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Zevallos v. Stamatakis

United States District Court, D. Utah, Central Division

December 6, 2017

CESAR YAPIAS ZEVALLOS and EFRAIN PEREZ ARIAS, Plaintiffs,
v.
PETE STAMATAKIS and MOUNTAIN PLAINS AGRICULTURAL SERVICE, Defendants.

          MEMORANDUM DECISION AND ORDER DENYING DEFENDANT MOUNTAIN PLAINS AGRICULTURAL SERVICE'S MOTION TO DISMISS

          David Nuffer District Judge.

         Defendant Mountain Plains Agricultural Service (“MPAS”) filed a Motion to Dismiss[1]arguing that Plaintiffs failed to plead sufficient facts in their Complaint[2] to state claims for violations of the Fair Labor Standards Act (“FLSA”) and the Trafficking Victims Protection Reauthorization Act (“TVPRA”); breach of contract; quantum meruit; intentional infliction of emotion distress; and negligent infliction of emotional distress. Because Plaintiffs allege sufficient facts to state plausible claims for relief, MPAS's Motion to Dismiss[3] is DENIED.

         Table of Contents

         STANDARD OF REVIEW ..................... 2

         BACKGROUND ................................... 3

         DISCUSSION ...................................... 5

         Plaintiffs allege sufficient facts to state a plausible FLSA claim ....................... 5

         MPAS had power to hire and fire Plaintiffs ............................... 9

         MPAS controlled Plaintiffs' conditions of employment .............. 10

         MPAS determined Plaintiffs' rate and method of payment ................ 10

         Plaintiffs lack of allegations that MPAS maintained their employment records is inconsequential ........ 11

         Plaintiffs allege sufficient facts to state a plausible TVPRA claim .................................. 12

         Plaintiffs allege sufficient facts to state a plausible claim for breach of contract ............. 15

         Plaintiffs allege sufficient facts to state a plausible claim for quantum meruit ................ 16

         Plaintiffs allege sufficient facts to state a plausible claim for intentional infliction of emotional distress .................... 18

         Plaintiffs allege sufficient facts to state a plausible claim for negligent infliction of emotional distress .................. 20

         ORDER ....... 21

         STANDARD OF REVIEW

         A defendant is entitled to dismissal under Rule 12(b)(6) when the complaint, standing alone, is legally insufficient to state a claim for which relief may be granted.[4] When considering a motion to dismiss for failure to state a claim, the thrust of all well-pleaded facts in the complaint is presumed.[5] “[C]ourts may [also] consider not only the complaint itself, but also attached exhibits, and documents incorporated into the complaint by reference.”[6] And courts will “liberally construe the pleadings and make all reasonable inferences in favor of the [plaintiff].”[7]

         The Supreme Court has held that satisfying the basic pleading requirements of the federal rules “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.”[8] “The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.”[9] “This requirement of plausibility serves not only to weed out claims that do not (in the absence of additional allegations) have a reasonable prospect of success, but also to inform the defendants of the actual grounds of the claim against them.”[10]

         BACKGROUND[11]

         In 2013, Plaintiffs came to the United States from Peru to work as sheepherders on a Utah ranch operated by Defendant Pete Stamatakis.[12] Plaintiffs were able to work in the United States because MPAS and Mr. Stamatakis applied for and procured visas for them as part of the H-2A program for foreign workers.[13] The H-2A program allows employers to bring foreign nationals to the United States to fill temporary agricultural jobs.[14] To participate, employers are required to certify to the Secretary of Labor that “there are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed to perform the labor or services involved[.]”[15] Employers must also certify that they will abide by Department of Labor (“DOL”) regulations and meet applicable housing standards, wage rates, and transportations costs.[16]

         In exchange for working as sheepherders, Plaintiffs were to be paid a rate of $750 per month from 2013 to 2015 plus room and board, and a rate of $1, 206.31 per month in 2016 plus room and board.[17] MPAS filled out a Job Order, which established the terms of Plaintiffs' employment, set the period of employment, and stated the employer would abide by DOL regulations.[18] Plaintiffs agreed to those terms and came to the United States to work.[19]

         Plaintiffs allege that after they arrived and began working on Mr. Stamatakis's ranch, it became clear Defendants were not abiding by the terms stated in the Job Order. Specifically, Plaintiffs allege their housing was inadequate, [20] they were not paid their contracted wages, [21] they did not have sufficient food and drink, [22] were verbally abused, [23] were refused medical care, [24]spent more than half of their time doing non-sheepherding work, [25] and more. Plaintiffs also allege Mr. Stamatakis confiscated their legal documents (passports, visas, and visa renewals forms) and refused to give them back.[26] Plaintiffs further allege MPAS refused to help them when Plaintiffs informed MPAS of Mr. Stamatakis's conduct, thereby working with Mr. Stamatakis to coerce Plaintiffs into continued work at the ranch.[27]

         In 2016, Plaintiffs left the ranch. They filed this case on April 6, 2017, alleging claims against MPAS and Mr. Stamatakis for violations of the FLSA and the TVPRA, breach of contract, quantum meruit, intentional infliction of emotional distress, and negligent infliction of emotional distress.[28]

         MPAS seeks dismissal of Plaintiffs' claims arguing that Plaintiffs failed to state a claim on which relief may be granted.[29]

         DISCUSSION

         Measured against the applicable legal standard, Plaintiffs allege sufficient facts to state plausible claims against MPAS for violations of the FLSA and the TVPRA, breach of contract, quantum meruit, intentional infliction of emotion distress, and negligent infliction of emotional distress. Each claim will be addressed in turn.

