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Armijo v. FedEx Ground Package System, Inc.

United States District Court, D. New Mexico

August 6, 2019

JAIME LOREE ARMIJO, on behalf of herself and all others similarly situated, Plaintiff,
v.
FEDEX GROUND PACKAGE SYSTEM, INC., a foreign company, Defendant.

          MEMORANDUM OPINION AND ORDER

          ROBERT C. BRACK SENIOR U.S. DISTRICT JUDGE

         Are FedEx drivers employees or independent contractors? Variations of this employment dispute have played out in cases across the nation, including several multi-state class action lawsuits, but the question has never been addressed under New Mexico law. Plaintiff Jaime Loree Armijo[1] worked as a pick-up and delivery driver for FedEx Ground Package System, Inc. (FedEx) for several years. She alleges that she was a FedEx employee during that time and is entitled to overtime payments under the New Mexico Minimum Wage Act (MWA) for the long hours she was required to work in order to fully service her route. FedEx argues that Ms. Armijo was paid per package and per stop on her route, not by the hour, and thus is not an “employee” as a matter of law because this compensation method falls under the MWA's “piecework” exception

         I. Factual and Procedural Background[2]

         FedEx is a “federally-registered motor carrier that offers the pickup and delivery of packages to businesses and residences.” (Doc. 102-1 at 5[3] ¶ 1; see also Doc. 76-1 ¶ 18.) Since 2011, FedEx has only contracted in New Mexico with incorporated businesses, not individual drivers. (See Docs. 102-1 at 5 ¶ 2; 76-1 ¶¶ 7-8.) FedEx terms such entities “Contracted Service Providers” (CSPs), and CSPs enter into Operating Agreements (OAs) with FedEx. (See Docs. 102-1 at 5 ¶¶ 2-4; 76-1 ¶¶ 5, 7.) Pursuant to the OAs, all individuals who drive for a CSP are required to be employees of that CSP. (Doc. 102-1 at 5 ¶ 4; 76-1 ¶ 12.)

         In July 2013, Ms. Armijo executed a “Pick-Up and Delivery Contractor Operating Agreement” with FedEx on behalf of the CSP Jaimes Elegant P&D Corporation (Jaimes Elegant). (Doc. 102-1 at 5-6 ¶ 5.) Ms. Armijo was the President and sole owner of Jaimes Elegant. (See Docs. 76-10 at 3; 102-2 at 109:1-7.) The contract provided that Jaimes Elegant would service a single route, or “Primary Service Area, ” by picking up and delivering all packages in the service area each day in exchange for weekly settlement payments. (See Docs. 102-1 at 5-6 ¶ 5, 6 ¶ 9; 102-2 at 185:8-12, 187:17-25.) The contract period lasted approximately three years, and during that time Ms. Armijo hired a total of five other employees, with varying lengths of employment, to drive the route for Jaimes Elegant. (See Docs. 102-1 at 6 ¶ 7; 102-2 at 252:20-256:2.) For about the first seven months of the contract, Ms. Armijo alone drove and serviced the route. (See Docs. 102-1 at 5-6 ¶ 5; 102-2 at 252:22-253:2.) For approximately the final year of the contract, Ms. Armijo delivered packages along the route “at a reduced level of involvement.” (Doc. 102-1 at 6 ¶ 8; see also 102-2 at 253:10-17.)

