-: SJC-13106, Kyana Jinks v. Credico (USA), LLC.
(papers rustling)
-: Okay, Attorney Lichten, whenever you're ready.
-: Thank you.
May it please the court, my name is Harold Lichten.
I have the pleasure of representing
the plaintiffs in this case.
In this case, the lower court simply refused
to apply Section 148B to determine whether Credico
was an employer of the plaintiffs solely because
he concluded the plaintiffs, quote,
"were not directly providing services to the defendant."
That conclusion was erroneous given the particular facts
of this case, where it is undisputed that 100%
of Credico's business was created by the sales
and marketing agents that my plaintiffs were part of,
and all of the income of the intermediaries
and of the plaintiffs came from Credico.
-: Okay, Counsel, before you go too much further,
can you just be a little particular with me
about what exactly you're appealing from?
I wasn't 100% sure from the Notice of Appeal.
It says, the appeal is from the court order
granting summary judgment to the creditors.
There seem to be other rulings in there
that were not necessarily addressed by your brief,
but also you agree that your second request for, to appeal
the grant of summary judgment to all defendants,
which was part of the order.
The other defendants have been kicked out
of this case, correct?
-: Yes, this case. Cipher: So what's
your focus, what's your scope?
-: Case only involves the decision by the court
to grant summary judgment to Credico on the question
of employment status, thereby prohibiting my clients
from establishing that they were deprived of minimum wage
and overtime with respect to Credico.
Cipher: Okay.
-: The other intermediary defendants are long since gone.
Cipher: Okay.
-: We're also appealing the decision to grant
summary judgment or grant judgment against Mr. Jackson
because of his participation in a federal FLSA opt-in case,
and we're also appealing, the third thing
that's very important, the decision of the judge to conclude
that the overtime statute did not apply to the plaintiffs
where the statute here in Massachusetts.
-: Can I turn to that one because that, your reading of that
just seems to be wiping out joint employer law.
I mean, here we have a case in which the person is,
we don't have to decide whether the employee
is an employee or an independent contractor.
The employee is an employee, right?
Harold: No.
-: Yes, he's, bear with me.
He's an employee of the other company, right?
Harold: No.
-: He's not?
He's not treated as an employee of that company?
-: For most of the time at issue,
these, they were all independent contractors, so up until.
This case goes back to 2013 because it was filed
in July of 2016, so the statute limitations
would go back to '13.
At the end of 2015, after Credico was sued in New York,
Credico put out a memo saying,
"We'll no longer allow the intermediaries
to have independent contractors."
They also put in an arbitration clause,
which is in the record.
It's not really part of this case, and so it's likely
that there is no class post-2015 because of
the arbitration clause, but these workers,
and two of my plaintiffs in this case,
were independent contractors.
Kafker: For a period of time.
-: We don't think the 148B requires
independent contractor status to apply the test,
but they were independent contractors.
-: So I'm trying to figure out, how we do these cases
'cause they're so complicated.
I understand when, okay, and maybe we take your first
couple beers where there's no, no commitment
that someone's an employee, but once we have someone
being an employee of one company, that test is so broad
that it's gonna confuse employment status.
I mean, 'cause no one's going to meet,
I mean the issue of joint employer is, is sort of
an exceptional circumstance, not a normal circumstance.
We want one employer to have all the obligations
and the way you're doing this is we're going to have
two employers a lot of the time, and that has
significant consequences because if you don't pay wage acts,
you're subject to personal liability if you're the CEO
or the treasurer of these companies.
There's, it just seems like the judge
is doing it intelligently to me.
He's making a determination of, okay, the person's
an employee of one company and then we gotta use
the joint employer test.
I just don't understand how your test is gonna work
in the real world.
-: Okay, well first the primary part of this case
doesn't involve employees, but I'm saying,
and I think the law's clear and I think section 148B
is clear that under that test, which has been applied
in Sebago, which is applied by the appeals court
in Gallagher, you first look to whether the person
is providing services or not.
That's the key.
-: Again, we're, when we're dealing
with independent contractors, and there's a sense
of manipulation that I get it, we have to use that test,
but once we can establish that there is one employer,
that test has the potential of creating
a lot of confusion between who the employer is.
-: Your Honor, in some cases that may be the case,
but in this particular situation.
Kafker: Almost every case, right, 'cause.
