Ludlow v. Flowers Foods, Inc. et al, No. 3:2018cv01190 - Document 365 (S.D. Cal. 2023)
Court Description: ORDER Denying 297 Motion for Decertification; Denying 303 Motion to File Documents Under Seal. Signed by Judge Jinsook Ohta on 3/15/2023. (smy1)
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Ludlow v. Flowers Foods, Inc. et al Doc. 365 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17147 Page 1 of 12 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 DANIEL LUDLOW, individually and on behalf of others similarly situated; and WILLIAM LANCASTER, individually and on behalf of others similarly situated, 15 v. 16 FLOWERS FOODS, INC., a Georgia corporation; FLOWERS BAKERIES, LLC, a Georgia limited liability company; and FLOWERS FINANCE, LLC, a limited liability company, 18 19 ORDER DENYING DEFENDANTS’ MOTION FOR FLSA DECERTIFICATION AND PLAINTIFFS’ MOTION TO SEAL Plaintiffs, 14 17 Case No.: 18cv1190-JO-JLB Defendants. 20 21 Plaintiffs are current and former delivery workers alleging that Defendants 22 intentionally misclassified them as independent contractors instead of employees. They 23 claim that Defendants did so in order to avoid paying them overtime and providing them 24 with other employment benefits. Plaintiffs filed a wage and hour complaint asserting a 25 collective claim under the Fair Labor Standards Act (“FLSA”) and class action claims 26 under the California Labor Code. Dkt. 56 (FAC).1 27 28 1 On July 5, 2022, the Court granted Plaintiffs’ motion for class certification of the Labor Code claims. Dkt. 312. 1 Dockets.Justia.com Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17148 Page 2 of 12 1 On March 29, 2022, Defendants filed a motion for decertification of the FLSA 2 collective action. Dkt. 213. In connection with this briefing, Plaintiffs filed a motion to 3 seal exhibits submitted in support of their opposition to the decertification motion. Dkt. 4 303. 5 decertification of the FLSA class and Plaintiffs’ motion to seal. For the reasons discussed below, the Court denies Defendants’ motion for 6 I. BACKGROUND 7 Defendant Flowers Foods, Inc. (“Flowers Foods”) is the national bakery company 8 behind popular brands such as Wonder Bread, Nature’s Own, and Dave’s Killer Bread. 9 FAC ¶ 21; Dkt. 302-3 (Declaration of Shaun Markley in support of Plaintiffs’ Opposition 10 to FLSA Decertification, “Markley Decl.”), Ex. 1. Flowers Foods describes itself as 11 “America’s premier baker” that “produces and markets bakery products” in the “retail and 12 food service” market. Markley Decl., Ex. 1. Flowers Foods claims in its SEC filings that 13 it is the “second largest producer and marketer of packaged bakery foods in the US” and 14 “operate[s] in the highly competitive fresh bakery market.” Id., Ex. 2 at 11. Its customers 15 are retail and foodservice locations such as Sonic and Walmart. Id., Exs. 16, 17. With 16 sales of $3.9 billion in 2017, Flowers Foods generates revenue from sales of bakery 17 products to its retail and foodservice customers. Id., Ex. 1. As such, one of Flowers Foods’ 18 key business functions is the distribution and delivery of these packaged bakery goods to 19 its customers. See Markley Decl., Exs. 1–4. 20 Flowers Foods engages the services of delivery workers by having its operating 21 subsidiaries enter into “Distributor Agreements” with them. Flowers Foods is the sole 22 parent company of Defendant Flowers Bakeries, LLC (“Flowers Bakeries”), which in turn 23 operates as the sole parent company of numerous non-party operating subsidiaries located 24 throughout California and the United States. See FAC ¶¶ 17, 18; see Markley Decl., Exs. 25 2–3. The local operating subsidiaries enter into standard and substantially identical 26 Distributor Agreements with all of Flowers Foods’ delivery workers. See Markley Decl., 27 Exs. 5–6. Under these agreements, these so-called “distributors” such as Plaintiffs 28 2 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17149 Page 3 of 12 1 contracted to deliver the bakery products from Defendants’ warehouses to the retail and 2 foodservice customer locations. See id., Exs. 1–2. 