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Sharkey v. Fortress Systems International, Inc.

United States District Court, W.D. North Carolina, Charlotte Division

August 13, 2019

CATHERINE E. SHARKEY and RON SEAVAN, Plaintiff,
v.
FORTRESS SYSTEMS INTERNATIONAL, INC., d/b/a FORTRESS MOBILE, and ZHONG SU, individually, Defendants.

          ORDER AND NOTICE OF HEARING

          FRANK D. WHITNEY, CHIEF UNITED STATES DISTRICT JUDGE

         THIS MATTER is before the Court on Plaintiffs' Motion for Judicial Settlement Conference filed on May 8, 2019 (Doc. No. 31), Defendants' Motion for Summary Judgment filed on June 7, 2019 (Doc. No. 34), Plaintiffs' Motion for Partial Summary Judgment filed on June 7, 2019 (Doc. No. 36), and Plaintiffs' Motion to Strike and/or Objection (Doc. No. 42) to Defendants evidence submitted in support of Defendants Motion for Summary Judgment filed on June 21, 2019. For the reasons below, Plaintiffs' Motions (Docs. Nos. 31, 36, 42) are DENIED and Defendants' Motion for Summary Judgment (Doc. No. 34) is GRANTED IN PART and DENIED IN PART as set forth herein.

         I. Background

         Plaintiff, Catherine Sharkey, filed its initial Complaint on January 10, 2018 on two counts: (1) Defendants violated the Fair Labor Standards Act (“FLSA”) by failing to pay employment taxes, keep accurate records of all hours worked by employees, and properly calculate and pay overtime to Plaintiff and similarly situated members; (2) Defendants willfully violated N.C. Gen. Stat. §§ 95-25.6 by failing to pay Plaintiffs and similarly situated hourly employees all promised and earned wages and overtime payments on the employees' regular payday for all hours worked. (Doc. No. 1). Plaintiff brought the first cause of action as an “opt-in” collective action under 29 U.S.C. § 216(b). (Doc. No. 1). Plaintiff subsequently filed a Motion to conditionally certify a collective action and facilitate notice under 29 U.S.C. § 216(b) on July 27, 2018. (Doc. No. 17). The Court denied Plaintiff's motion for conditional certification on August 1, 2018. (Doc. No. 20).[1] Plaintiff filed an amended Complaint on March 11, 2019 with Plaintiff, Ron Sevean joining the collective action against Defendants on Counts I and II. (Doc. No. 29 at p. 1). Under the Amended Complaint, Plaintiff Sharkey also alleged: (1) Defendants violated the Equal Pay Act by providing Sharkey with lower pay and compensation than similarly situated male employees on the basis her gender (“Count III”); (2) Defendants violated Title VII of the Civil Rights Act by providing Sharkey with lower pay and compensation than similarly situated male employees based on her gender (“Count IV”); and (3) Defendants' termination of Sharkey was an act of retaliation as defined under Title VII of the Civil Rights Act (“Count V”). Defendants filed a Motion for Summary Judgment on all five Counts. Plaintiffs filed a Motion for Partial Summary Judgment on Counts I and II.

         Defendant Fortress Systems, International, Inc. (“FSI”) is a provider of mobile surveillance and smart fleet management solutions for pupil transit, mass transit, and commercial vehicle fleet and equipment management industries, and is headquartered in Charlotte, North Carolina. (Doc. No. 29 at p. 7). Defendant Zhong “Jack” Su has owned and operated FSI since 1991. (Doc. No. 37 at Ex. A). Plaintiffs, Catherine Sharkey and Ron Sevean worked at FSI and were classified as independent contractors during the relevant time period and both Plaintiffs signed Sales Agent Agreements (“SSAs”) with FSI. (Doc. No. 29 at p. 2); (Doc. No. 34-5 at p.1-3).