-: Your Honor, in this situation where Credico gave 100%
of the intermediary's business, and there were
200 intermediaries that were created, was from Credico.
They only had business that Credico assigned them
and it was 100% of their work and my clients,
all of their income, anything that they made,
all of the services they provided were for Credico.
-: Let me give you an example though, okay.
So you're a law firm and you have one major client.
Does that make you the employee of that client?
I mean, a lot of businesses have one good client.
I, you know, I'm just not sure that's the test, right?
It's whether you control the, I mean, it's the classic
joint employer test that the judge applies, isn't it?
-: Well, how then would you explain the several comments
by the SJC, by this court on numerous occasions
that we're going to look at arrangements and not allow
arrangements that seek to get around the wage statutes?
-: I get it in, in the major case on point.
The court was confronted with someone who's an independent,
described as an independent contractor by two employers,
and we're saying just because there isn't
a contractual relationship, 'cause you have to sort out
whether the person's an employee or
an independent contractor in that case, you have to,
and I get that we have to do that, but once we determine
that one person is the employer, you're just gonna make
everybody a joint employer if we.
You know, there's gotta be, there's gonna be almost no one
who's not a joint employer if we applied
that three-part test.
-: No, no, Your Honor, I'm not saying that.
In all fairness, what I'm saying is that
in the particular facts of an arrangement like this,
as commented by the Department of Labor
and its opinion letter on vertical employment
and as commented by this court where you have these facts,
where you have 100% of the business of the intermediaries
is derived from Credico, they control the intermediaries.
The intermediaries would have nothing to do.
They can only go out and sell in areas
that they're assigned, and when you have the workers
who have no other work to do other than the work
of Credico selling their products
in the territories that they're assigned.
-: So on your facts, on your facts, and we'll put aside the,
the discrepancies in the factual record, on your facts
then you'd win under the, the control test
or the economic realities test on, on, on your facts.
What I don't understand at all is what, whether somebody
is an independent contractor or employee has to do at all,
at all, with whether somebody is an employer.
I don't even, I don't even begin to understand
how the differentiation between an independent contractor
or an employee determines who the employer is
for the purposes of a joint employer.
-: Okay, well, it may be that we're spending too much time
on this because the primary part of the case
involves the independent contractor, but I would posit
to you that if you read 148B and as other courts have found,
it doesn't say anything about independent contractors.
It talks about.
-: But there's an amendment pending.
Isn't there a amendment to the law pending,
wanting to do something like that?
-: There may be, but that's, there's nothing now.
This is, when these clients have their case,
the section 148B simply says that persons performing service
not authorized under this chapter deemed employees,
and it says for purposes of this chapter, and chapter 151B,
which is where our claims are, an individual performing
any service except as authorized under this chapter,
but I'd like to move on because again, the employee part
of this case is a, is a small
or non-existent part of the case.
I'm here on behalf of my clients, who for most of the time,
were independent contractors as were the hundreds
of other people around the United States who were,
worked for Credico intermediaries.
-: But don't we have to decide how we decide
who is an employee in this case?
-: Well, finishing on what Justice Kafker said,
you may not have to get there.
I would like you to get there, but you,
it's clear that these workers were independent contractors
for most of the time and I heard him saying, I thought.
Kafker: Aren't you saying the opposite?
-: What?
Kafker: You're saying they're misclassified as.
Harold: Misclassified, yes.
-: You're saying, I mean, I get it.
I understand we have this initial test where we have
to figure out whether they're independent contractors
or employees, I get that, and the legislature
is super protective of making sure they're employees,
unless those three part test is met.
So I get that part of this.
What I don't get is once you figure out who the employer,
once you figure out their employees to,
then we're in, we need a second test.
It's not the first test, and the second test seems to be
a traditional joint employer analysis because again,
it's an oddity and rare, but you, you're, you're,
you're taking me somewhere, I don't understand this.
-: I disagree with that added step analysis.
If the worker, let's just take for this purpose,
is an independent contractor, then to determine whether
or not they're an employee of a particular company,
you apply the 148B test.
Now we know that from Sebago.
-: But that doesn't work because it doesn't.
Everyone, it's so hard to meet that
independent contractor test if the answer is always,
you're an employee to both companies.
Anyway, you're going to wipe out that distinction
between joint employer and single employer.
