CATHERINE C. BLAKE, District Judge.
Now pending before this court are two motions for leave to file amended pleadings. The named plaintiffs, on behalf of themselves and the conditionally-certified plaintiff class (together "the plaintiffs"), seek leave to file an amended summons and complaint to correct a misnomer.
SCCP is a Maryland corporation that for the past four or five years has primarily provided painting services. Defendant Ascenzo Sulmonte ("Mr.Sulmonte") is the founder, sole owner, and president of the corporation. The plaintiffs, all of whom are of Hispanic origin and native Spanish speakers, worked for SCCP as painters at some point since February 21, 2004. The plaintiffs were hired by Rene Aguilera ("Mr.Aguilera"), who is responsible for much of SCCP's day-to-day operations and hires all of its workers.
It is undisputed that SCCP did not require the plaintiffs to complete income tax-related paperwork, that SCCP never withheld taxes or made other payroll withholdings from their paychecks, and that SCCP never issued them IRS W-2 (employee compensation) or 1099 (non-employee compensation) forms. According to the defendants, when Mr. Aguilera hired the plaintiffs, they negotiated to "be[ ] responsible for their own taxes due to their choice not to supply paperwork for such tax and employment purposes, and ... wanted to handle payments to them on a self-employed basis expecting to get a full dollar amount for the hours without [SCCP] touching their money for tax purposes." (Defs.' Opp. to Summ. J., Ex. A at 1.) The defendants further contend that they could not issue proper tax forms because the plaintiffs did not provide them with the requisite information such as full names, addresses, or social security numbers.
During their tenure with SCCP, the plaintiffs worked at various job sites in Virginia, Maryland, and the District of Columbia, where they claim they often worked more than 40 hours per week but were not compensated at an overtime rate. It is undisputed that individuals who worked over 40 hours in a given workweek were not paid at one-and-a-half times their regular rate for the hours worked over 40. SCCP time sheets indicate that its painters frequently worked more than 40 hours per week and were compensated for all hours at their regular wage rate. (See Pls. Summ. J. Mem., Ex. 5.)
A. Plaintiffs' Motion for Leave to File Amended Summons and Complaint
The plaintiffs seek leave to file an amended summons and complaint to correct all references from Giovanni (a.k.a."John") Sulmonte to Ascenzo (a.k.a."John") Sulmonte. Giovanni Sulmonte is Ascenzo Sulmonte's father. The misnomer resulted, according to the plaintiffs, from the fact that the defendant is commonly known by the name "John," which is not his given name. In trying to identify the intended defendant by his given name, the plaintiffs erroneously identified him by his father's name. The defendants oppose the motion, contending that at this stage of the litigation amending the complaint will result in injustice by placing Ascenzo Sulmonte's "individual rights, interests, welfare, and property ... at risk, [and] requiring careful individual review of the claims by himself and his chosen counsel." (Defs.' Opp. to Pls.' Mot. for Leave at 3.)
Federal Rule of Civil Procedure 15(a)(2) provides that courts should freely allow parties leave to amend their pleadings "when justice so requires." The Fourth Circuit has stated that "[u]nder modern practice, if the right party is before the court, although under a wrong name, an amendment to cure a misnomer of parties will be allowed." United States v. A.H. Fischer Lumber Co., 162 F.2d 872, 874 (4th Cir.1947) (internal quotation marks and citation omitted).
The defendants contend that Azcenzo Sulmonte is not involved in the litigation and was not individually served in this action. According to plaintiffs, however, Ascenzo Sulmonte has been involved in this case by, inter alia, being deposed, appearing at court proceedings, and signing interrogatory responses. During Ascenzo Sulmonte's deposition, he testified that he is the sole officer of SCCP and that he is the founder and president of the business. Moreover, it is undisputed that service of process was made on an adult, "Mrs. Sulmonte, wife," at Ascenzo Sulmonte's home address in Thurmont, Maryland. Giovanni Sulmonte, on the other hand, has made no appearances nor actively participated in the litigation, and there has been no suggestion by either party that he is involved with SCCP.
