Russo v. Federal Medical Services, Inc.

Background

Alexander Russo and Eric Reddick sued Federal Medical Services, Inc.; Ben Fitzgerald Real Estate Services, LLC; and Jim Slattery, Abigail Woulfe, and Jerry Tate. They alleged violations of California wage-and-hour laws, the federal Fair Labor Standards Act (FLSA), the California Unfair Competition Law, and California’s Private Attorneys General Act (PAGA). Their claims involved minimum wages, overtime, meal and rest breaks, and itemized wage statements.

Federal Medical and Ben Fitzgerald worked together on janitorial contracts for Department of Veterans Affairs facilities in California. Federal Medical became the prime contractor in 2019, while Ben Fitzgerald continued to oversee on-site management. The opinion describes overlapping responsibilities involving Slattery, Tate, Woulfe, and the two companies. Russo and Reddick generally worked night shifts. Reddick’s employment ended in 2023, although the parties gave conflicting accounts of the exact date and whether he resigned or was terminated. Russo was still employed when he filed the lawsuit.

Summary-judgment standard

The court applied Federal Rule of Civil Procedure 56. Summary judgment is appropriate when no genuine dispute about an important fact exists and the moving party is entitled to judgment under the law. If disputed evidence could allow a reasonable jury to decide for either side, the issue must proceed to trial.

Employer status under California law

The court denied both plaintiffs’ and Ben Fitzgerald’s motions concerning whether Ben Fitzgerald was plaintiffs’ employer. Although Federal Medical formally became the prime contractor and the teaming agreement said that one company’s employees would not be considered the other company’s employees, evidence showed that Ben Fitzgerald continued to participate substantially in day-to-day management. A jury could therefore find that Ben Fitzgerald and Federal Medical were joint employers.

The court also denied Ben Fitzgerald’s statute-of-limitations argument. If a jury finds that Ben Fitzgerald jointly employed the plaintiffs, it could find that Ben Fitzgerald remained an employer during the relevant period.

The court denied Slattery’s motion concerning his direct liability under California wage-and-hour laws. It also denied plaintiffs’ and Tate’s motions on Tate’s status as an employer. The court held that the California corporate-agent rule does not automatically protect Slattery or Tate because they were owners or controlling shareholders rather than merely corporate agents acting within the scope of their agency. They may be liable as employers if plaintiffs prove that they meet the applicable Industrial Welfare Commission definition of employer.

FLSA liability

The court denied all motions concerning individual liability under the FLSA. The FLSA uses an economic-reality test that considers the power to hire and fire, control over schedules or working conditions, control over pay, and maintenance of employment records.

Evidence concerning Slattery created a triable factual issue because he owned and led Federal Medical, signed subcontracting agreements, had final authority over hiring and firing, participated in discipline, and stated that he maintained timecard and paycheck records. Evidence concerning Woulfe also created factual disputes about whether she controlled the economic reality of plaintiffs’ employment or merely carried out Slattery’s decisions. Russo did not establish as a matter of law that Tate or Ben Fitzgerald had sufficient economic control to impose FLSA liability, but the court denied summary judgment on their behalf because a jury could interpret the evidence in different ways.

California Labor Code section 558.1(a)

Section 558.1(a) can impose direct liability on an employer or another person acting for an employer for specified wage-and-hour violations. The court granted plaintiffs’ motion to determine that Slattery and Tate were persons acting on behalf of an employer. Slattery was an officer and controlling shareholder of Federal Medical, and Tate was president of Rosemark and Ben Fitzgerald’s largest shareholder.

The court denied plaintiffs’ motion concerning whether Woulfe was a managing agent. The evidence could support either a finding that she exercised substantial discretion affecting company policy or that she merely followed her superiors’ instructions.

The court denied the remaining motions under section 558.1(a). Plaintiffs did not provide a sufficient evidentiary basis to establish minimum-wage or overtime violations as a matter of law, and their meal-and-rest-break claims presented factual disputes. Plaintiffs’ pay records were submitted without declarations or affidavits authenticating them, so the court could not consider those records for summary judgment. The court also found factual disputes about each individual defendant’s personal involvement in the alleged violations.

Willfulness

The court denied plaintiffs’ motion seeking a ruling that the alleged violations were willful. Willfulness requires proof that an employer knew its conduct was prohibited or acted with reckless disregard of that question. Conflicting testimony about the defendants’ roles in payroll, pay policies, and responding to reported underpayments prevented such a ruling before trial.

PAGA claims

The court granted defendants’ motion concerning Reddick’s PAGA claims and dismissed those claims with prejudice. The court found that Reddick’s claim accrued when his employment ended on April 30, 2023, and that he needed to file the required notice with the Labor and Workforce Development Agency by April 30, 2024. Plaintiffs provided no evidence that he filed that notice.

The court ruled that Russo was an “aggrieved employee” with standing to pursue representative PAGA claims. The court found that he was employed by Federal Medical and alleged that it personally violated wage laws against him. The court denied defendants’ request to dismiss Russo’s representative claims for lack of evidence involving other employees, without prejudice to a possible pretrial motion in limine.

The court also denied Ben Fitzgerald’s motion concerning Russo’s PAGA notice. Although Russo’s notices did not use the exact legal name “Ben Fitzgerald Real Estate Services, LLC,” they identified Rosemark-related names and were sent to Ben Fitzgerald’s registered address. The evidence indicated that Ben Fitzgerald did business as Rosemark, and the court found that the notice gave Ben Fitzgerald clear information about the claims. The court therefore concluded that the technical naming issue did not defeat Russo’s PAGA claim.

Disposition

The court denied the motions concerning Ben Fitzgerald’s employer status and the related statute-of-limitations issue. It denied the motions concerning Slattery and Tate’s employer status for direct liability, denied all motions concerning FLSA liability, granted plaintiffs’ motion identifying Slattery and Tate as persons acting on behalf of an employer under section 558.1(a), and denied the other section 558.1(a) motions. It denied plaintiffs’ willfulness motions, dismissed Reddick’s PAGA claims with prejudice, held that Russo had standing to pursue representative PAGA claims, and denied Ben Fitzgerald’s motion to dismiss Russo’s PAGA claim.