-: But Your Honor, in fairness, that is not true
because if you look at the Sebago case, which I think
is the leading case, Sebago was a case where the cab drivers
sued the medallion companies, they sued the garages,
and they sued the dispatchers, and Justice Cordy said,
you have to look at each company and see, apply the test,
and the first part of that test is whether or not
they were providing services for that entity and he found,
or the court found, and it's, I can understand why,
that they weren't providing services for any
of those companies, because the services they were providing
were to the people of the public, for whom they gave rides.
They just rented those taxi cabs and after that,
they could do whatever they want.
-: But that makes complete sense in that context
where nobody is taking responsibility for them,
and by the way, we don't decide that they're all
joint employers in that case, right.
We just decide they're not independent contractors.
Harold: Of those companies.
-: Right, they're not independent contractors,
but we don't as say, these are all joint employers, do we,
that they're all responsible for the wage act violation?
-: Yes, I think the fair reading of Sebago is that
if Justice Cordy had found that the workers
were performing services for, let's say,
the medallion company, then 148B would have applied
to that particular company,
and it's likely, not necessarily.
Kafker: They get triple damages from every
single one of those companies?
-: No, because some of them weren't, the plaintiffs
weren't providing services for those companies.
-: Well, but if there's multiple employers in your context,
what you're saying there, there isn't a, I don't know.
Anyway, I'm distracting you, so.
Wendlandt: Can I ask you a slightly different question
on the facts of this case?
Harold: Yes.
-: Why are your clients under your tests
not employees of Verizon?
-: My guess would be that that would be
a step too far because.
-: But you're, I'm just, I'm just applying you the tests
that you suggest, right, 148B, and under 148B,
if you apply the test as you suggest it should be applied,
I conclude they're employees of Verizon.
Where does it end?
Harold: Well.
-: That is, we have an obligation to interpret
statutes with common sense, and it sounds like you're saying
it lacks common sense to extend this to Verizon,
but they're providing services for Verizon.
-: They are providing services for Verizon.
-: But where does it end?
How do I, how do I find the limiting principle
to the tests that you're suggesting?
-: Well, first of all, the legislature defined
how we make the determination,
and these people are independent contractors.
-: But under Justice Wendlandt's example,
they would be employees of Verizon
because they don't meet the second,
they don't meet the three-part test.
-: If they met, no well, I'm not,
it's not clear whether they meet.
There's no evidence of control that Verizon controlled them.
There may be some evidence, I don't know.
Kafker: But what's the three-part test?
The second part.
-: Whether there was control, whether they were,
what they were doing was part of the usual part
of business of Verizon, and Verizon would say
it's a telecom company providing
telezone service, telephone services, it's not
a sales company, and whether the individuals
had an independently established trade or business
separate and apart.
I not sure Verizon would meet that test.
-: How is that any different than, that when you apply
the test to Credico?
-: Because I, I wish the court would focus a little bit
on this particular facts of this situation.
You have a company, Credico, a multinational company,
that doesn't have anyone doing market and sales for them.
It creates this network of 200 intermediaries
who have really no assets, who are just individuals,
and those people then utilize these workers.
It's like the old farm worker cases
where a big farm hires a farm contractor.
There are many cases like that under the FLSA
and the farm contractor is held to be just an employee
of the farm, not not the employer.
That is what this is, and then these.
-: What about the third prong?
The individual is customarily engaged in an independently
established trade occupation, profession, or business.
There's, they're never going to meet that.
Verizon, that's, Verizon's on the hook.
-: Well, no, it, it is possible that in,
in a normal situation that these workers would have gone out
and done sales and marketing for a number of companies.
This is an unusual situation.
What if my clients had done some work for Credico,
some work for others, they were independent salesmen.
Those are independent contractors and therefore they do have
an independently established trade or business,
as would the intermediaries if they actually went out
and did business with other companies.
This was closed.
100% of the work my clients did was for Credico
and 100% of what the intermediaries did were for Credico.
This is an arrangement created by Credico,
and please remember that in Depianti, in footnote 17,
you specifically said that where the larger company
creates the agent of the misclassification then,
then they can evade the purposes of the wage act,
and there's at least evidence in this record
that that was true, especially since they were
independent contractors in this case.
-: So what's the evidence that Credico
created the agent of miscalculation?
