Richard S. Hannye, Esq., HANNYE LLC, Haddonfield, NJ, Attorney for Plaintiffs.
Kenneth Goodkind, Esq., Peter J. Tomasco, Esq., Michael D. Homans, Esq., FLASTER GREENBERG P.C., Cherry Hill, NJ, Attorneys for Defendants.
JEROME B. SIMANDLE, Chief District Judge.
This matter comes before the Court on Plaintiffs' motion for conditional certification of a FLSA "opt-in" collective action and certification of a Rule 23 "opt-out" state wage class action [Docket Item 43], Defendants' motion to seal [Docket Item 66], and Plaintiffs' motion to dismiss Cardo Windows, Inc.'s counter-claims for breach of contract [Docket Item 74].
For the reasons set forth below, Plaintiffs' motion for conditional certification of a FLSA collective action will be granted. Because Plaintiffs' motion for class certification under Rule 23 turns on the appropriate test to determine whether an individual is an employee or an independent contractor under the New Jersey Wage and Hour Law ("NJWHL") and the Supreme Court of New Jersey recently accepted certification of this exact question, this motion will be denied without prejudice. Defendants' motion to seal will be granted in part. Plaintiffs' motion to dismiss Cardo Windows, Inc.'s counter-claims will be granted in part and denied in part.
A. Factual Background
Defendant, Cardo Windows, Inc. ("Cardo") does business under the trademark, "Castle the Window People." (Deposition of Roderick J. Arce on January 14, 2014 ("Arce Dep.") 149:3-7.) Cardo sells and installs windows in multiple states including New Jersey, Pennsylvania, Delaware, Massachusetts, Rhode Island, Vermont, New Hampshire, Connecticut, New York, and Ohio. (Arce Dep. 149:8-18.) Cardo maintains warehouses and sales facilities in Mount Laurel, New Jersey; Cedar Grove, New Jersey; Mechanicsburg, Pennsylvania; East Berlin, Connecticut; and Boston, Massachusetts. (Certification of Christopher Cardillo, Sr. ("Cardillo Cert.") [Docket Item 68-5] ¶ 4.) Defendants contend that each of the five different facilities operates on its own schedule and is operated by different people. (Cardillo Cert. ¶ 12.)
Plaintiff Jack Varner worked 10 to 14 hours per day as an installer for Cardo from February 2003 to October 2012. (Certification of Jack Varner ("Varner Cert.") ¶ 1.) He did not install windows for anyone but Cardo during the 11 years he worked as an installer for Cardo, except for two roofing jobs he completed with his brother. (Deposition of Jack Varner ("Varner Dep.") 27:4-18; 28:5-17.) Plaintiff Fred Adami worked 10 to 12 hours per day installing windows for Cardo from March 2001 to June 2012. (Deposition of Fred Adami ("Adami Dep.") 113:4-12.) Varner and Adami primarily completed work orders in New Jersey. (Adami Dep. 257:11-16; Varner Dep. 127:17-25; 128:1-6.) Both completed work for Cardo as sole proprietors and signed agreements characterizing their relationship with Cardo as independent contractors. (Adami Agreement dated March 1, 2001 [Docket Item 6-1]; Varner Agreement dated January 29, 2010 [Docket Item 68-23.])
Roderick Arce was employed by Cardo from 1994 to January 2011. (Arce Dep. 8:16-20.) He started as an Installation Manager in 1994 and became Director of Operations. (Id.) In these capacities, Arce was responsible for scheduling window installations, ordering windows, hiring and training installers, and appearing in court on behalf of Cardo. (Arce Dep. 9:21-10:5.) From 2005 to January 2011, Arce was one of three partners in the company. (Arce Dep. 8:16-20.) According to Defendants, Arce was terminated for allegedly embezzling funds from Cardo. (Defendants' Counterstatement of Facts ("Def. CS") [Docket Item 68] ¶ 89.)
Cardo's installation work crews consist of both "installers" and "helpers." For efficiency, Cardo installation managers prefer crews with two or three people. (Arce Dep. 23:10-22.) A crew consists of an installer and one or more helpers. (Arce Dep. 23:20-22.) According to Plaintiffs, the only difference between installers and helpers is that installers have workers' compensation liability insurance, a driver's license, a work truck, tools, and equipment, while helpers lack any of the above. Otherwise, helpers complete the same tasks as the installers with few exceptions. (Arce Dep. 13:22-24; 15:7-18.) If a Cardo installer is not assigned enough work to keep a helper busy, the helper is assigned to another installer with more work. (Arce Dep. 74:16-25; 75:1-3.) Defendants contend that the helpers work for, are selected by, and are paid by the installer. (Def. CS ¶ 19.)
