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Wage & Hour Law Update

Federal Judge Enjoins Alleged Retaliatory Group Termination of Warehouse Workers

This space has discussed the circumstances under which a company can be, or can be alleged to be, the “joint employer” of workers under the FLSA. Often, these allegations arise where a large company contracts out a specific function to a third party vendor, and particularly where the company is the sole or a primary source of that third party vendor’s business. This blog has generally not focused on non-monetary FLSA relief, however, injunctive relief (i.e., enjoining an employer from taking an action ) is a statutory remedy. The intersection of these two concepts was recently addressed by a California federal judge, who, in effect, reversed a proposed mass layoff by a subcontractor, based on a showing that the mass layoff likely constituted unlawful retaliation for filing a lawsuit under the FLSA. Carrillo v. Schneider Logistics Inc , C.D. Cal., No. 11-cv-8557, 1/31/12.

Plaintiffs in Carrillo are current workers directly employed by defendant Premier, which in turn held several contracts to provide semi-truck trailer loading services to defendant Schneider, on a per-truck basis, including at a warehouse in Mira Loma, California. In October 2011, the workers commenced a lawsuit against Premier and Schneider (as joint employer),alleging violations of the FLSA and California wage law. Later that month, Premier notified Schneider that it was terminating its contract to provide loader services at the California facility, as well as at two other facilities outside of California. The next month, Plaintiffs received written notice from Premier under the Worker Adjustment and Retraining Notification Act (“WARN”) that, based on the cessation of Premier operations at Mira Loma, their employment would terminate on February 24, 2012. Plaintiffs sought an injunction, claiming that the proposed terminations constituted retaliation in violation of the FLSA and state law.

After acknowledging that a preliminary injunction is an “extraordinary remedy,” the Court granted the injunction, ruling that the Plaintiffs had both: 1) established a likelihood of success on the merits of their retaliation claim against Premier and against Schneider as joint employers; and 2) demonstrated that they would suffer irreparable injury, absent an injunction. As concerned Schneider’s joint employer defense, the Court, observing that it had already determined in an earlier opinion that the business relationship between Premier and Schneider gave the latter (the alleged “joint employer”) a high degree of control over the business relationship and the workers in question (in that the contract “dictate[d] nearly every material term of plaintiffs’ employment”), credited Plaintiffs evidence that Schneider personnel exercised both direct and indirect control over their work, including supervision at the warehouse in question. The Court found compelling evidence of “pretext” in the joint defendants’ conduct, including particularly Schneider’s actions the Court found not to be in conformity with its own economic interest, such as: 1) entering into a new contract at Mira Loma with a new provider at higher cost; 2) not attempting to renegotiate the existing contract with Premier; and 3) not offering Premier the contract at the same price it negotiated with the new provider. 

The presence of managerial personnel from both the subcontractor-employer and an entity further up the contractual “food chain” is a common practice, particularly in warehouse and factory environments. However, allegations that all such entities are responsible to the workers in question under the FLSA are just as common. See, e.g., Oi Kwan Lai v. Eastpoint Int’l, Inc., 1999 U.S. Dist. LEXIS 13458 (S.D.N.Y. Sept. 1, 1999). Businesses must set policy and manage risk accordingly.  Further, businesses defending against FLSA suits or that have employees who previously asserted FLSA claims must consider the possibility of plaintiffs’ counsel seeking injunctive relief if job actions are implemented vis a vis such employees.