-: Yes, in the New York case, which is the Vasto case,
there were, and in the record and we cited this,
there were 1,250 opt-ins in that case, I think,
from all over the country.
They all were independent contractors,
and sometime in 2016, all of a sudden Credico said,
and this is in Judge Englemayer's decision in Vasto,
we're no longer going to allow a utilization
of independent contractors.
You have to have employees and everybody became an employee.
So there's at least some evidence in the record
that, that Credico created the system.
In addition. -: So when you say
something is in the record, counsel,
that evidence you just told me about,
that's not in the Vasto record, that's in this record.
-: Well, Judge Engelmayer discusses it in his decision,
as part of his decision.
Cipher: Okay.
-: In addition to that, while we're on that subject,
there is evidence in the record that Credico
had specific control over these workers.
I know this is hotly disputed, but I want to point out
two points, which I think are really critical.
First, Credico had the right to order the removal
of any agent on any project that the def,
that DFW was working on in this case.
We've cited to you, it's, it's at the record
appendix 10, page 11, that if Credico objects to any
of subcontractor's employees and subcontractor
does not remove such person from the program,
Credico may terminate the statement of work
of this agreement immediately.
So they do have the right to order the removal
of someone lest the work be lost.
Secondly, there's evidence in the record
that Credico set the wage scale, I'm sorry, the pay scales
for these workers, that it wasn't totally independent.
We put in the record.
-: Set the compensation schedule for the franchisor
who employs them, but they don't set.
He's gonna stand up and say the exact opposite,
and I suspect he's going to be right that they don't
determine their hourly wage or any of that, right?
Harold: Well, that's, that's what trials are for and I.
-: Their trials are for if you have a dispute,
but if we're going to find that there's no discussion
of salary or payments.
Payments are, what the business receives is different
from where the employee is compensated.
Harold: No, there, there is, Your Honor.
I beg to differ.
-: Okay, all right.
-: On this commission schedule, which is in the record,
appendix eight, page 149, there's a schedule
that is produced by Credico in this litigation,
and it sets the commission for the rep.
It says rep, and a dollar amount is listed,
and owner, meaning the intermediary,
and a dollar amount is listed.
Judge Engelmayer in his decision in the Vasto case said
that this was a dispute. Kafker: Hold it.
Look what you just said. -: Of fact which
he could not resolve.
-: Mr. Lichten, you're very,
it's hard to pin you down on facts.
What you just read there, the rep and the other,
that's the franchisor, right?
It's not the employee, right?
It's the compensate, am I misreading that,
'cause I'm going to go back to that page
to try to figure that out.
-: This is a document that Credico produced,
which lists the amount of the commission
that the rep would get, and it lists.
Kafker: The rep.
-: The rep is the agent, my client, sorry,
and then it says what the owner.
-: There's a direct payment by Credico to your clients,
as opposed to a payment to the person
who employs your clients.
-: No, in fairness, Credico took its share,
then it sent the money down to the intermediary.
The intermary takes, intermediary takes its share,
pays some of the managers, their share,
although they're all independent contractors,
and then pays an amount to my clients.
-: That qualification is just what Judge Salinger, I think,
is talking about on the elusiveness of being able
to find the facts from which the arguments are based
in the business litigation session.
-: Yes, but I know I'm, I'm, I'm way out of time,
but if I can just say one thing, the problem with applying
the common law right to control tests are, although
I think even under that test, there should have been a trial
is that you allow, and this is what the Department of Labor
has said and David Wilde has said in his treatises,
you would allow companies to completely evade the wage act
by taking large companies who have lots of assets,
creating penniless intermediaries, and then allowing
these intermediaries to blatantly violate the wage act,
and they were blatant violations here.
My clients worked 60 hours a week and got no overtime
and no minimum wage.
I know there's a dispute about the overtime statute,
but at least on minimum wage, they sometimes earn nothing
or $100 or $200, and the court by ruling that only
the right to control test apply and turning blinders
to the actual situation in this case would allow
these companies to violate the wage laws in a way
that I think you have said on numerous occasions
should not be permitted.
-: Okay, counsel, one final question just for me,
and that is, can you, turning to the argument of the amicae,
they suggest the test should be a piercing
of the corporate veil.
Wouldn't that test help us distinguish between Verizon
as an employer and Credico as an employer?