Considering that the plaintiffs sued the defendants for alleged offenses occurring while they worked for SCCP, a company founded and run solely by Ascenzo Sulmonte; that the plaintiffs referred in their complaint to the individual defendant as "an officer of S.C.C.P." and as being "highly involved in and/or responsible for overseeing the running of S.C.C.P." (Compl.¶ 13); that the summons and complaint were served at Ascenzo Sulmonte's home address; and that Ascenzo Sulmonte,
B. Defendants' Motion for Leave to Amend Answer
Defendants seek leave to amend their answer to include two additional defenses:
(Defs.' Mot. for Leave, Ex. A at 1-2.)
The defendants describe both defenses as falling under the doctrines of setoff and recoupment.
Imbesi v. Carpenter Realty Corp., 357 Md. 375, 744 A.2d 549, 552 (2000). Under Maryland law, recoupment may be raised as a defense rather than an affirmative counterclaim, see Smith v. Smith, 79 Md.App. 650, 558 A.2d 798, 801 n. 2 (1989), while setoff must be pled as a counterclaim, see E.J. Smith Construction Co. v. Burton, 262 Md. 62, 277 A.2d 84, 87 (1971). The plaintiffs contend that while the defendants have styled their proposed amendments as defenses, they are in fact counterclaims for setoff and must be pled as such in compliance with the requirements of the Federal Rules of Civil Procedure. The defendants argue that the amendments are properly pled as recoupment defenses and, therefore, need not be specially pled as counterclaims.
i. Eleventh Defense
The plaintiffs claim that they are employees as defined under the FLSA and, as such, are entitled to overtime wages, which SCCP failed to pay. The defendants now seek "restitution" for "mistaken overpayments" of wages that SCCP should have withheld for tax purposes, in the event the plaintiffs are deemed to be employees and failed to pay taxes as independent contractors. Whether called recoupment or setoff, a claim for such payments would be futile, as plaintiffs do not owe defendants monies which the defendants may have been obligated to pay but did not. Any necessary accounting for taxes that may be owed on any recovery can be done at the time of judgment.
Nor would it be in the interest of justice to allow the defendants to amend their answer in such a way. See Fed.R.Civ.P. 15(a)(2) ("The court should freely give leave [to amend a pleading] when justice so requires.") The defendants seek to recoup "mistaken overpayments" for unpaid taxes that they knew would not be paid. It is undisputed that SCCP did not require its workers to fill out proper tax forms and, despite claiming they were independent contractors, never sent them the appropriate 1099 tax forms. In light of their past conduct, the defendants' present concern about complying with the "appropriate governmental authorities" seems disingenuous at best. Moreover, the record demonstrates that SCCP has no organized bookkeeping system; at certain, seemingly arbitrary, intervals SCCP disposed of papers listing its workers' hours and wages. Thus, even assuming the defendants have some legal justification for seeking restitution for overpayments in the form of unpaid taxes, it is unclear how the defendants would go about calculating any alleged overpayments. Lastly, the defendants offer no explanation for the delay in adding this defense. The plaintiffs' status under the FLSA has been at issue since the inception of the litigation, and SCCP's failure to send its workers the proper tax forms belies any suggestion that the defendants did not know whether their workers were filing tax returns. Considering these factors, the equities do not favor permitting the defendants leave to amend their answer.
ii. Twelfth Defense
In their proposed twelfth defense, the defendants seek recoupment for alleged breaches of oral agreements by seven plaintiffs. A recoupment is allowed as a defense in an action for breach of contract and the defendant is entitled to "a recoupment to the extent of his damages which were the certain result of the breach." Smith, 558 A.2d at 805 (quoting Hammaker v. Schleigh, 157 Md. 652, 147 A. 790, 797 (1929)). Here, however, the defendants provide no indication that their allegations of breached agreements flow from the same transactions underlying the plaintiffs' breach of contract claims. The defendants do not identify the agreements at issue, the breaching conduct, or the resultant damages. Standing alone, then, the defendants' breach of agreement allegations are not a recoupment defense, but at best a counterclaim that should have been pled as such.