3 The Distributor Agreements set forth the working relationship between the delivery 4 worker and Defendants. See Markley Decl., Ex. 6. The Distributor Agreement labels the 5 delivery workers as “distributors” and “independent contractors.” Id. at § 16.1. A 6 prospective distributor purchases the right to deliver Defendants’ bakery products in a 7 specific geographic territory. Id. at § 2.4. Purchasing the rights to a territory entitles the 8 distributor to deliver specific bakery products to specific customer locations within the 9 given territory. Id. at §§ 2.2–2.3. The distributor can purchase and own more than one 10 territory or resell his or her territory to another person for a profit. Id. § 15.1. The 11 distributor may also hire helpers to service his or her territory while he or she holds other 12 full-time jobs (so-called “absentee” distributors). Id. § 16.2. 13 These Distributor Agreements also describe how the distributor purportedly earns 14 money with these territory rights. 15 “purchases” bakery products from Defendants and then “re-sells” those products to the 16 retail and foodservice customers within their given territory. See Markley Decl., Ex. 6 at 17 §§ 4.1, 8.6. A distributor earns money based on the standard margin—the difference 18 between the purchase price and the sale price—which is set by the operating subsidiary 19 based on its negotiations with the customers on the product price. See Markley Decl., Exs. 20 3, 21–22. A distributor must sell any unsold bakery products back to Defendants at a price 21 set by the subsidiary. Ex. 6 at § 12.2. Under the Distributor Agreement, a distributor 22 The Distributor Agreements also set forth the quality standards that distributors must 23 meet as part of their job requirements. For example, the Distributor Agreement requires 24 the distributor to perform his or her services in accordance with “the standards that have 25 developed and are generally accepted and followed in the baking industry,” which 26 specifically includes maintaining an adequate and fresh supply of products in the stores, 27 actively soliciting stores not being serviced, properly rotating the products, promptly 28 removing stale products, maintaining proper service per the store’s requirements, and 3 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17150 Page 4 of 12 1 maintaining equipment in sanitary and safe conditions. Markley Decl., Ex. 6 at § 2.6; see 2 also Ex. 3. The Distributor Agreement also requires the distributor to obtain his or her own 3 delivery vehicle and insurance, and to keep the delivery vehicle clean, professional, and 4 safe. Ex. 6 at § 9.1. The Distributor Agreement further requires the distributor to use 5 Flowers Foods’ “proprietary administrative services” to collect sales data or prepare sales 6 tickets. Id. at § 10.1. 7 Flowers Foods also manages the distributors’ work through its local subsidiaries. 8 Flowers Foods expects the distributors to adhere to specific customer requirements. See 9 Markley Decl., Exs. 27–30. These customer requirements include dress codes, product 10 handling protocols, and other codes of conduct. See, e.g., Ex. 27 at § 3. Therefore, Flowers 11 Foods’ operating subsidiary bakeries employ managers to train, monitor, and assist 12 distributors in the daily operation of their territories to ensure that they adhere to these 13 requirements. Id., Ex. 10. Its managers field complaints from the customer retail stores 14 regarding distributors and may escalate the issues to upper management for review and 15 possible termination. See id., Exs. 4, 11. If a distributor fails to make its delivery services, 16 the subsidiary sends a breach letter and threatens termination of the relationship. See 17 Markley Decl., Exs. 19, 20. Furthermore, each of the subsidiaries has a distributor relations 18 department that manages distributor work disputes, sells various insurance program 19 benefits that are automatically deducted from the distributor’s pay, and processes final 20 paychecks. See Markley Decl., Ex. 4. 21 The Distributor Agreement sets an indefinite duration for the working relationship 22 between the distributor and Defendants. Under the Distributor Agreement’s terms, the 23 distributor relationship continues unless the distributor sells the territory, the Flowers 24 Foods subsidiary ceases to use distributors in a territory for “business reasons,” or the 25 subsidiary terminates as a result of the distributor engaging in certain enumerated activities 26 deemed non-curable or repeated curable breaches. Markley Decl., Ex. 6 at §§ 3.1, 17.1. 