-: No court has ever adopted the piercing
of the corporate veil.
I'm not suggesting that that would be appropriate
nor do I think that's appropriate
in wage and hour litigation.
I know of no case that's ever done that.
-: Okay, thank you very much.
Harold: Thank you.
-: Attorney Miller.
-: Good morning.
May it please the court, Barry Miller,
and with me is Alison Silveira, both of Seyfarth Shaw,
for defendant appellee Credico (USA) LLC.
Before I.
-: Can I ask you to address Justice Cipher's question
about piercing the corporate veil?
Why is that not the right test?
-: Yeah, I'm willing to address several things
that came up in Mr. Lichten's.
Wendlandt: Excellent, can you address that one now?
-: Yes.
Wendlandt: Thank you.
-: Piercing the corporate veil wouldn't help here.
It wouldn't make for a distinction because there's simply
not record evidence that would allow for a piercing
of the corporate veil as between DFW and Credico.
We have a 12 factor test that lays out what.
-: I get that you can't pierce the corporate veil here.
It doesn't sound like the facts sustain it,
but why is that not the appropriate test?
-: Oh, it may well be.
We actually think that the test announced in Cerulo,
for example, is the correct test that you should be
looking for the immediate employer of these people,
these workers, i.e. the person who hired them,
the person who has the power to fire them,
the person who supervises them and the person who decides
how they're going to get paid, and the record here
is very clear on all of those points.
-: I agree with that point, but Mr. Lichten highlights
something that troubles me, which is also what we were
worried about in the last case, which is, at least
for a period of time there was basically treating
these people as independent contractors when they weren't.
Barry: That was my second.
-: And that's a really, that time period creates,
doesn't that put us into the Jan-Pro analysis?
Barry: It doesn't.
-: Okay, why not?
-: For a couple of reasons.
First of all, all of these people by operation of law,
were employees of DFW.
That is the finding in Judge Salinger's summary judgment.
Kafker: But doesn't that, doesn't that hurt you then?
-: I don't think it does.
-: 'Cause there's a period of time where you're sort of
very involved in this relationship with the franchisor
and there, and we have this position where
the legislature's intent, which is to protect people
who are employees from being treated like employees
is being violated for a couple of years, right?
-: I would say two things about that.
First of all, there's no evidence whatsoever in the record
that Credico was the agent of misclassification
in the way that Mr. Lichten has.
-: Well, but isn't that, in Sebago and in Jan-Pro,
you guys lose that sort of protected status.
Once we've got employees being treated
like independent contractors, then we start coming down hard
on why that's the case, including looking at
the overall relationship between, in your case Credico
and then whatever it is, DFW or whatever the name is.
-: I don't think that second step is actually warranted.
Where we have people who are treated nominally
as independent contractors and nominally is important here,
what we do is look to the entity that hired them,
that paid them, that decided how they were going
to be compensated, and we come down hard on that entity,
and what that allows the business community to do
is that when we subcontract a piece of work,
we don't have to get involved in the employment
and other contracting machinations
of the sub-contred, contracted entity.
We can and we should be able to stay out of that
and let DFW manage its own affairs.
-: But does that become like a, a trial issue
like in Jan-Pro or in Sebago?
I'm just trying to understand why your situation
is different there, particularly in light of
that fight in footnote 17, where we're talking about
the possibility that you willfully structured
your relationship with the middle person
here to do that, don't.
-: The first point here is that this case
was decided on summary judgment.
It wasn't decided on a motion to dismiss.
There was simply no evidence that Credico created the system
or did anything other than the exact opposite
of what DiPianti considers.
Credico here was the agent of appropriate classification.
They said, you know what?
We need to manage our business risk.
We're only going to subcontract with entities
that treat their workers as employees,
and the reason they did that is also.
-: At two years later, don't they?
They don't do, they only do that
after they get sued and clobbered in New York, right.
-: They won in New York.
They won outright in New York.
They won everything in New York, and there was no trial
in Sebago and there was no trial in Jan-Pro.
Each of those cases resulted in a defense judgment.
The other thing that I want to point out
is that Mr. Lichten is not correct that all the money
here comes from Credico.