Plaintiffs and Defendants agree that Cardo provides installation crews with materials needed for each job and if Cardo does not have the needed materials, installation crews purchase the material for future reimbursement by Cardo. (Arce Dep. 59:23-25; 60:1-3; 61:6-18.)
Plaintiffs and Defendants agree that due to regular turnover, Cardo is frequently seeking and hiring new installers. When seeking new installers, Cardo's primary requirement is that the applicant have workers' compensation insurance, a pickup truck, and the tools necessary to install windows. (Arce Dep. 81:5-20.) Applicants with experience installing windows, but without a truck or tools, are offered a job as a helper. (Adami Dep. 267:1-12.) In 2009, Cardo had between 27 and 32 installers at any given time and 95 percent had a helper. (Arce Dep. 13:4-10.) Plaintiffs contend that Cardo trains 30 to 45 new installers each year at a cost of $10, 000 each, and Cardo also trains the installers' helpers. (Arce Dep. 210:1-25; 211:1-25; 212:1-6.) Defendants contend that Cardo only hires experienced installers and new installers only receive on-the-job training from other installers. (Def. CS ¶¶ 43-47.)
Plaintiffs assert that Cardo exercises significant control over the day-to-day operations of the installers. Cardo requires installation crews to display signage on their trucks and wear apparel with Cardo's logo, indicating they work for Cardo. (Arce Dep. 47:7-16; 47:20-25; 48:1.) Cardo's standard sales pitch to customers is that "all of our installers work only for Castle." (Arce Dep. 151:8-18.) Cardo also requires its installers to tell customers they work for Cardo and discourages installers from telling customers they are independent contractors because Cardo sells its products with the understanding that Cardo manufactures, sells, and installs its own windows. (Arce Dep. 55:24-25; 56:1; 57:8-22.) Installation crews must call their manager between 1:00 pm and 2:00 pm to let the manager know whether they will complete the job that day. (Arce Dep. 75:23-25; 76:1-4.) Cardo requires its installers to complete a time request form if they want to take time off. (Varner Dep. 75:15-22.) Defendants contend that the installers, not Cardo management, determine when installers will complete work for Cardo, based primarily on the customer's schedule. (Deposition of John Belmonte on April 30, 2013 ("Belmonte Dep.") 38:19-23.)
As further evidence of Cardo's control over the installers, Plaintiffs note that each day, Cardo installation managers meet with the installers in the warehouse or meeting room for five to seven minutes to discuss their work the day before. (Arce Dep. 49:4-15.) Additionally, management provides installation crews with a job packet each day which includes a detail sheet, an office cover sheet, a copy of the customer contract with Cardo, a copy of the Cardo salesman's window measurement sheet, a copy of the Cardo salesman's pricing sheet, a road map to the customer's house, and a quality control report to be completed by the customer. (Arce Dep. 49:23-25; 50:1-4.)
Plaintiffs and Defendants disagree regarding the typical hours worked by Cardo installation crews. Plaintiffs contend that some Cardo installers work seven days per week, but six days per week is mandatory. (Arce Dep. 97:10-14.) Beginning in 2008, Cardo started to give its installers off every other Saturday, so they would work a six day week, then a five day week, and so on. (Arce Dep. 97:10-14.) Installation crews work from seven in the morning when they are required to pick up windows for each window installation job at one of Cardo's warehouses, until six, seven or eight o'clock at night, when they are required to call their manager to record their hours and report whether the job was completed. (Arce Dep. 25:23-25; 26:1-12; 98:7-13; 142:8-25; 143:1-6.) According to Plaintiffs, the average Cardo installer works 60 to 65 hours per week. (Arce Dep. 98:18-25; 99:1.) Defendants contend that installers work a wide variety of times for Cardo with no mandatory requirements. (Cardillo Cert. ¶ 13.) Further, Defendants state that neither Plaintiffs Adami nor Varner averaged more than 8.75 working days in a 14-day pay period during the most recent two-year period for each. (Id.)