         Plaintiff, Catherine Sharkey was contracted to work for FSI in a sales position from April 1, 2017 through October 3, 2017. (Doc. No. 34-5 at p. 2). Under the initial SSA, Plaintiff Sharkey earned a 0.4% commission, a monthly salary of $6, 000 and received a monthly draw[2] of $666.66 per month for the first twelve months. Id. On October 2, 2017, Plaintiff received an email from John Emory, FSI's SVP of Strategic Partnerships and Sharkey's direct supervisor, with a new Compensation Plan to become effective on that date. (Doc. No. 38-2 at p. 56). The new Compensation Plan reduced Plaintiff's Sharkey's base salary from $6, 666 per month to $3, 560 per month and increased her commission from 0.4% to one percent. (Doc. No. 34-5 at Ex. K). Plaintiff Sharkey was initially required to sign and accept the offer or resign by October 3, 2017, at 6 p.m. Id. The deadline to accept was extended to October 4, 2017, at 9 a.m. Id. Plaintiff Sharkey refused the offer and was terminated. (Doc. No. 29 at p. 13).

         Plaintiff, Ronald Sevean, was contracted to work for FSI in a sales position from February 1, 2017 to March 21, 2017. (Doc. No. 34-5 at p. 3). Under the SSA, Plaintiff Sevean was paid two percent commission on total invoice sold, a monthly salary of $6, 933, and a monthly draw of $400 per month for the first twelve months. (Doc. No. 38-2 at p. 63). Plaintiff Sevean was terminated on March 21, 2017, purportedly for poor performance. (Doc. No. 34-1 at p. 121).

         In support of its Motion for Summary Judgment on Counts I and II, Plaintiffs rely on Zhong “Jack” Su's Deposition, documentary evidence produced in Discovery, Catherine Sharkey's Deposition, Ronald Sevean's Deposition, and Defendant's responses to Interrogatories.

         In Su's Deposition, he testifies he did not know the difference between a 1099 and a W-2 prior this lawsuit and he did not consult an attorney as to whether those hired as contractors should have been hired as employees. (Doc. No. 38-1 at p. 20-31). He claims he hired sales agents as independent contractors because that was their preference (Doc. No. 38-1 at p. 41-44). Defendants converted all independent contractors to employees as a result of this lawsuit (Doc. No. 38-1 at p. 97). FSI employed 21 “independent contractors” from 2015 through 2018. (Ex. B at Fortress Document Production - 1). FSI did not pay employment taxes for those hired as independent contractors, (Doc. No. 38-1 at p. 171), and did not pay back wages to any of the converted W-2 employees. (Doc. No. 38-1 at p. 33).

         Su further testifies in his Deposition that he did not keep track of Sales Agent's work hours and continues to not track their hours because they are now salaried employees. (Doc. No. 38-1 at p. 84-85). He claims to not know whether current sales team members work overtime or not, and their payment remains the same regardless of the number of hours worked. (Doc. No. 38-1 at p. 88). In response to Plaintiff Sharkey's request for all documents evidencing the number of hours worked, number of hours present on the job, number of hours required to be present on the job, any adjustments made to hours recorded, compensation paid, overtime paid, commissions paid, or bonuses paid, FSI responded, “[t]he only responsive documents regarding the named Plaintiff would be invoices submitted and emails originated by her and information contained on [FSI's] Zoho system, which will be produced.” (Doc. No. 38-5 at p. 4). Plaintiff Sharkey testified in her Deposition that she worked five to fifteen hours of overtime per week. (Doc. No. 38-3 at p. 9-11). Plaintiff Sevean testified in his Deposition that he typically began work at 8:00 a.m. and was still doing paperwork until 10:00 p.m. (Doc. No. 38-4 at p. 10-11).