As Justice Wendlandt pointed out, it ultimately comes
from Verizon, from Direct Energy, and it does give rise
to this really boundless standard because any person
who's working in your usual course of business
becomes someone who may sue you for travel damages,
attorney's fees, interest, and the statute
has criminal penalties, which actually gives rise
to questions about the rule of lenity here,
where I could be held criminally responsible
for the employment practices of an entity
that I am at contractual arms' length with.
I don't see how that standard is even something
that this court could make sense of.
-: So what standard do we apply, 'cause we have to do
a joint employer analysis here.
You can't just stop.
So I mean, the piercing the corporate veil one
seems impossible and has never been used
in joint employer context in employment law, right?
If they don't.
-: I would argue that that's what DiPianti contemplates.
-: Well, I mean, we've got joint employer cases
in all different contexts in employment discrimination
and it's, it seems to be a well-established test.
If you're, piercing the corporate veil
is something we do very rare.
-: So a few things.
Joint employer is not a unitary standard.
It means different things in different contexts.
For example, for purposes of the workers' compensation law,
it's different than for purposes of the pay equity law,
and here you have no statutory structure that contemplates
anything other than the direct employer.
Mr. Lichten and his clients are trying to take a statute
that as Justice Kafker characterized, it is designed
to force workers into an employment relationship
so that the Commonwealth can regulate their employment.
That statute is not intended to open this up
to potential liability for all of the other entities
that regularly do business with that employer.
-: But hasn't this court opened that up some when,
when there's an issue of misclassification,
even if you're the innocent party to a certain extent
in that misclassification, we've not ruled out
that you've got to go do the next step,
which is to figure out whether you're an employer
and we expressly said in, again, I can't remember Jan-Pro,
whatever that case is called, that, that you don't need
a contractual relationship with you to be
potentially an employer, right?
We, we've left this open.
-: Certainly DiPianti says that you don't need
a direct contractual relationship to be an employer.
What it doesn't say is that those people were in fact
employees and the outcome of the case
was to the contrary, but.
Kafker: But it sent it back to try that issue, right?
-: It's a somewhat complicated procedural history
that's recited in the Vasquez case
that the plaintiffs cite.
What happened was, the case got sent
back down to the trial court.
Before the Massachusetts federal trial court got to it,
there was a parallel piece of litigation in Georgia
that went the defendant's way, was reduced to judgment,
and the Massachusetts court gave that full faith and credit,
and that was the end of the case,
but there's a circularity here if we create a standard
that requires the prime contractor to get into the business
of the subcontractor and look at its affairs
and make sure that it's doing all of these things.
That's exactly what it shouldn't be doing.
The entire structure here is that it should be able
to subcontract the work and leave compliance
to the subcontracted entity.
-: But we need a test.
So I, again, do not understand how a statute
that determines who's an employee and who's
an independent contractor answers the question
who's a joint employer.
I don't understand it, but that's the first question
to know w%hat you're dealing with, and then what if
the employer for that now employee under that statute,
under 148B, is just a shell, there's nothing there.
We need a test.
Is it the economic realities test,
is it the control test where we do it?
We need a test.
-: So I would answer that in two ways.
First of all, I'm not sure that we do need a test.
We're talking about a statute here.
We're not talking about a common law cause of action,
and if the legislature wanted to reach through
the hiring entity to get to Credico, Verizon,
or anybody else, it could have done that, and in fact,
there's a recent example of that out of New York.
The New York general assembly just passed a statute
that is very much on point during the construction industry.
-: It can't be that, that, that company X is really
the employer and pulling all the strings, and this person
is not making minimum wage or there's other
wage act problems, and they're not going to get paid,
and it's, well maybe someday the legislature
will pass the right statute.
There has to be a second step in the test.
-: Well, there's existing law that would allow us
to get through to an employer that was
in fact pulling the strings.
I think that's what piercing the corporate veil would do.
There's no evidence that would support that conclusion here
if we needed a test at all.
-: But you lose if we use that test if,
you need a test, 'cause otherwise you lose,
'cause the test, you fail that test.
Barry: Which test is that, Your Honor?
-: The test set out in the wage law.
You don't, says you're an employee if you're not an,
if you, if you don't meet these three things,
so you're, you're in trouble if that's the case.
-: I don't think that's the case, actually, Your Honor,
and Gallagher talks about this.
So Gallagher is easy to misinterpret
and I misinterpreted it myself the first several times
I read it, but there are two separate analyses there.