Even assuming the defendants had properly pled this defense as a counterclaim for breach of contract, however, the claim is too vague to survive a motion to dismiss. The defendants merely recite the elements of a breach of contract claim by alleging that seven plaintiffs breached agreements that resulted in foreseeable damages. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (holding that to survive a Rule 12(b)(6) motion to dismiss, "a plaintiff's obligation to provide
C. Plaintiffs' Motion for Summary Judgment
The plaintiffs seek summary judgment on the questions of whether they are covered employees under the FLSA and, thus, are entitled to overtime wages, and whether the defendants are liable for their failure to pay these wages. The defendants maintains that material questions of fact exist as to whether the plaintiffs are self-employed workers not entitled to FLSA protections.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Supreme Court has clarified this does not mean that any factual dispute will defeat the motion: "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir.2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to ... the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir.2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
Under the FLSA, employers must pay their covered employees an overtime rate of one and one-half times the employees' regular rate for each hour worked in excess of forty hours per work week. 29 U.S.C. § 207(a)(1). The determination of whether an individual is a covered employee is a legal question under the FLSA, and courts look to the underlying "economic reality" of the relationship between the worker and the putative employer. Schultz v. Capital Int'l Sec. Inc., 466 F.3d 298, 304 (4th Cir.2006). "The focal point is whether the worker is economically dependent on the business to which he renders service or is, as a matter of economic reality, in business for himself." Id. (internal quotation marks and alteration omitted).
i. Plaintiffs' "Independent Contractor" Label
The gravamen of the defendants' argument is that the plaintiffs are not "employees" because they deliberately sought not to be in order to hide their undocumented work status. According to the defendants, the plaintiffs individually negotiated to be independent contractors, bargained not to be employees of SCCP, and declined to fill out paperwork to become employees. These negotiations, the defendants contend, evidence that the plaintiffs "recognize they are not permitted to be employees for wages and deliberately steered away from any such work relationship." (Defs.' Opp. to Summ. J. at 16.)
While the defendants question whether the plaintiffs' immigration status prevents them from being lawfully employed under federal law, they stop short of contending that an unlawful work status alone would exempt the plaintiffs from FLSA coverage. Federal courts have consistently recognized that the broad sweep of the FLSA encompasses undocumented workers. See, e.g., Patel v. Quality Inn S., 846 F.2d 700, 705 (11th Cir.1988); In re Reyes, 814 F.2d 168, 170 (5th Cir.1987).
In Tony and Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), the Supreme
The defendants' attempt to distinguish the present case from Alamo is unavailing. They contend that Alamo involved the exploitation of "drug addicts" and "derelicts," while these plaintiffs deliberately chose not to be employees by seeking payment as self-employed workers. As discussed above, however, courts look beyond the parties' subjective intent to determine the economic reality of the employment relationship.
ii. Economic Realities Test
Courts have established a six-factor test to determine whether a worker is an employee or an independent contractor, based on "economic reality." These factors, derived from United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947), are:
Schultz, 466 F.3d at 304-05. No single factor is dispositive, as "the test is designed to capture the economic realities of the relationship between the worker and putative employer." Id. at 305.