27 On February 21, 2019, Plaintiffs filed their First Amended Complaint alleging a 28 FLSA claim for failure to pay overtime on behalf of themselves and the FLSA collective 4 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17151 Page 5 of 12 1 class. Dkt. 56 (FAC). Plaintiffs asserted a FLSA collective class defined as “All persons 2 who worked pursuant to a ‘Distributor Agreement’ or similar arrangement with Flowers 3 Food, Inc., or one of its subsidiaries, in California that were classified as ‘independent 4 contractors’ during the period commencing three years prior to the commencement of this 5 action through the close of the Court-determined opt-in period.” FAC ¶ 42. Over one 6 hundred plaintiffs have filed opt-in forms to the FLSA claim (the “opt-in Plaintiffs”). See 7 Dkts. 19, 86, 96, 97, 114, 125, 146, 227, 251, 261, 256, 258, 265. 8 II. LEGAL STANDARD 9 The FLSA provides a mechanism for workers to pursue their claims under the statute 10 jointly as a collective action. 29 U.S.C. § 216(b). It specifies that workers may litigate as 11 a group if they claim a violation of the FLSA, are “similarly situated,” and affirmatively 12 opt into the joint litigation in writing. Campbell v. City of Los Angeles, 903 F.3d 1090, 13 1101 (9th Cir. 2018) (citing 29 U.S.C. § 216(b)). The plaintiffs bear the burden to show 14 that they are “similarly situated.” Id. at 1117–18. 15 The Ninth Circuit has instructed that opt-in plaintiffs are “similarly situated” if they 16 “share a similar issue of law or fact material to the disposition of their FLSA claims.” 17 Senne v. Kansas City Royals Baseball Corp., 934 F.3d 918, 948 (9th Cir. 2019) (quoting 18 Campbell v. City of Los Angeles, 903 F.3d 1090 (9th Cir. 2018)). So long as the proposed 19 collective class’s “factual or legal similarities are material to the resolution of their case, 20 dissimilarities in other respects should not defeat collective treatment.” Id. The “similarly 21 situated” standard does not, unlike a Rule 23 analysis, require a strict inquiry into the 22 procedural benefits of a collective action. Campbell, 903 F.3d at 1115. This collective 23 treatment of similar claims in the workplace furthers the “broad remedial goal of the 24 [FLSA, which] should be enforced to the full extent of its terms.” Hoffmann-La Roche Inc. 25 v. Sperling, 493 U.S. 165, 173 (1989). 26 Furthermore, a FLSA collective action is governed by different standards than a 27 class action under Federal Rule of Civil Procedure Rule 23. Unlike a Rule 23 class action 28 in which a district court must affirmatively allow a class to proceed, workers may initiate 5 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17152 Page 6 of 12 1 a FLSA collective action simply by filing opt-in forms with the district court. Campbell, 2 903 F.3d at 1101. After the collective action proceeds through discovery, an employer can 3 move to “decertify” the FLSA class by showing, based on the factual record, that the opt- 4 in plaintiffs are not “similarly situated” to the named plaintiffs. Id. at 1102, 1109. At this 5 stage, “the plaintiff bears a heavier burden” to show that they are similarly situated. Id. at 6 1117–18. 7 III. DISCUSSION 8 The opt-in Plaintiffs brought a collective action under the FLSA alleging Defendants 9 failed to pay distributors overtime based on the alleged misclassification as independent 10 contractors. See 29 U.S.C. § 207. Defendants moved to decertify the collective action on 11 the grounds that the opt-in Plaintiffs are not “similarly situated” under the FLSA’s joint 12 employer test or employee-independent contractor tests. 13 A. Joint Employer Test 14 First, Defendants argue that a joint employer determination—whether Defendant 15 Flowers Foods and its operating subsidiaries are joint employers of the opt-in Plaintiffs— 16 is a threshold issue that will require an individualized inquiry. On that basis, they argue 17 that decertification is warranted. 18 Under the FLSA, an entity is a “joint employer” with another entity if it has joint 19 control over the terms and conditions of a worker’s job. See 29 U.S.C. § 203(d); 29 C.F.R. 20 § 791.2. An entity may be liable for FLSA overtime claims as a joint employer if it acted 21 directly or indirectly in the interest of an employer regarding an employee. See 29 C.F.R. 22 § 791.2. To determine whether a defendant is a joint employer under the FLSA, courts 23 consider “whether the alleged employer (1) had the power to hire and fire the employees; 24 (2) supervised and controlled employee work schedules or conditions of employment; 25 (3) determined the rate and method of payment; and (4) maintained employment records.” 