REAL v. DRISCOLL STRAWBERRY ASSOCIATES, INC.

BRIGHT, Circuit Judge.

Fifteen individual plaintiffs (appellants), representing themselves and a class of similarly situated persons, appeal from a summary judgment dismissing their action brought under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq. (1976), against the appellees, Driscoll Strawberry Associates, Inc. (DSA) and Donald J. Driscoll (Driscoll). The district court concluded that the record establishes as a matter of law that the appellants do not qualify as "employees" subject to protection under the FLSA. On appeal, appellants contend that issues of material fact exist concerning whether they operate as "employees" of Driscoll and/or DSA under the FLSA. We reverse the grant of summary judgment and remand for trial.

I. Factual Background.

Donald J. Driscoll, doing business as Driscoll Berry Farms, is one of several individuals and corporations that contracts with DSA to grow varieties of strawberries on which DSA owns patents.

Appellants represent a class of Mexican-American persons who work or have worked as strawberry growers under identical agreements, entitled "Patent Sublicense and Subcontract for Growing Strawberry Crop with Sublicensee" (the Agreement), with Driscoll. Each such Agreement is signed by an individual plaintiff-class member, as "Sub-Licensee," by Driscoll as "Contractor," and by DSA, declared to be a "third party beneficiary" of the Agreement.1

The original complaint in this lawsuit referred to appellants as "independent contractors" and contained six counts charging antitrust and contract violations by DSA and Driscoll.2 However, after counsel deposed the individual appellants with the assistance of Spanish-speaking interpreters, appellants changed their theory of the case. They added a seventh count to the complaint, alleging that the Agreements with the appellees are a "sham," that they are in reality employees of DSA and Driscoll jointly, and that the appellees have failed to compensate the appellants in accordance with the minimum wage standards of the FLSA.

The district court granted the appellees' motion for summary judgment and dismissed all seven counts of the complaint. On appeal, appellants challenge only the summary judgment on the FLSA claim.

We outline the evidence relating to the appellants' work status in some detail.

A. The Agreement.

DSA prepared the Agreement form, which has remained essentially unchanged during the period relevant here, and furnishes it to Driscoll. Apart from a few blanks in the form filled in by Driscoll, DSA established the terms of the Agreement without negotiation with Driscoll or any of the appellants.

The Agreement relates that DSA has granted Driscoll a license to grow a crop of DSA's patented strawberry varieties and the right to sublicense the growing of such crop to others, "subject to approval by [DSA] in each instance[.]" The Agreement stipulates that DSA shall at all times exclusively own both the strawberry plants it supplies to Driscoll and the crop derived from the plants.

Under the Agreement, Driscoll grants a "Sub-Licensee" (an appellant in this case) the right to grow a strawberry crop "for the account of [DSA]" on a described parcel of land (usually about three acres) owned or leased by Driscoll. Driscoll undertakes to plant the strawberries and to deliver the already planted land to the sublicensee. In return, the sublicensee agrees in essence to furnish the labor necessary to care for the land and plants during the growing season,3 to harvest the strawberry crop, and to sort, grade and pack the strawberries for marketing by DSA. A sublicensee is empowered to hire and supervise all employees necessary to carry out his duties under the contract.

The Agreement repeatedly recites that a sublicensee is an "independent contractor" and specifies that neither Driscoll nor DSA "has assumed under this agreement any rights of supervision and control over the growing of said strawberry crop * * *." The Agreement further provides that the sublicensee

The Agreement specifies a number of grounds for its automatic termination, the most important of which reads:

B. The Working Relationship of the Parties.

DSA supplies the strawberry plants to Driscoll without any direct charge.4

Driscoll employees perform all of the tasks necessary to prepare the land for planting, utilizing tractors and other specialized equipment owned by Driscoll. Although the Agreement assigns responsibility for planting the strawberries to Driscoll, sublicensees perform the actual work of planting. The sublicensees space the plants in accordance with marks placed in the strawberry beds by Driscoll employees, following the spacing "recommendations" of DSA. Driscoll pays the sublicensees for planting the strawberries, at a rate he establishes in his discretion ($200.00 per acre in 1976).

Driscoll typically plants several different varieties of strawberries, possessing varying yields. Apparently, Driscoll determines the overall quantity and proportion of each variety to be planted.5 Driscoll attempts to some extent to accommodate the sublicensees' requests in apportioning the strawberry plants available in each variety. However, on Driscoll's Tschumperlin Ranch in 1976, every sublicensee's plot contained the same proportions of the main types of berries, "summer" and "winter" berries, except for two containing slightly more summer berries.