The first Silk factor is the degree of control that SCCP had over the manner in which the plaintiffs performed their work. Evidence in the record demonstrates the following elements of SCCP's control over the plaintiffs. SCCP directed plaintiffs to particular job sites in Virginia, Maryland, and the District of Columbia, and Mr. Aguilera rotated among these job sites, providing supervision and instruction of foremen and painters. (See Pls.' Summ. J. Mem., Ex. 4 at 18-19, 86-90.) Additionally, Mr. Sulmonte provided instructions for the painters in English that Mr. Aguilera would translate orally in Spanish. (Id., Ex. 1 at 36-37, 199-200.) Instructions included which rooms should be painted and in what manner they should be painted
Where putative employers provide specific direction for how workers, particularly low-skilled workers, are to perform their jobs, courts have weighed the control factor in favor of employee status. Compare Heath, 87 F.Supp.2d at 457-58 (favoring employee status where employer published a training manual outlining all aspects of the work to be done by chicken catchers, and crew leaders provided continual on-site feedback) and Schultz, 466 F.3d at 307 (favoring employee status where a standard operating procedure governed how security guards were to carry out their duties) with Herman v. Mid-Atlantic Installation Servs., Inc., 164 F.Supp.2d 667, 672 (D.Md.2000) (favoring independent contractor status where workers' compliance with technical cable installation specifications was consistent with role of contractor hired to perform highly technical duties). Moreover, the control element may be satisfied where the putative employer sets the plaintiffs' schedules, directs them to particular work sites, requires them to fill out time sheets, and can fire them at will. See Quinteros v. Sparkle Cleaning, Inc., 532 F.Supp.2d 762, 769 (D.Md.2008) (alleging all of these factors).
SCCP contends that it did not exercise control over the painters because they coordinated their work with clients and took direction from the clients, as opposed to SCCP. Even if the painters did coordinate with and take direction from the clients at the job sites, that does not negate the amount of control that SCCP retained over them, which is the relevant inquiry in this analysis. See Schultz, 466 F.3d at 305 ("[T]he issue is not the degree of control that an alleged employer has over the manner in which the work is performed in comparison to that of another employer. Rather, it is the degree of control that the alleged employer has in comparison to the control exerted by the worker.") As discussed above, SCCP exerted a significant degree of control over the manner in which the plaintiffs performed their jobs.
The defendants also contend that SCCP did not control the manner in which the plaintiffs applied paint to the walls, relying on the fact that the painters supplied their own rollers and brushes. There is no doubt that the painters exercised some independent judgment as to how they physically applied paint to the walls, however, as a general rule, they did not control the manner in which they performed their duties. As noted above, SCCP controlled the type of paint used and the number of coats applied, often hired inexperienced painters and trained them on the job, and provided regular feedback on the painters' performance at the job sites. These actions suggest that SCCP exercised a significant amount of control over the manner in which the painters performed their duties, even though the painters were able to make some independent choices. See id. at 307 (finding control element satisfied where standard operating procedure dictated most tasks performed by security agents even though they occasionally exercised their own judgment in assessing security threats). Moreover, the plaintiffs' alleged independent responsibilities fall short of what courts have found to indicate a lack of control by the putative employer. See Herman, 164 F.Supp.2d at 674 (finding lack of control where workers had to assume
2. Opportunities for Profit or Loss Dependent on Managerial Skill
SCCP contends that painters had opportunities for profit both because they contracted for higher amounts based on their managerial skill and because they could leave SCCP at any time to earn greater profits elsewhere. The plaintiffs argue that SCCP set their schedules and they had no opportunity to increase their profits by working more efficiently. Where the putative employee's work is, by its nature, time oriented, not project oriented, courts have weighed the second Silk factor in favor of employee status. In Schultz, for example, the Fourth Circuit reasoned that security agents, who were paid at a set rate for each shift and whose work schedules were dictated by the employer's needs, could not work more efficiently in order to perform additional paid work. 466 F.3d at 308; see also Heath, 87 F.Supp.2d at 458 (noting that "because the number of chickens to be caught is limited by Perdue, there is no occasion for extra pay or profit"). In Herman, on the other hand, the court emphasized the cable installers' potential for earning greater profits by improving their technique so as to service more customers faster. 164 F.Supp.2d at 674. Here, the painters are more akin to the chicken catchers in Heath and the security agents in Schultz than to the cable installers in Herman. SCCP paid the painters a set salary or hourly rate and dictated their schedules, leaving no opportunity for the painters to earn more by working more efficiently. The fact that some painters earned a higher set rate than others, based on their level of skill, does not change the analysis. Once on the job, each painter was dependent on SCCP's scheduling to earn a living, and SCCP offers no evidence that painters could increase their profits by working more efficiently.
