orozco’s case is premised on a series of inferences that are not
    warranted on the record before us. The MJ therefore erred by failing to grant
    Plackis’s motion for judgment as a matter of law.                      Because there was
    insufficient evidence to support the jury’s verdict that Plackis was Orozco’s
    employer, we need not address Plackis’s remaining challenges to the jury
    verdict and the jury instructions.
    CONCLUSION
    For the foregoing reasons, we REVERSE the MJ’s denial of judgment as
    a matter of law and RENDER judgment in favor of Plackis.
    5 Orozco urges us to consider the economic reality of the situation and argues that “it
    matters little if one or more of the Gray factors is absent.” Citing 29 C.F.R. § 791.2(b) and 29
    C.F.R. § 779.224(b), Orozco argues that direct or primary control is not a prerequisite for
    employer status under the FLSA and that the FLSA does not require that Plackis exercise
    control frequently. We have considered the entirety of the circumstances and are persuaded
    that Plackis does not qualify as Orozco’s employer under the FLSA.
    11
    

Document Info

Docket Number: 13-50632

Judges: Stewart, Higginbotham, Elrod

Filed Date: 7/3/2014

Precedential Status: Precedential

Modified Date: 11/5/2024