26 Bonnette v. Cal. Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983), 27 disapproved of on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 28 528 (1985). 6 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17153 Page 7 of 12 1 In this case, whether parent company Flowers Foods exercised sufficient control 2 over the opt-in Plaintiffs to qualify as their joint employer with the local subsidiaries will 3 rest on similar legal and factual issues shared by the collective class. As set forth above, 4 this analysis involves common questions like, (1) whether Flowers Foods had the power to 5 hire and fire the distributors, (2) whether it had a role in supervising and controlling the 6 distributors’ work schedules or work conditions, (3) whether it determined their pay rate 7 and method, and (4) whether it maintained employment records for the distributors. 8 Bonnette, 704 F.2d at 1470. The answers to these questions largely hinge on common 9 evidence regarding the respective roles and responsibilities of the parent company, the 10 operating subsidiary, and the delivery workers such as, (1) the substantively identical 11 Distributor Agreements entered between all the local subsidiaries and the delivery workers, 12 and (2) other evidence of statewide practices regarding the management of these delivery 13 workers. For example, the common Distributor Agreement set forth the local subsidiary’s 14 right to terminate a distributor if he or she fails to adhere to customer requirements or make 15 the deliveries according to enumerated quality standards. See Markley Decl., Ex. 5 at 16 § 17.1; Ex. 6 at § 17.1; Exs. 19, 20. The Distributor Agreement also describes the local 17 subsidiary’s ability to control the distributors’ pay by setting the price at which the 18 distributors “purchase” the baked goods from Flower Foods, the price at which they “sell” 19 these baked goods to Flowers Foods’ customers, and the price at which they must “sell 20 back” any unsold baked goods to Flowers Foods. See Ex. 6 at §§ 4.1, 8.6. Furthermore, 21 the opt-in Plaintiffs have submitted evidence that all the local subsidiaries across California 22 hired managers to monitor the distributors and ensure they complied with Flowers Foods’ 23 customer service requirements. 24 subsidiaries also had the ability through their distributor relations departments to process 25 distributor insurance program benefits, deduct from their paychecks, and process their final 26 paychecks. Markley Decl., Ex. 4. The Distributor Agreement is silent on whether Flower 27 Foods, the parent corporation, had a role in performing the functions of hiring and firing, 28 supervising, determining pay, and keeping records—the parent corporation either had no See Markley Decl., Exs. 8, 10. 7 All the operating Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17154 Page 8 of 12 1 role in these decisions, or it had a degree of involvement that is not apparent in the 2 Distributor Agreements. However, the standard companywide nature of Flowers Foods’ 3 corporate practices regarding its distributors—the fact that neither the Distributor 4 Agreements nor the corporate practices for managing the distributors varied by subsidiary 5 or locality—suggests that the parent corporation’s degree of involvement and control, 6 whether high or low, is the same across the collective class members that perform work for 7 their respective subsidiary. Defendants have not provided any evidence to show that 8 Flowers Foods implemented the above practices, which determine the working relationship 9 and degree of control between the subsidiaries and distributors, differently across the 10 subsidiaries. From this evidence, it appears Flowers Foods and its subsidiaries did or did 11 not jointly control each member of the collective class to the same degree. Because the 12 proposed collective class of distributors shares these similar issues of law or fact material 13 to the disposition of the joint employer inquiry, the Court concludes that decertification is 14 not warranted. Senne, 934 F.3d at 948. 