Plaintiffs explain that Cardo's installers are paid based on stubs submitted to Cardo upon completion of individual installation jobs. After completing a window installation, Cardo installers fill out an "Installer Pay Stub" reflecting the items installed, the quantity of each item installed, the cost for installation, and a subtotal of amount owed. (Hannye Cert. Ex. 68 [Docket Item 45-4.]) Cardo's installers are paid based on the work completed. For example, installers are paid $40 for installation of one double hung window plus a $10 bonus. (Arce Dep. 50:18-19; 68:25; 80:5-11.) Cardo's installers are paid every two weeks based upon the bills that had been approved by Cardo management after cross-referencing the installer's weekly recap sheet with Cardo's weekly recap. (Arce Dep. 51:23-25; 52:1-20.) Cardo installers are not paid for their travel time, but they receive a gas allowance. (Arce Dep. 77:16-23.) Defendants do not appear to dispute Plaintiffs' description of the compensation process, but point to the piece work method as evidence that it is impossible to determine the number of hours per day worked by each installer. (Def. CS ¶¶ 76-79.)
In 2010, Cardo began requiring its installers to sign a master subcontractor agreement after an audit by Cardo's workers' compensation policy carrier, Selective. (Arce Dep. 154:14-25; 155:1-25; 156:1-25; 157:1-22.) Cardo required its installers to sign the Selective Master Subcontractor Agreement on a payday and threatened to withhold paychecks until the agreements were signed. (Adami Dep. 385:10-20; Varner Dep. 178:14-19.) Neither Plaintiffs Adami nor Varner read the Selective Master Subcontractor Agreement before signing it and neither was allowed to keep a copy of what they signed. (Adami Dep. 385:5-11; 387:6-13; Varner Dep. 240:9-20.) Plaintiffs contend that many aspects of the Selective Master Subcontractor Agreement conflict with Cardo's actual treatment of its installers including assignment of work and compensation. (Hannye Cert. [Docket Item 45-1] ¶¶ 163-207.) Defendants note that both Varner and Adami also signed independent contractor agreements upon starting work with Cardo. (Def. CS ¶ 39; see also Def. Exs. 19-20 [Docket Items 68-22 & 68-23.])
Plaintiffs assert that Cardo did not pay overtime to any of its installers for work in excess of 40 hours per week in 2009 or 2010. (Arce Dep. 160:19-24.) Cardo did not provide its installers with any benefits it provided its employees such as health insurance, disability insurance and life insurance in 2009 and 2010. (Arce Dep. 160:25; 161:1-5.) Cardo did not withhold any federal payroll taxes from the installers' paychecks or provide installers with W-2s. (Arce Dep. 161:14-20.) Cardo withholds state payroll taxes from the pay of installers depending on their state of residence. (Deposition of Nicholas Cardillo on April 30, 2013 ("Cardillo Dep.") 109:19-25.) Cardo began withholding New Jersey payroll tax from the pay of its installers in 2008. (Cardillo Dep. 110:10-12.) Cardo began withholding New Jersey Unemployment and Disability payroll taxes from its installers after the State of New Jersey ruled that certain installers were employees, not independent contractors in connection with claims for unemployment benefits. (Arce Dep. 159:13-25; 160:1-5.)
Defendants contend that during all relevant times, Cardo subcontracted its installation services to independent contractors and filed IRS 1099 forms for each installer. (Cardillo Cert. ¶ 17.) Defendants assert that Cardo's treatment of its installers was validated in 2011 by the New Jersey Department of Labor and Workforce Development ("NJDOL") after a review of Cardo's payroll practices. (Cardillo Cert. ¶ 19; see also Def. Ex. 6 [Docket Item 68-6.]) Further, Defendants note that it is the industry norm to treat window installers as independent contractors. (Def. CS ¶¶ 8-11.)
Cardo has produced IRS 1099 forms for installers from 2009 through 2012. (Def. Ex. 13 [Docket Item 68-13.)) These forms indicate that Cardo had 39 installers in 2009, 47 installers in 2010, 41 in 2011, and 39 in 2012. (Id.) Many installers worked for Cardo in consecutive years and 15 worked for Cardo in each of the three years from 2010 to 2012. (Id.) This is consistent with Plaintiffs' claim that Cardo has "14 core installers, " including Plaintiffs Adami and Varner. (Pl. Br. [Docket Item 43] at 24.)
