Smart v. US LBM, LLC

Background

Shay Smart sued US LBM, LLC and Pilot IT, LLC. Pilot is described as a staffing company that provided independent contractors to US LBM. Smart alleged that Pilot recruited him for a Senior IT Project Manager position at US LBM and represented that the position would last at least a year. He was classified as an independent contractor and paid by Pilot based on timesheets.

Smart alleged that, in practice, US LBM set his schedule, supplied a computer and work materials, gave him a company email address, required internal training and numerous daily meetings, assigned him work performed by regular employees, and required him to work more than 40 hours per week. He also alleged that he used his home phone, internet, and energy for work. Smart complained to people associated with both defendants that he believed he had been misclassified. US LBM then ended his contract, according to the allegations, and Pilot later paid his final paycheck.

Smart’s amended complaint asserted nine claims: willful misclassification; whistleblower retaliation; wrongful termination in violation of public policy; failure to permit inspection of employee records; failure to provide accurate and itemized wage statements; waiting-time penalties; violation of California’s Unfair Competition Law; failure to pay overtime; and failure to reimburse required business expenses.

Legal standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court generally accepts the complaint’s factual allegations as true and asks whether they support a plausible claim for relief. The court also explained that leave to amend generally should be allowed unless the pleading could not be cured by alleging additional facts.

Rulings on the claims

First claim—willful misclassification. Smart relied on California Labor Code sections 226.8 and 2775. The defendants argued that section 226.8 does not give an individual a private right to sue. The court agreed and dismissed the first claim with prejudice. It reasoned that section 226.8 provides for civil penalties and does not require payment of wages, while sections 2775 and 2778 establish standards for deciding whether someone is an employee or independent contractor but do not themselves require payment of wages.

Second and third claims—retaliation and wrongful termination. Pilot argued that Smart had not alleged enough facts connecting Pilot to his termination. The court agreed. Smart alleged that he complained to Pilot’s managing director, but he did not allege that the managing director told US LBM about the complaint or that Pilot otherwise participated in the termination. The court dismissed the second and third claims against Pilot without prejudice.

Fourth claim—employee-record inspection. Smart alleged that he requested his personnel file, that US LBM said it had no records, and that Pilot did not respond. The defendants disputed whether Smart was their employee, each asserting that the other company employed him. The court held that Smart sufficiently alleged at the pleading stage that both defendants could be joint employers. It denied the defendants’ motions to dismiss the fourth claim. The court also declined to resolve US LBM’s assertion that it maintained no personnel file because that presented a factual dispute not appropriate for resolution on a motion to dismiss.

Fifth claim—wage statements. The court rejected Pilot’s argument that it could not be liable because there was no joint-employer relationship. It also rejected US LBM’s argument that Pilot’s payment of Smart meant US LBM had no obligation to provide wage statements. The court denied the motion to dismiss this claim, except that Smart could not seek penalties based on wage statements issued before July 22, 2023. The court stated that this limitation did not prevent Smart from seeking actual damages subject to the longer limitations period described in the opinion. In the conclusion, the court dismissed this claim with prejudice to the extent it sought penalties for statements issued before July 22, 2023.

Sixth claim—waiting-time penalties. US LBM argued that this claim depended only on the dismissed misclassification claim. Smart clarified at the hearing that he also based the claim on alleged unpaid overtime. The court held that the claim could proceed on that basis and denied the defendants’ motions to dismiss it.

Seventh claim—Unfair Competition Law. Smart based this claim on alleged willful misclassification and failure to provide timely and accurate wage statements. The court denied the motion to dismiss. It explained that a private plaintiff may bring an Unfair Competition Law claim even when the underlying statute does not provide a direct private right of action, and noted that the claim also rested on the wage-statement allegations.

Eighth claim—overtime. The court rejected the defendants’ arguments concerning joint employment and the sufficiency of Smart’s allegations. Smart alleged that his work exceeded 40 hours every week he worked and that he was not paid overtime. The court found those allegations sufficient at the pleading stage. It also found sufficient allegations that Pilot knew or should have known about the overtime because Pilot required Smart to record only 40 hours per week on its timesheets. The court denied the motion to dismiss this claim.

Ninth claim—business expenses. Smart alleged that he worked remotely and incurred costs for his home phone, internet, and energy while performing work. The court found these allegations sufficient at the pleading stage to support a claim under California Labor Code section 2802, which requires reimbursement of reasonable and necessary work expenses when the employer knew or had reason to know of them. The court denied the motion to dismiss this claim.

Disposition

The court granted in part and denied in part the defendants’ motions to dismiss. It dismissed Smart’s first claim with prejudice; dismissed his second and third claims against Pilot without prejudice; dismissed the fifth claim with prejudice to the extent it sought penalties for wage statements issued before July 22, 2023; and denied the remainder of the motions. Smart was permitted to file an amended complaint within 30 days of the order.

Judge-name note

The supplied case metadata identifies Kandis Westmore as the judge, while the opinion text’s signature identifies Trac Koide as United States Magistrate Judge. This summary uses the name appearing in the signature.