         Plaintiffs allege sufficient facts to state a plausible FLSA claim

         The FLSA requires employers to pay a minimum wage to employees, who are “employed in an enterprise engaged in commerce.”[30] “Any employer who violates [this] provision[] . . . shall be liable to the employee or employees affected in the amount of their unpaid minimum wages . . . and in an additional equal amount as liquidated damages.”[31] And [a]n action to recover the liability prescribed . . . may be maintained against any employer[.]”[32] In order to recover under the FLSA, a plaintiff, whose work involved some kind of interstate commerce, must allege that an employer failed to pay minimum wages.[33]

         MPAS argues Plaintiffs fail to allege sufficient facts to show that MPAS was Plaintiffs' employer.[34] MPAS maintains it was merely an agent of Mr. Stamatakis, and simply submitted H-2A visa application forms on his behalf.[35]

         The FLSA broadly defines “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee[.]”[36] The federal regulations which implement the FLSA state that an employee can be “employed jointly by two or more employers” and that “all joint employers are responsible, both individually and jointly, for compliance with [the FLSA].”[37] The regulation further states that “[w]here the employee performs work which simultaneously benefits two or more employers . . . a joint employment relationship generally will be considered to exist in situations such as . . . [w]here one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee[.]”[38]

         The Tenth Circuit has not articulated a test for determining whether individuals or entities are joint employers under the FLSA. MPAS argues that because the Tenth Circuit has used an “economic realities” test in similar situations, [39] Plaintiffs' claim should be examined using the economic realities test developed by the Ninth Circuit in Bonnette v. Cal. Health and Welfare Agency.[40] The Ninth Circuit test looks at whether an alleged employer: “(1) had 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) maintained employment records.”[41] Under this test, the existence of a joint employer relationship does “not depend on isolated factors but rather upon the circumstances of the whole activity.”[42]

         In contrast, Plaintiffs urge the use of a more favorable test established by the Fourth Circuit, which focuses on the relationship between the “putative joint employers, ” rather than the relationship between the “employee and putative joint employer.”[43] The Fourth Circuit identified six non-exhaustive factors to consider in determining whether a joint employment relationship exists:

(1) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the ability to direct, control, or supervise the worker, whether by direct or indirect means;
(2) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to-directly or indirectly-hire or fire the worker or modify the terms or conditions of the worker's employment;
(3) The degree of permanency and duration of the relationship between the putative joint employers;
(4) Whether through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
(5) Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
(6) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers' compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.[44]

         “Further, because the status of a particular employment relationship is highly fact-dependent, . . . the absence of a single factor-or even a majority of factors-is not determinative of whether joint employment does or does not exist.”[45]

         The Fourth Circuit also stated that when “plaintiffs have had no opportunity for discovery as to payroll and taxation documents, disciplinary records, internal corporate communications, or leadership and ownership structures[, ]” they need not plead facts to show a joint employer relationship under all the factors.[46] One factor alone “can give rise to a reasonable inference” that a joint employer relationship exists.[47]

         Plaintiffs allege MPAS had a unified business operation with Mr. Stamatakis to recruit and hire temporary foreign workers under the H-2A program.[48] Plaintiffs also allege “MPAS sets many of the terms of the sheepherders' employment, ” and “plays an integral role in recruiting and initiating H-2A sheepherders' employment[.]”[49] Taking these and the other factual allegations in the Complaint as true, Plaintiffs have sufficiently alleged that MPAS and Mr. Stamatakis were joint employers under the broad Fourth Circuit test. Nevertheless, because Plaintiffs have sufficiently alleged that MPAS was a joint employer under either test, Plaintiffs' claims will be analyzed using the narrower Ninth Circuit test for purposes of this Memorandum Decision and Order.