One is, are you performing services
directly for this entity?
If so, we'll apply 148B, the ABC test,
but you have to get past the first phase.
You have to show that these workers are providing services
directly to the defendant entity, and you don't have that
here for reasons that Justice Salinger described
in his summary judgment opinion, and that gets me back to
the second part of my response to Justice Lowy's question.
If we do need a standard and I maintain that we may not
because this is statutory and the statute goes as far
as it goes, but if we do, that standard has to allow a party
who ultimately could be held liable for trouble damages
and criminal penalties to avoid that outcome
without taking over the business of a subcontracted entity,
and if you, the, the economic realities test
is essentially attuned to that, and you look at facts
like who set this person's compensation.
-: But I'm confused though, in the two year,
if Mr. Lichten is right, that there's two years of time
added before the employment relationship is formalized.
So we have two years in which they're acting
as independent contractors when they're not,
according to this test.
Barry: That gets me back to something that I said.
-: Let me.
Barry: Sorry.
-: So then we have this free for all between
your company and the intermediary.
Don't, isn't that exactly what we did in, in DiPianti?
-: No, there's no free for all, because it's very clear
who hired these people.
If we're looking for one employer,
there's no question who it is.
Jason Ward hired all of these people.
By the way, it's not true that all of them
were treated as independent contractors for that period.
Several of them started after the DFW had switched over
to a full employee status, but the other important part
of the response to that is what I mentioned
a few minutes ago about these folks being only
nominally independent contractors.
There was no difference in treatment, no difference
in the way that they were paid as between the time
that they were independent contractors and employees.
They were always paid strictly on commission
and at rates established by Jason Ward and DFW,
and that gets to the document that Mr. Lichten pointed to.
-: So Mr. Lichten's brief is going to say that
because of the compensation structure that you set up
and everything else, including that you can term, is it act,
is he accurate to say that you have the power
to get rid of them, get rid of all these people,
'cause that's an unusual power for a company to have
that's not an employer.
-: It makes sense in context if you look at the contract
that Mr. Lichten referred to.
There are provisions in it that talk about ensuring
that there's not fraud or really criminal activity
by these workers, and under those circumstances,
if the end client Verizon insists on the removal
of that person, you have to do it.
That is the extent of the power that is even contemplated.
By the way, there's no evidence that
it was ever exercised either.
-: So there's no corresponding responsibility or power
for Credico, just for Verizon.
-: Correct, the contract reserves essentially the right
for Verizon to require that a given worker, for example,
who has engaged in fraud not be selling the phone.
Cipher: So Credico could not do that?
-: I don't believe so under the contract, not, not at will,
not for no reason, and more to the point,
there's no evidence that anybody did it.
One thing that is clear is that the compensation practices
and all the hiring, all the firing in fact
was done by Jason Ward and there's even testimony
in the record from Lee Tremblay, one of the plaintiffs,
to the effect that he understood that Jason Ward
set his compensation, determined how he would be paid,
and he was aware of other intermediary entities,
we call them ISOs, who made different decisions about how
to pay people and paid their workers differently.
So all of that was going on at the subcontracted entity.
Under those circumstances, there's just no basis
for a finding that Credico exercised sufficient control,
or even had sufficient control to exercise, to put itself
in a position to avoid the draconian penalties
of the wage act.
-: Well, we've got obviously, Judge Salinger is very critical
of the, of the plaintiff in laying out what the genuine
issues of material fact were, and the plaintiffs pushed back
on that in the brief and you make the comment you make and,
and then Judge Salinger applied the control test.
Is it, if it were the plaintiff's facts,
does the case come out differently if it's
the economic realities test?
-: It's difficult for me to conceive of exactly what
the plaintiff's facts are, 'cause I think
they've drifted a little bit.
I don't think there are any facts supported by
any record evidence that gets them anywhere close,
and Judge Salinger made that same conclusion.
He pored through this record and went to pains to do it
as he describes in the decision, and he drops footnote
after footnote about how the assertions that plaintiffs
makes simply aren't supported by evidence and again,
this is a summary judgment decision.
It's not a motion to dismiss and fundamentally,
plaintiffs had a full opportunity to gather evidence
that would support these facts and they failed to do it.
The record simply doesn't support that and summary judgment
for that reason was entered appropriately for Credico.