         Jaimes Elegant's OA allowed the company “full discretion . . . to compensate [its] own employees, such as individual drivers, as [it saw] fit, including hourly, daily, weekly, or as otherwise permitted by law.” (Doc. 102-1 at 7 ¶ 12; see also Docs. 62-1 at 10; 76-1 ¶¶ 35-36.) Addendum 3 to the OA governs the specifics of how FedEx paid weekly compensation settlements to Jaimes Elegant. (See Docs. 102-1 at 6 ¶ 9; 63-1 at 3-32; 104 at 3 ¶ 1.) According to FedEx, “CSP compensation is designed to account for all the activities and services they provide to FedEx Ground, including the loading of the CSPs' vehicles in the mornings and . . . the return of packages picked up to the Ground station in time to be loaded onto a linehaul truck for onward delivery to FedEx Ground hubs.” (Doc. 102-1 at 7 ¶ 13; see also Docs. 104 at 6; 76-3 ¶¶ 17-18; 102-3 at 187:25-188:25.) Per the OA, Jaimes Elegant's settlements included payments based on: the numbers of stops and packages picked up and delivered (see Doc. 63-1 at 3-4); the number of miles driven (if more than 200 in a given day) (see Id. at 4-5); fuel settlements based on fuel price changes in the service area (see Id. at 5-6); a weekly “core zone” subsidy providing an additional stipend based on the number of stops made and the customer density of the route (see Id. at 14- 18); mileage and fuel settlements for longer distance “linehaul” work (see Id. at 22-27); and weekly “flex program” payments, which included a base weekly payment for participation in the program and a per-package payment for any “flexed” packages that drivers picked up or delivered outside Jaimes Elegant's service area (see Id. at 31). (See also Docs. 102-1 at 6 ¶ 10, 8 ¶ 18; 104 at 5 ¶ 2; 102-2 at 247:3-248:11.)

         The parties agree that there were four “distinct additional employment requirements imposed by FedEx” in addition to the general requirement that Jaimes Elegant complete all the required package pickups and deliveries each day.[4] (See Docs. 104 at 3-4 ¶ 3; 106 at 5-6.) These requirements included: (i) mandatory quarterly groups meetings with the FedEx terminal manager and other FedEx personnel to discuss safety and terminal performance (see Docs. 104 at 3-4 ¶¶ 3- 4; 104-1 at 1-2; 81-2 at 410:1-23); (ii) mandatory waiting time at the FedEx terminal prior to departure, during which fully loaded vehicles were prohibited from departing the terminal until all other vehicles had been loaded and all packages were accounted for (see Docs. 104 at 3 ¶ 3; 81-2 at 166:11-22; 67-1 at 218:2-8; 104-1 at 2); (iii) designated windows of time in which certain deliveries or pickups must be made[5] (Docs. 104 at 3-5 ¶¶ 3, 6; 104-1 at 2-3; 104-3 at 160:17- 161:18); and (iv) the completion of various administrative tasks upon returning to the FedEx terminal at the end of the day (Docs. 104 at 3-4 ¶ 3, 5 ¶ 7; 81-2 at 343:13-25.)

         “Drivers were generally required to arrive at the FedEx terminals by” 7:00 a.m. and were not allowed to depart the terminal until all packages had been sorted and accounted for and all the trucks were completely loaded. (Doc. 104 at 4 ¶ 5; see also Doc. 104-1 at 2.) “On average, drivers had to wait 30 minutes every day between the time their trucks were loaded and the time they could depart the terminal and start their work.” (Doc. 104 at 4 ¶ 5; see also Doc. 104-1 at 2.) After drivers returned to the terminal at the end of the day they “were required to complete various FedEx forms and perform other ministerial and administrative tasks[, ]” including vehicle maintenance and inspections. (Docs. 104 at 5 ¶ 7; 104-1 at 3.) Ms. Armijo estimates that she spent an average of 2.5 hours per week on these post-delivery activities. (Doc. 104-1 at 3.)

         The parties agree that Ms. Armijo was required to fulfill these duties even though they were not specifically listed in the OA, but disagree as to whether the activities were compensated. (Compare Doc. 104 at 3 ¶ 2 (“these are requirements whose violations FedEx considers a breach of the Operating Agreement, [yet] there is no mechanism for paying the drivers for satisfying these obligations”), with Doc. 106 at 5-6 (these requirements “are affirmative duties ‘integral to the delivery and pick-up process itself' and Plaintiff and other CSPs were compensated for these tasks under the express terms of the Operating Agreement”) (quoting Casias v. Distrib. Mgmt. Corp., Inc., No. CV 11-00874 MV/RHS, 2013 WL 12091857, at *8 (D.N.M. Mar. 27, 2013)).)