Sublicensees furnish their own hoes, shovels, clippers for pruning the strawberry plants, and hand carts used in picking the berries. Some of the sublicensees own dusters utilized to dust for mildew.6 Driscoll selects and supplies all heavier equipment plus irrigation pipe, fertilizers, "dust" for mildew or for insects, and insect-spraying equipment.

For the most part, the sublicensees' own judgment determines the timing of weeding, dusting for mildew, and irrigation. However, Driscoll's foreman, Kazumasa ("Kay") Mukai, if he observes that an appellant's plot is not well maintained, may contact the negligent appellant to "discuss" the situation.7 According to Mukai, a sublicensee may refuse to respond to such notice, and he has never taken any action against a sublicensee for negligence in caring for his plot.8

DSA's research department inspects the strawberry plants for insect pests and advises Driscoll of the existence and nature of any insect problem. Driscoll thereafter informs the sublicensees of the need to dust or spray. DSA similarly recommends to Driscoll when fertilizer should be applied, and Driscoll then passes such recommendations on to the sublicensees.

Beginning in about April, as the berries ripen, sublicensees pick the strawberries by hand and pack them in crates purchased jointly by appellants and Driscoll and bearing Driscoll's name. DSA-employed inspectors grade the berries according to standards set by DSA and may require sublicensees to sort and remove inferior berries.9

DSA markets the strawberries and possesses, under the Agreement, the "absolute right" to process the berries in any manner and to sell them in any market or locality "for such prices and on such terms and conditions as it [DSA] may deem desirable[.]"

Sublicensees are paid weekly, as specified in the Agreement, a set percentage (55% in 1974) of "the net proceeds actually received" for the berries sold that week "by Contractor [Driscoll] from Driscoll Strawberry Associates, Inc., under Contractor's contract with said patent owner" (emphasis added), less a percentage of certain expenses, such as the cost of baskets or crates. The Agreement does not define "net proceeds," the basis for the appellants-sublicensees' income, except by this reference to Driscoll's separate contract with DSA. Driscoll indicated in a deposition that he receives a "price per crate [of berries]" from DSA but that he does not know how DSA determines that price.10

The record contains seven identical affidavits of individual appellants, alleging essentially that Driscoll, through his foreman, Mukai, controls the appellants' activities in growing and harvesting the strawberries, especially in operations requiring substantial business judgment.11

II. Existence of Genuine Issues of Material Fact.

Summary judgment may properly be granted only where no genuine issue of material fact exists or where, viewing the evidence and inferences that may be drawn therefrom in the light most favorable to the party opposing summary judgment, the movant is clearly entitled to prevail as a matter of law. See Fed.R.Civ.P. 56(c); Jones v. Halekulani Hotel, 557 F.2d 1308, 1310 (9th Cir. 1977); Zweig v. Hearst Corporation, 521 F.2d 1129, 1133 (9th Cir.), cert. denied, 423 U.S. 1025, 96 S.Ct. 469, 46 L.Ed.2d 399 (1975). Moreover,

See New England Mutual Life Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977).

In this case, the district court based summary judgment upon its determination that the record establishes as a matter of law that the appellants possess "independent contractor" status and that neither Driscoll nor DSA is an "employer" of the appellants within the meaning of the FLSA. We review that determination against a background of the applicable statutory definitions.

Courts have adopted an expansive interpretation of the definitions of "employer" and "employee" under the FLSA,12 in order to effectuate the broad remedial purposes of the Act. See, e. g., Dunlop v. Carriage Carpet Co., 548 F.2d 139, 144 (6th Cir. 1977); Usery v. Pilgrim Equipment Co., 527 F.2d 1308, 1311 n.6 (5th Cir.), cert. denied, 429 U.S. 826, 97 S.Ct. 82, 50 L.Ed.2d 89 (1976). Cf. United States v. Silk, 331 U.S. 704, 712, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) (Social Security Act).13 The common law concepts of "employee" and "independent contractor" are not conclusive determinants of the FLSA's coverage. See Usery v. Pilgrim Equipment Co., supra, 527 F.2d at 1311 n.6; Mednick v. Albert Enterprises, 508 F.2d 297, 299 (5th Cir. 1975). Rather,

See Goldberg v. Whitaker House Cooperative, 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) (FLSA).