-: One more question.
I know your time is up.
Can you address getting rid of Jackson on,
on the issue of claim preclusion?
-: Yes.
That's a little bit more of a niche-y issue,
but I think it's actually quite clear and Justice Salinger
dealt with two separate instances of that.
The original plaintiffs were dismissed from the case
on the same grounds, I don't know why they didn't appeal
and Mr. Jackson did, but the gist of the rule
against claim splitting is you can't file a lawsuit
against somebody and keep claims in your pocket.
So if, for example, you filed a lawsuit against Credico
in the Southern district of New York as Mr. Jackson did
when he filed an opt-in consent form,
giving him full status as a party, by the way.
The Genesis Healthcare case in the briefs
from the Supreme Court says that, these folks are parties.
So in effect, Mr. Jackson sued Credico and he advanced only
a claim under federal law, the Fair Labor Standards Act.
He never did anything, never even sought to assert
a Massachusetts claim in that action and so when it
was reduced to judgment against him, any claim he could
have had is dead and has to be dead.
Plaintiffs would like the court to engage in speculation
and say, well, the Southern district of New York
might not have allowed that because the Massachusetts claim
was discretionary, but that is exactly the argument
that this court's rulings on this subject preclude
in the seminal case of Anderson versus Phoenix.
At 387 Mass. 444, page 451, the court said,
"We cannot countenance a plaintiff's action in failing
"to plead a theory in federal court with the hope
"of later litigating the theory in a state court
"because it was possible, or even probable,
"that the federal court would have declined
"to exercise its pendent jurisdiction.
"Rather, such a plaintiff should plead his state claim
"in the federal court and if that court fails
"to hear the claim the plaintiff may then
"ordinarily file suit in state court."
That's exactly this case.
That's exactly what Mr. Jackson did,
and this court has already ruled on it.
-: Can I ask one more question on the sales,
the salesperson issue?
Is there a different definition for
minimum wage versus overtime?
-: No, actually, and that raises a thicket of issues.
The statute contains very few exemptions from
the minimum wage obligations that it imposes,
and those occur only in section two, where it defines
out of occupation, certain categories of people,
including sales folks who never make visits to the office,
or who do not make daily visits to the office,
but the, the section one A, which enumerates
the overtime exemptions separately includes
a sales person exemption that is not met
with similar language about not making
visits to the office.
-: So is that why there's a difference?
Is that, is that your position that
that explains the difference?
-: Yes, and it's actually syllogistic because section two
was passed in 1947 and what it does is say,
if you're a salesperson who never makes visits
to the office, you're not engaged in an occupation.
You're not covered by chapter 151 in any respect.
Minimum wage, record keeping, overtime,
it just doesn't apply to you.
Section one A, which was added in 1960, 13 years later,
merely says, if you're an outside salesperson,
you're exempt from overtime, and so if plaintiff's theory
that these two sections meant the same thing were true,
what that means is that in 1960, the legislature decided
to pass a statute that says this group of people
who are already exempt from every aspect of this statute
are exempt from one narrow little bit of it.
That doesn't make any sense at all, and so if we know
that the definition in section two does not swallow
the definition in section one A, as plaintiffs contend,
then where do we look for that standard?
And Judge Salinger, I think appropriately looked
to federal law because it uses exactly the same term,
outside salesperson, and under that standard, as was found
in Vasto, as was found in Martin, these folks
were categorically outside sales personnel,
and the last thing that I would like to add to that
is that those same cases also reject plaintiff's
fundamental contention here about what Credico is.
Judge Engelmayer and the Southern district of New York
engaged in factual finding on a record there, and he said,
this is a completely normal run of the mill business.
It is commonplace to outsource these sort of marketing
services and in fact, with respect to Sprint alone,
it was one of many brokers that engaged
in that sort of thing.
So all of the aspersions that plaintiffs wanna cast
on this company and this business model have already
been rejected by three separate courts, Judge Salinger,
the Southern district of New York, and that ruling
was upheld by the Second Circuit.
There's simply no basis for a finding that Credico
was liable to these plaintiffs for anything,
and for that reason, we would ask the court
to affirm the ruling below.
-: Okay, thank you very much.
Barry: Thank you, Your Honor.
-: We'll take our morning break.
Bailiff: All will rise.