         Sharkey's and Sevean's “Sales Agent Agreements” produced in Discovery show FSI hired Sharkey and Sevean as “Sales Agents” and had them sign “Sales Agent Agreements” with nearly identical terms. (Doc. No. 38-2 at 62-75; 272; 331-346). Su claims in his Deposition that he relied on Sophie Oyuang, FSI's CFO, to write the SSAs and he trusted her to get it right even though he knew she did not consult legal counsel when writing them. (Doc. No. 38-1 at p. 98-99). Per the SSAs, “independent contractors” were provided a company credit card to pay for mileage and business expenses, a laptop and an ADSL hardline connection with a wireless router. (Doc. No. 38-2 at p. 64-66). Both SSAs bound Plaintiffs to confidentiality, copyright, non-disclosure, and proprietary information provisions. (Doc. No. 38-2 at p. 66-67). The SSAs also instructed Plaintiffs on policies and procedures for communication and handling of company records and data (Doc. No. 38-2 at p. 69-70). The SSAs listed several activities that Sharkey and Sevean were responsible for, including but not limited to, achieving a sales quota, making daily sales phone calls, sales appointments, attending trade shows and company trainings, and recording sales activities in the company's Zoho CRM. (Doc. No. 38-2 at 61). According to Su's Deposition, Su also set the number of customers sales agents were required to call, required them to log all calls and required them to report to him every day. (Ex. A at 99:17-102:10; 115:15-116:3). The SSA's included a termination clause, which provided that either the sales agent or the company could terminate the agreement with thirty days written notice. (Doc. No. 38-2 at 62).

         Plaintiffs also cite Ron Sevean's Complaint to the New Jersey Department of Labor and Workforce Development (“NJDOL”) following his termination, alleging that FSI failed to pay him his last paycheck and was owed $5, 604.50 in unpaid wages. (Doc. No. 38-2 at 109). NJDOL sent a letter to Defendant Su directly to notify him of the claim. (Doc. No. 38-2 at 109). FSI paid Plaintiff Sevean $5, 629.50 to settle the claim. (Doc. No. 38-2 at p. 116).

         In support of its Motion for Summary Judgment on Counts I through V, Defendants rely on, Catherine Sharkey's Deposition, Ronald Sevean's Deposition, Zhong “Jack” Su's Deposition, Plaintiffs' Responses to Interrogatories, Sophia Oyuang's Declaration and its attached exhibits, and Mark Cotton's Declaration.

         In her Declaration, Sophia Oyuang testifies that FSI hired Plaintiff Sharkey in early 2017 for a newly created position to support the outside sales team by making calls and setting up appointments for Mark Cotton and other outside sales personnel. (Doc. No. 34-5 at p. 1). In her Deposition, Plaintiff Sharkey testifies, “my understanding was that I was to support the sales team in the various activities that the outside salespeople had to do.” (Doc. No. 34-1 at p. 20). Oyuang testifies Plaintiff Sharkey worked from home and was classified as an independent contractor. (Doc. No. 34-5 at p. 1).

         According to Oyuang, Plaintiff Sevean worked for FSI as an outside salesperson from February 1, 2017 to March 21, 2017 and was also classified as an independent contractor. (Doc. No. 34-5 at p. 3). Plaintiff Sevean testifies that his typical day was spent calling as many customers as possible by phone. (Doc. 34-2 at 6). He also went out and visited potential customers, estimating that he spent approximately seventy percent of his time at his home office and thirty percent of his time on the road. Id. at 8-11.

         FSI did not keep track of either Sharkey's or Sevean's hours, nor pay them overtime. (Doc. No. 34-5 at p. 1-3). Oyuang further testifies that FSI contractors were expected to work eight hours per day, and the SSAs stipulated contractors “will occupy a home office on Monday to Friday from approximately 9:00 a.m. to 6:00 p.m.” to allow contractors flexibility to plan their day and leave room for a one-hour lunch break. Id. Furthermore, FSI's published overtime policy prohibits overtime work without preapproval. (Doc. No. 34-5 at Ex. B). FSI also published Paycheck Problem Complaint Procedures that provided reporting instructions to workers who had questions about their paychecks, including questions about overtime. (Doc. No. 34-5 at Ex. I). According to Ouyang's testimony, neither Plaintiff questioned unpaid overtime pursuant to these procedures. (Doc. No. 34-5 at p. 4).