15 B. Employment or Independent Contractor Relationship 16 Having determined that the opt-in Plaintiffs are similarly situated with regard to the 17 joint employer question, the Court next turns to Defendants’ argument that an 18 individualized inquiry would be necessary to determine whether opt-in Plaintiffs are 19 employees rather than independent contractors under the FLSA. 20 To determine whether an employment relationship exists under the FLSA, courts 21 have adopted the “economic realities test,” which focuses on whether the worker is 22 dependent on the company to which they provide services. See Real v. Driscoll Strawberry 23 Assocs., Inc., 603 F.2d 748, 754 (9th Cir. 1979). Under the economic realities test, a court 24 examines the following non-exhaustive factors to determine whether a worker is an 25 employee or an independent contractor: “(1) the degree of the alleged employer’s right to 26 control the manner in which the work is performed; (2) the alleged employee’s opportunity 27 for profit or loss depending upon his managerial skill; (3) the alleged employee’s 28 investment in equipment or materials required for his task, or his employment of helpers; 8 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17155 Page 9 of 12 1 (4) whether the service rendered requires a special skill; (5) the degree of permanence of 2 the working relationship; and (6) whether the service rendered is an integral part of the 3 alleged employer’s business.” 4 determinative; rather, “such determination depends ‘upon the circumstances of the whole 5 activity.’” Id. at 754–755 (quoting Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 6 (1947)). Notably, courts have adopted “an expansive interpretation of the definitions of 7 ‘employer’ and ‘employee’ under the FLSA.” Id. at 754. Id. The presence of any individual factor is not 8 As with the joint employer analysis, the Distributor Agreement provides common 9 proof of many of the above “economic realities” factors that bear on whether an 10 employment relationship exists. 11 employee’s work “requires a special skill,” Real, 603 F.2d at 754, because work that 12 requires a high degree of skill often reflects an independent contractor relationship. See, 13 e.g., Cotter v. Lyft, Inc., 60 F. Supp. 3d 1067, 1069 (N.D. Cal. 2015). The substantively 14 identical Distributor Agreements that all opt-in Plaintiffs signed defines the scope of the 15 job duties. The local subsidiaries require each distributor to deliver the bakery products to 16 various customer locations by driving their delivery vehicles. See Markley Decl., Ex. 6 at 17 §§ 4.1, 8.6, 9.1. They also require each distributor to properly stock and maintain the store 18 shelves with bakery products. Markley Decl., Ex. 6 at § 2.6. By defining the scope of job 19 duties for each opt-in Plaintiff, these standard Distributor Agreements provide common 20 proof of the complexity or degree of special skill required for the distributor job. For example, courts consider whether an alleged 21 The Distributor Agreement also provides common proof regarding the permanence 22 of the working relationship between the distributors and the company. The fact that a 23 worker has “continuously” provided services to the alleged employer for a “long period[] 24 of time” will weigh in favor of an employment relationship. See Donovan v. Sureway 25 Cleaners, 656 F.2d 1368, 1372 (9th Cir. 1981); see also, e.g., Torres-Lopez v. May, 111 26 F.3d 633, 644 (9th Cir. 1997). 27 relationship between all distributors and the subsidiaries. For each opt-in Plaintiff, the 28 Distributor Agreement specifies that the working relationship continues indefinitely; this The Distributor Agreement governs the working 9 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17156 Page 10 of 12 1 long-term working relationship does not end unless the distributor or the subsidiary 2 terminates the relationship. Markley Decl., Ex. 6 at §§ 3.1, 17.1. By governing the length 3 of the working relationship between the company and each opt-in Plaintiff, the Distributor 4 Agreement provides common proof of the permanence of the working relationship 5 envisioned by the parties. 