Defendants assert that there are substantial differences between Cardo's core installers and other installers who completed brief or limited work for Cardo. (Def. Opp. [Docket Item 67] at 23.) Unlike Adami and Varner, the majority of Cardo installers worked primarily in one state. (Cardillo Cert. ¶ 11.) Of the 92 installers who completed work for Cardo between 2009 and 2012, 27 were incorporated businesses, including one with over 10 employees, while 65 were sole proprietors like Adami and Varner. (Def. Opp. at 25-26; Def. Ex. 13 [Docket Item 68-13.]) 14 of the 65 sole proprietors did not work more than 40 hours per week and cannot be eligible for overtime pay. (Id.; Cardillo Cert. ¶ 23.) Only 28 worked primarily out of the New Jersey facilities. (Def. Ex. 13; Cardillo Cert. ¶¶ 4-6, 11.) Of these 28, 12 have binding arbitration agreements. (Cardillo Cert. ¶ 22.) Defendants further allege that Adami's experience working for Cardo is distinguishable from other installers because of his close relationship with former Cardo owner, Roderick Arce. (Def. CS ¶¶ 84-88.)
B. Procedural Background
On May 10, 2012, Plaintiff Fred Adami, individually and on behalf of all others similarly situated, filed a putative collective action and class action against Defendants Cardo Windows, Inc. d/b/a "Castle The Window People, '" Christopher Cardillo, Sr., Christopher Cardillo, Jr., Nicholas Cardillo, Edward Jones, John J. Belmonte, and Pat Tricocci. [Docket Item 1.] Plaintiff asserted claims under the Fair Labor Standards, Act ("FLSA"), New Jersey Wage and Hour Law ("NJWHL"), New Jersey Construction Industry Independent Contractor Act ("CIIC"), and the Employee Retirement Income Security Act ("ERISA"). Plaintiff also asserted claims for injunctive relief requiring Cardo to pay federal and state taxes on behalf of plaintiffs and comply with FLSA, NJWHL, CIIC, and ERISA in the future. Defendants filed an Answer on June 22, 2012 and Cardo asserted counter-claims against Fred Adami, including a claim for breach of contract. [Docket Item 6.] On July 12, 2012, Plaintiff Adami filed an Answer to Cardo's counter-claims. [Docket Item 9.] Plaintiff filed an Amended Complaint on November 27, 2012, adding a second Plaintiff, Jack Varner, and an additional Defendant, Nicholas Brucato. [Docket Item 18.] On December 11, 2012, Defendants filed a partial motion to dismiss Plaintiffs' Amended Complaint. [Docket Item 22.] The Court granted in part and denied in part Defendants' partial motion to dismiss, dismissing Counts VI and X, for failure to maintain records under the FLSA and NJWHL; Counts III and IX, for violation of § 502(a)(3) of ERISA; and Count XIII, for wrongful discharge. [Docket Items 60 & 61.]
Magistrate Judge Schneider ordered all fact discovery on certification issues to be completed by April 30, 2013. [Docket Item 32.] Thereafter, Plaintiffs filed a motion for conditional certification of an FLSA "opt-in" collective action and certification of Rule 23 "opt-out" state wage class action. [Docket Item 43.] Additional requested discovery regarding class issues will be addressed after the Court decides Plaintiffs' motion for class certification. [Docket Item 58.] Defendants filed a motion to seal certain exhibits to Defendants' opposition to Plaintiffs' motion for class certification. [Docket Item 66.] Defendants also filed an Answer to Plaintiffs' Amended Complaint in which Cardo asserted a counter-claim against Jack Varner for breach of contract. [Docket Item 69.] In response, Plaintiffs filed the present motion to dismiss Cardo's counter-claims against Adami and Varner for breach of contract. [Docket Item 74.] The Court heard oral argument on these motions on December 16, 2013. At oral argument the Court reserved decision on Plaintiffs' motion for conditional certification, Defendants' motion to seal, and Plaintiffs' motion to dismiss. The Court denied Plaintiffs' motion to certify a Rule 23 state wage class, without prejudice to renewing the motion for class certification after the Supreme Court of New Jersey addresses the NJWHL issue of determining whether an individual is an employee or an independent contractor.
Following oral argument, the Court allowed the parties to submit supplemental briefing addressing certain discrete issues. Plaintiffs subsequently submitted new certifications signed by Adami and Varner dated December 19, 2013 and December 20, 2013 respectively. Since oral argument, Plaintiffs have also submitted seven "FLSA Consent Form[s]." Three contain dates after oral argument, including those signed by Adami and Varner. Four others contain dates in October 2012. Because these submissions exceed the scope of supplemental briefing allowed at oral argument, the Court has not considered them and limits its review to those issues the Court asked the parties to brief.
A. Plaintiffs' Motion for Conditional Certification of a FLSA "Opt-In" Collective Action
Plaintiffs argue that the Court should conditionally certify Plaintiffs' FLSA claims as a collective action because they have carried their burden of showing that Plaintiffs and proposed collective action members are similarly situated. Plaintiffs request that the Court approve notice to all persons who installed ...