         MPAS had power to hire and fire Plaintiffs

         According to the Ninth Circuit in Bonnette, one factor to consider when determining if a joint employer relationship exists is whether MPAS had the power to hire and fire Plaintiffs.[50]

         Plaintiffs do not expressly allege MPAS had the power to hire and fire them. However, Plaintiffs allege MPAS “plays an integral role in recruiting and initiating H-2A sheepherders' employment with its member ranches[, ]” including Mr. Stamatakis's ranch.[51] Plaintiffs also allege MPAS “sets many of the terms of the sheepherders' employment with the member ranch.”[52] Plaintiffs further allege MPAS and Mr. Stamatakis “filed H-2A visa applications as joint employers each year from 2011-2016 in order to employ temporary foreign workers under the H-2A visa program to work as sheepherders.”[53]

         Moreover, the Job Order attached to Plaintiff's Complaint provides that applicants were to apply directly to MPAS, and that MPAS would conduct applicant interviews, screen applicants, and check applicant references.[54] The Job Order also provides the anticipated length of Plaintiffs' employment, and that “[t]ermination may be carried out by the employer, and/or the employer's agent[.]”[55] MPAS itself argues it was an “employer agent” for the purposes of Plaintiffs' employment.[56] Therefore, under this language of the Job Order, MPAS had authority to fire Plaintiffs. Additionally, the self-serving fact that MPAS identified itself as an “employer agent” when filling out the Job Order[57] does not overcome Plaintiffs' allegations that MPAS was a joint employer under the standard of review on a Rule 12(b)(6) motion.

         The facts Plaintiffs allege, coupled with the language of the Job Order, are sufficient to create a reasonable inference that MPAS had the power to hire and fire Plaintiffs.

         MPAS controlled Plaintiffs' conditions of employment

         The second factor in determining whether a joint employer relationship exists under the Bonnette test is whether the alleged joint employer supervised or controlled employee work schedules or conditions of employment.[58] Plaintiffs allege “MPAS sets many of the terms of the sheepherders' employment[.]”[59] Plaintiffs further allege MPAS furnished specific terms of employment for Plaintiffs in its Job Order, including; job description, length and period of employment, wage rates, housing terms, and workers' compensation terms.[60] These allegations, coupled with the language of the Job Order, are sufficient to create a reasonable inference that MPAS controlled the terms and conditions of Plaintiffs' employment at Mr. Stamatakis's ranch. Control may be shown by evidence to be different than stating terms of employment, but at this stage the allegations are sufficient.

         MPAS determined Plaintiffs' rate and method of payment

         The third factor in Bonnette's joint employer test is whether the alleged joint employer determined the employee's rate and method of payment.[61] Plaintiffs allege MPAS controlled the terms of Plaintiffs' employment, including wage rates and frequency of pay.[62] Specifically, Plaintiffs allege MPAS determined that Plaintiffs would be paid $750 per month from 2012-2015 plus room and board, and $1, 206.31 per month in 2016 plus room and board, and would be paid twice monthly.[63] In addition, the Job Order states that the following deductions may be taken from Plaintiffs' pay: “FICA (if applicable); loans and advances (if any); long-distance telephone charges (if any); the reasonable repair or replacement cost of willful or negligent damage to housing, tools and equipment caused by the work (other than normal wear and tear).”[64]

         The facts Plaintiffs allege, coupled with the language of the Job Order, are sufficient to create a reasonable inference that MPAS determined Plaintiffs' rate and method of payment while working at Mr. Stamatakis's ranch.

         Plaintiffs lack of allegations that MPAS maintained their employment records is inconsequential

         The final factor in the Bonnette test is whether the alleged joint employer maintained the employee's employment records.[65] Though Plaintiffs do not allege MPAS maintained their employment records, this factor is not dispositive in determining whether or not a joint employer relationship existed.[66]

         Looking at the “circumstances of the whole activity, ”[67] Plaintiffs allege sufficient facts to create a reasonable inference that MPAS “exercised considerable control over the nature and structure of the employment relationship.”[68] The fact that Mr. Stamatakis may have been in charge of the day-to-day supervision of Plaintiffs is merely consistent with the concept of MPAS and Mr. Stamatakis having differing roles as Plaintiffs' joint employers.[69]

         Plaintiffs have sufficiently alleged that MPAS was their joint employer with Mr. Stamatakis under either the Fourth Circuit test or the Ninth Circuit test.[70] Plaintiffs have also alleged that MPAS and Mr. Stamatakis failed to pay them at least a minimum wage for work that involved interstate commerce in violation of the FLSA.[71] These allegations are sufficient to state a plausible claim against MPAS for violation of the FLSA.

         Plaintiffs allege sufficient facts to state a plausible TVPRA claim

         Pursuant to 18 U.S.C. § 1595(a), any person who is a victim of a violation of the TVPRA, “may bring a civil action against the perpetrator (or whoever knowingly benefit[ted])” from the violation.[72] A violation of § 1589(a) of the TVPRA occurs when a person:

         knowingly provides or obtains the labor or services of a person by any one of, or by any combination of, the following means--

(1) by means of force, threats of force, physical restraint, or threats of physical restraint to that person or another person;
(2) by means of serious harm or threats of serious harm to that person or another person;
(3) by means of the abuse or threatened abuse of law or legal process; or
(4) by means of any scheme, plan, or pattern intended to cause the person to believe that, if that person did not perform such labor or services, that person or another person would suffer serious harm or physical restraint[.][73]

         A violation of § 1589(b) of the TVPRA occurs when a person:

knowingly benefits, financially or by receiving anything of value, from participation in a venture which has engaged in the providing or obtaining of labor or services by any of the means described in subsection (a), knowing or in reckless disregard of the fact that the venture has engaged in the ...

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