3. Investment in Equipment and Employment of Others
It is undisputed that the painters purchased their own paint brushes and rollers and SCCP supplied all other equipment, including paint, drop cloths, paint sprayers, stepladders, extension ladders, painting tape, sandpaper, paper, company t-shirts, and protective equipment such as hard hats and harnesses. (See Pls.' Summ. J. Mem., Ex. 4 at 82-83.) In Heath, the putative employer provided all major equipment, while the crew leaders, found to be employees, purchased their own computers for bookkeeping and protective gloves and masks for some of the catchers. The court concluded that "[t]he crew leaders' relative lack of capital investment in equipment is perhaps one of the strongest indicators that they are employees and not independent contractors." Heath, 87 F.Supp.2d at 458; see also Herman, 164 F.Supp.2d at 675 (weighing factor strongly in favor of independent contractor status where installers made considerable investments in their own vehicles, specialty tools, and insurance premiums). While the painters did purchase their own brushes and rollers, this investment was minimal relative to SCCP's capital investment and is highly analogous to the crew leaders' investments in Heath. The painters were heavily dependent on SCCP to provide the necessary materials for professional painting. Moreover, while some painters referred new workers to SCCP, it is undisputed that SCCP controlled all personnel decisions, further distinguishing them from the cable installers in Herman who had the right to hire helpers or subcontractors. See Herman, 164 F.Supp.2d at 674.
4. Degree of Skill Required
This factor requires little consideration, as Mr. Sulmonte himself acknowledged that painting "is not a high-skilled job" (see Pls. Summ. J. Mem., Ex. 1 at 103), and it is undisputed that SCCP hired painters with no experience. While the defendants suggests that some of the plaintiffs managed other painters and "interface[d] with other superintendents" at the job sites (see Defs. Opp. to Summ. J. at 12), this type of generalized managerial skill does not connote independent contractor status. See Heath, 87 F.Supp.2d at 458 (noting that while the crew leaders' position required generalized supervision and management skills, that did not render them independent contractors). The defendants' further contention that having to comply with job specifications requires "knowledge of method" (see Defs. Opp. to Summ. J. at 12) also fails to change the outcome. Every task, whether skilled or unskilled, requires some degree of knowledge as to how to perform it and an ability to follow directions. Cf. id. at 458 (noting that a chicken catcher's ability to become faster with experience "is true of most repetitive tasks, skilled or unskilled").
5. Permanence of the Working Relationship
The defendants contend that it hired the plaintiffs temporarily to work on a particular job site.
6. Integral Part of the Business
The defendants contend that because the painters were not hired for permanent work and the company could survive without them, they were not an integral part of the business. As discussed above, the plaintiffs have successfully demonstrated that they had some degree of permanence with SCCP. Moreover, this factor does not turn on whether the individual worker was integral to the business; rather, it depends on whether the service the worker performed was integral to the business. In Heath, for example, the court concluded that the chicken catchers' function, as opposed to the individual workers, was an integral part of the business of processing chickens. 87 F.Supp.2d at 459. Here, the plaintiffs are painters and the putative employer a painting contractor. Certainly painters' work is as integral to the business
Based on the analysis of the Silk factors, the court concludes that the plaintiffs were covered FLSA employees when they worked for SCCP. As a result, SCCP is liable to the plaintiffs for any underpayment of overtime wages.
For the foregoing reasons, the court will grant the plaintiffs' motions for leave to file an amended summons and complaint and for partial summary judgment and will deny the defendants' motion for leave to amend their answer. A separate Order follows.