6 The Distributor Agreement further provides common proof regarding a distributor’s 7 opportunity for profit or loss. A worker’s opportunity for profit or loss turns on “the 8 managerial skills of [the alleged employer]” versus “the [worker’s] own judgment and 9 industry.” See Real, 603 F.2d at 755. In other words, this inquiry considers whether the 10 worker makes money based on his or her own entrepreneurial acumen, which leans toward 11 an independent contractor relationship. The standard Distributor Agreement governs the 12 parameters of the distributors’ opportunities to purchase and sell routes, how distributors 13 earn money from their delivery of the baked goods, and other opportunities to earn money 14 through the distributor services. See Markley Decl., Ex. 6 at §§ 2.4, 16.2. By describing 15 the distributor’s various methods of earning money for their services, the Distributor 16 Agreement provides common proof of the opt-in Plaintiffs’ opportunities for profit or loss. 17 Finally, common proof will determine whether the distributor’s service is central to 18 Defendants’ business. If the worker plays an integral role in the alleged employer’s 19 business, the arrangement is more akin to that of an employee-employer relationship. See 20 Real, 603 F.2d at 754. As explained above, the standard Distributor Agreement details the 21 distributor’s specific job requirements and responsibilities. See generally Markley Decl., 22 Ex. 6. Common evidence such as corporate filings regarding Flowers Foods’ business 23 operations and financial performance also describes the nature of Defendants’ business. 24 See, e.g., Markley Decl., Ex. 1; Ex. 2 at 11. Because these common corporate filings 25 evidence the nature of Flowers Foods’ business and the common Distributor Agreement 26 shows what work the distributors perform, they provide common, class-wide evidence 27 regarding the opt-in Plaintiffs’ role in Defendants’ overall business structure. 28 10 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17157 Page 11 of 12 1 The above issues are only a few non-exhaustive examples of similar legal and factual 2 issues concerning the distributor plaintiffs that are material to the resolution of their FLSA 3 claim. See Senne, 934 F.3d at 948. Defendants argue that the Motor Carrier Act exemption 4 and the outside sales exemption are individualized defenses that defeat collective 5 treatment. The Court disagrees. Even if these defenses involved individualized inquiries, 6 the law is clear that given the existence of similar material issues of fact or law—and the 7 Court has identified several above—dissimilarities in other respects do not defeat collective 8 treatment. See Campbell, 903 F.3d at 1114. Accordingly, the Court denies Defendants’ 9 motion for decertification of the FLSA action. 10 IV. MOTION TO SEAL 11 Plaintiffs filed a motion to seal exhibits submitted in connection with their 12 opposition to Defendants’ motion for decertification, on the grounds that the exhibits 13 contain material previously designated by Defendants as “CONFIDENTIAL” under the 14 terms of the Protective Order. Dkt. 303. The public has a “right to inspect and copy public 15 records and documents, including judicial records and documents.” Kamakana v. City & 16 Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). In considering a sealing request, 17 the court thus begins with “a strong presumption of access [as] the starting point.” Id. A 18 party seeking to seal a judicial record associated with a dispositive motion bears the burden 19 of overcoming this strong presumption by “articulat[ing] compelling reasons supported by 20 specific factual findings” for the sealing. Id. Plaintiffs do not contend that these exhibits 21 are confidential nor identify any specific harm that would arise from their disclosure. They 22 seek to seal the exhibits only on the grounds that they had been designated 23 “CONFIDENTIAL” pursuant to the Protective Order. This is insufficient to establish the 24 “compelling reasons” required to justify sealing. Because Plaintiffs have not met their 25 burden to demonstrate any compelling reasons to seal these exhibits, the Court denies the 26 motion to seal without prejudice [Dkt. 303]. 27 /// 28 /// 11 Case 3:18-cv-01190-JO-JLB Document 365 Filed 03/15/23 PageID.17158 Page 12 of 12 1 V. CONCLUSION 2 For the reasons discussed above, the Court DENIES Defendants’ motion for 3 decertification of the FLSA claim [Dkt. 297]. The Court DENIES Plaintiffs’ motion to 4 seal [Dkt. 303] without prejudice to refiling. 5 6 IT IS SO ORDERED. Dated: March 15, 2023 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12
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