The courts have identified a number of factors which may be useful in distinguishing employees from independent contractors for purposes of social legislation such as the FLSA. Some of those factors are:

The presence of any individual factor is not dispositive of whether an employee/employer relationship exists. Such a determination depends "upon the circumstances of the whole activity." Rutherford Food Corp. v. McComb, 331 U.S. 722, 730, 67 S.Ct. 1473, 1477, 91 L.Ed. 1772 (1947).

Upon examining the record in light of these standards, we conclude that the district court erred in ruling that the appellants failed to raise genuine issues of fact as to whether they are "employees" of DSA and/or Driscoll under the FLSA.

The Agreement labels the appellants as "independent contractors" and employs language, purporting to describe the appellants' relationship to Driscoll and DSA, that parrots language in cases distinguishing independent contractors from employees. That contractual language, however, is not conclusive in the circumstances presented here. Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA. See Rutherford Food Corp. v. McComb, supra, 331 U.S. at 729, 67 S.Ct. 1473; Usery v. Pilgrim Equipment Co., supra, 527 F.2d at 1315. Similarly, the subjective intent of the parties to a labor contract cannot override the economic realities reflected in the factors described above. Usery v. Pilgrim Equipment Co., supra at 1315; Brennan v. Partida, 492 F.2d 707, 709 (5th Cir. 1974).

The record as developed at this stage of the litigation undercuts the appellees' assertion that the appellants are independent contractors. The appellants' affidavits, which must be taken as true for summary judgment purposes, plainly disclose that Driscoll possesses substantial control over important aspects of the appellants' work.15 Indeed, some evidence indicates that Driscoll may be able to "fire" an appellant at any time.16 Although the appellants may hire and control their own helpers, that factor does not prevent a finding that they are employees. See, e. g., Mednick v. Albert Enterprises, 508 F.2d 297, 301 (5th Cir. 1975). The appellants' opportunity for profit or loss appears to depend more upon the managerial skills of Driscoll and, especially, of DSA—in developing fruitful varieties of strawberries, in analyzing soil and pest conditions, and in marketing—than it does upon the appellants' own judgment and industry in weeding, dusting, pruning and picking. Moreover, the appellants' investment in light equipment—hoes, shovels and picking carts—is minimal in comparison with the total investment in land, heavy machinery and supplies necessary for growing the strawberries. The services performed by the appellants consist primarily of physical labor, requiring no special technical knowledge or skill. Appellants' activities appear to be an integral part of Driscoll's strawberry growing operation, rather than an independently viable enterprise.

At the very least, the record demonstrates the existence of genuine factual issues concerning whether Driscoll is an "employer" of the appellants, within the meaning of the FLSA.

DSA contends that it cannot be deemed an employer of the appellants because the appellants' direct working relationship rests solely with Driscoll, who is an independent contractor neither controlling nor controlled by DSA.17 We do not think the record establishes Driscoll's alleged independent contractor status beyond question. In any event, the independent contractor status of one party (Driscoll) standing in the position of an employer of certain workers does not as a matter of law negate the possibility that the contractee (DSA) may be a joint employer of those workers under the FLSA. Hodgson v. Griffin and Brand of McAllen, 471 F.2d 235, 237 (5th Cir.), cert. denied, 414 U.S. 819, 94 S.Ct. 43, 38 L.Ed.2d 51 (1973). See also Falk v. Brennan, 414 U.S. 190, 195, 94 S.Ct. 427, 38 L.Ed.2d 406 (1973). The test, as always, must focus on the economic realities of the total circumstances.

Although DSA exercises little direct supervision over the appellants' work, it apparently does determine the form of the working relationship between the appellants and Driscoll.18 In addition, as already noted, the Agreement reserves to DSA the power to reject Driscoll's choices for "Sub-Licensee." DSA possesses the power under the Agreement to determine the quantity and variety of the strawberry plants grown by the appellants, see note 5 supra. Inferences drawn from the record suggest that DSA effectively, though indirectly, controls certain important decisions in growing the strawberries, including the spacing of the plants, when and how much fertilizer is to be applied, and the timing and type of spraying for insects. Moreover, DSA inspectors directly supervise the sorting and grading of the strawberries at harvest. Particularly significantly, it appears that DSA may ultimately determine the amount the appellants are paid for their labor. See supra at note 10. Finally, the appellants' activities as "strawberry growers" appear to be completely dependent economically upon DSA's provision of strawberry plants and capacity to market the strawberry harvest.

We are convinced that, on this record, the district court erred in ruling as a matter of law that DSA is not an employer of the appellants.

Accordingly, we reverse the summary judgment as to both Driscoll and DSA and remand the case for further proceedings.19