         Ms. Armijo filed suit against FedEx on April 11, 2017, asserting that she and a putative class of similarly situated FedEx drivers had been misclassified as independent contractors when they were actually FedEx employees. (See Doc. 1 (Compl.) at 1-2.) Ms. Armijo asserted claims for recovery under New Mexico's unauthorized deduction statute, N.M. Stat. Ann. § 14-13-11(A), the New Mexico Minimum Wage Act, N.M. Stat. Ann § 50-4-22, and a theory of unjust enrichment. (Id. at 15-18.) On January 3, 2018, the Court dismissed Ms. Armijo's claims for violation of the unauthorized deduction statute and unjust enrichment, leaving only her overtime claim under the MWA. (See Doc. 42.)

         In her Renewed Motion for Class Certification, Ms. Armijo urges the Court to certify a putative class of individuals who were signatories for entities that contracted with FedEx, like Jaimes Elegant, and also drove full time for FedEx. (See Doc. 87.) After Ms. Armijo first moved for class certification in March 2018 (Doc. 60), the Court denied her motion on the ground that the putative class was not ascertainable because Ms. Armijo failed to define what would make a driver “full-time.” (See Doc. 86 at 6.) On October 19, 2018, Ms. Armijo filed a revised motion to certify her proposed class, this time defining the putative class as:

All persons who (1) were signatories and authorized officers (2) on behalf of an entity (3) that contracted with either FedEx Ground System, Inc., or FedEx Home Delivery, Inc., to provide delivery services (4) and whose contract (known by the FedEx entities as the “IC” contract) classified the contracting entities as independent contractors (5) and who drove at least 32 hours a week (6) for at least 20 weeks within a given year [7] from April 11, 2014 forward.

(Doc. 87 at 1.) FedEx opposes Ms. Armijo's Renewed Motion for Class Certification, arguing that whether authorized signatories who were also drivers, like Ms. Armijo, were employees under New Mexico's “economic realities test” cannot be determined by common evidence because “the misclassification inquiry is individualized for each” putative class member. (Doc. 91 at 32 (capitalization altered).)

         With the motion for class certification still pending, on January 21, 2019, FedEx moved for summary judgment on Ms. Armijo's remaining claim under the MWA. (See Docs. 102; 102-1). FedEx argues that even if Ms. Armijo could prove that she should otherwise be classified as an employee under the economic realities test, her overtime claim would be precluded because Ms. Armijo is squarely excluded from the MWA's protections by an exception for employees who are compensated on a piecework basis. (See Doc. 102-1 at 10 (discussing N.M. Stat. Ann. § 50-4-21(C)(5)).) The Court will first take up FedEx's motion for summary judgment to determine if any issues remain for trial that would necessitate ruling on Ms. Armijo's motion for class certification.

         II. Motion for Summary Judgment

         Summary judgment is appropriate when the Court, viewing the record in the light most favorable to the nonmoving party, determines “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005). A fact is “material” if it could influence the determination of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a material fact is “genuine” if a reasonable trier of fact could return a verdict for either party. Id. The moving party bears the initial responsibility of showing “an absence of evidence to support the nonmoving party's case.” Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). Once the moving party meets this burden, Rule 56 “requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324 (quotation omitted).

         All the facts that are material to the question of whether Ms. Armijo was compensated on a piecework basis are undisputed. The parties have asserted various disputes as to questions of law and the relevance of various facts (see Docs. 104 at 3-6; 106 at 5-7), but the only genuine dispute of fact is whether Ms. Armijo was compensated for the affirmative duties FedEx required of her in addition to picking up and delivering packages. (See Docs. 104 at 3 ¶ 2; 106 at 5-6.) However, as will be explained further below, even viewing this disputed fact in a light most favorable to Ms. Armijo and assuming that she was not compensated for her waiting time and other affirmative duties, this fact is not material to the determination of whether she was paid on a piecework basis.