         Oyuang testifies Plaintiff Sharkey and Plaintiff Sevean regularly invoiced FSI for their work and never requested payment in their invoices for overtime work. (Doc. No. 34-5 at p. 3). Included as Exhibits with Oyuang's Declaration are copies of invoices that Plaintiffs submitted to FSI for their work, and none of them make any claim for overtime payment. (Doc. No. 34-5 at Ex. F). Oyuang also testifies that Plaintiffs never otherwise communicated with FSI that they were working overtime or believed that they should be compensated for overtime work. (Doc. No. 34-5 at p. 3). She further states Plaintiffs never made a request for preapproval to work overtime and FSI was not aware that either Plaintiff claimed to have worked any overtime. Id.

         Oyuang testifies Plaintiff Sharkey was not a particularly good performer as she was absent from 20.5 days of the 128 days she was contracted with FSI and attended fourteen customer meetings while at FSI. (Doc. 34-5 at p.2; Ex. E). Furthermore, FSI's call logging systems shows that Plaintiff Sharkey averaged 9.56 phone calls per day and FSI's Zoho CRM system shows that Plaintiff Sharkey averaged 33.16 minutes of calls per working day. (Doc. No. 34-5 at Ex C and Ex. D). Plaintiff Sharkey's minimum call volume under her SSA was twenty calls per day. (Doc. No. 34-5 at p. 2). Mark Cotton also testified Plaintiff Sharkey “was not engaged as a salesperson” and “generated few useful appointments” for him. (Doc. No. 34-5 at p. 2). Furthermore, according to Oyuang, Plaintiff Sharkey only had three years of experience and few industry connections when she came to FSI as compared to Cotton who has over thirty-five years of experience and extensive industry connections that are valuable to FSI. (Doc. No. 34-5 at p. 4).

         In October 2017, FSI restructured the compensation plans for three salespeople, Mr. Lonon, Mr. Meyer and Plaintiff Sharkey, thereby reducing each's monthly salary. (Doc. No. 34-5 at Ex. K). As part of the restructuring, Plaintiff Sharkey's commission was increased from 0.4% to one percent. Id. On October 2, 2017, John Emory sent an email to Plaintiff Sharkey, notifying her of the change in her compensation plan. (Doc. No. 34-1 at Ex. 16). Emory explained in the email the change in Plaintiff Sharkey's compensation plan was due to Plaintiff Sharkey not being able reach assigned sales activity goals and quota. Id. The next day, Plaintiff Sharkey responded to Emory's email requesting clarification on the decision to reduce her salary as she was under the impression that certain data regarding her sales performance was incorrect. Id. Emory responded that day at 4:51 p.m., explaining the offer was not negotiable, that Plaintiff Sharkey must sign and accept the offer or resign by 6 p.m., and failure to do so would result in termination. Id. In response, Plaintiff Sharkey again requested clarification and expressed she felt she was being “singled out, ” referencing Mark Cotton, [3] another salesperson, for purposes of comparison. Id. At 6:29 p.m., Emory replied with a more detailed explanation for the change in compensation and refuted Plaintiff Sharkey was being “singled out” as FSI restructured the compensation plans of others on the sales team on September 25, 2017. (Doc. No. 34-1 at Ex. 16). Emory also stated in this reply, “[w]e require your decision by 9:00am tomorrow, Wednesday October 04, 2017. If no response by 9:00am, your relationship with Fortress Mobile is officially terminated.” Id. Eventually, Plaintiff Sharkey refused to sign the restructured contract and was terminated. (Doc. No. 34-5 at p. 5).

         Following his termination, Plaintiff Sevean filed a complaint with the NJDOL, claiming he was owed additional money because FSI did not provide proper notice of termination of his contract. (Doc. No. 34-5 at Ex. I). In his complaint, Plaintiff Sevean made no claims for overtime payment, ...


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