         There are two dispositive legal questions before the Court: (1) whether FedEx paid Jaimes Elegant on a “piecework” basis, thus bringing Jaimes Elegant and Ms. Armijo[6] under the piecework exception to the MWA; and, if so, (2) whether the unproductive waiting time and other affirmative duties FedEx required of Ms. Armijo sufficiently alter the piecework structure such that the exception no longer applies. Having considered the parties' motions, the record, and relevant law, the Court answers the first question in the affirmative and the second in the negative and will grant FedEx's motion for summary judgment.

         A. FedEx paid Ms. Armijo on a “piecework” basis.

         New Mexico's Minimum Wage Act “generally requires employers to pay overtime to employees who work more than 40 hours per week.” Casias, 2013 WL 12091857, at *5 (citing N.M. Stat. Ann. § 50-4-22(D)). However, the MWA explicitly excludes “salespersons or employees compensated upon piecework, flat rate schedules or commission basis . . .” from its definition of “employees” covered by the Act. See N.M. Stat. Ann. § 50-4-21(C)(5). FedEx argues that its weekly settlement system, which compensates CSPs per stop, package, and mile, falls under the piecework exception as interpreted by courts in this District, and thus Ms. Armijo's overtime claim fails as a matter of law. (See Doc. 102-1 at 10-15.) Ms. Armijo argues for a narrower interpretation of the term “piecework, ” asserting that the compensation system established by her OA does not qualify as piecework and, even if it did, is removed from that definition by the additional requirements FedEx imposes on CSPs. (See Doc. 104 at 1-2.)

         FedEx bears the burden of proving that Ms. Armijo is exempt from the MWA, see Rivera v. McCoy Corp., 240 F.Supp.3d 1150, 1155 (D.N.M. 2017) (citations omitted), and “[e]xemptions from the [MWA] are strictly and narrowly construed against employers.” Casias, 2013 WL 12091857, at *5 (citing New Mexico ex rel. State Labor Comm'r v. Goodwill Indus., 478 P.2d 543, 545 (N.M. 1970)). “Thus, an employer asserting an exemption defense must prove that the exemption ‘unmistakably' includes the employee whom the employer claims to be exempt from the Act.” Id. The MWA does not define the terms “piecework, ” “flat rate, ” or “commission, ” nor has the New Mexico Supreme Court addressed what types of payment systems fall under these exempted categories. See Id. Several courts in this District, however, have examined similar issues in applying New Mexico law and reached instructive conclusions.

         In Olivo v. Crawford Chevrolet, Inc. (Olivo I), the plaintiffs were employed by a car dealership to paint and repair damaged automobiles. 799 F.Supp.2d 1237, 1239 (D.N.M. 2011). “Plaintiffs were paid by the job[, ] . . . mean[ing] that employees were given certain assignments and were paid a set amount per assignment-regardless of the amount of time it actually took to complete the assignment.” Id. at 1239-40. They were also, however, “each made to wait approximately 10-15 hours each week, without pay, at the body shop between work assignments.” Id. at 1240. The plaintiffs asserted that they were thus “not truly paid on a flat rate or piecework basis” because “the fact that Defendants compelled Plaintiffs to remain on the premises at least some of the occasions when no assignments were available change[d] the analysis.” Id. at 1242. The Defendants did “not deny that Plaintiffs were required to wait at the body shop between assignments, but [argued] that Plaintiffs' pay for completed assignments was understood by all to compensate for waiting time as well.” Id. at 1240.

         In Olivo I, United States District Judge Bruce Black found as a threshold matter that “[a]ll parties agree[d] that Plaintiffs earned a predetermined wage per each job assignment[, ]” so they were “compensated by the job, and thus . . . paid on a ‘piecework' basis.” Id. at 1242. However, Judge Black opined that the time plaintiffs were forced to wait at the shop between jobs constituted “work” because they were not able to effectively use that time for their own purposes and it was to their employers' benefit to have “workers at their disposal when jobs ar[ose].” Id. (citation omitted). The court then denied summary judgment on the issue of whether the plaintiffs were exempt from the MWA because, based on how much ...


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