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Cunningham v. Electronic Data Systems Corp.

March 31, 2010

KELLEY CUNNINGHAM, ET AL., PLAINTIFFS,
v.
ELECTRONIC DATA SYSTEMS CORP., DEFENDANT.



The opinion of the court was delivered by: Richard J. Holwell, District Judge

MEMORANDUM OPINION AND ORDER

This is a purported collective action brought under the Fair Labor Standards Act ("FLSA") to recover unpaid overtime wages. Now before the Court is defendant Electronic Data System's ("EDS") second motion for summary judgment asserting the air carrier exemption to the FLSA's overtime requirements. 29 U.S.C. § 213(b)(3). Because EDS provides services to an air carrier but is not an air carrier itself, the exemption only applies if EDS proves, first, that it performs transportation-related services, and second, that its relevant operations are "controlled by" an air carrier. The Court finds that EDS has not proven the second proposition. Accordingly, the motion for summary judgment is denied.

BACKGROUND

EDS is one of the country's preeminent information technology ("IT") companies. It provides IT services to "government entities and private businesses throughout the world," (Arnold Decl. ¶ 2), and claims to have "founded the information technology outsourcing industry." (Rudich Decl. Ex. D.) It maintains offices in dozens of countries, serves approximately 960 clients, and estimates its own value at more than $20 billion. (Id.) Examples of its work include the provision of server management and technology infrastructure services to Mazda Motor Europe; a $586 million contract to provide information storage services to the British Columbia Ministry of Labor and Citizens' Services; and a $531 million contract to provide varied IT and telecommuncations support to an international television marketing company. (Id.)

This case concerns EDS's relationship with one particular client, American Airlines ("American"). The airline receives IT services from EDS that, according to defendant, "touch upon virtually every area of American's business, including flight planning and operations, pilot communications, in-flight catering, airplane maintenance, flight reservations, human resources, finance, marketing, and a multitude of other functional areas." (Shanks Decl. ¶ 3.) In other words, American outsources IT work to EDS, and that work is important to American's operations. The core IT services that EDS provides American include "midrange hosting (i.e., servers), mainframe hosting, network, applications development and maintenance, helpdesk, and desktop." (Id.)

Aside from core IT services, EDS also provides American with Staff Augmentation ("Staff Aug") services. (Def. 56.1 ¶ 82.) Staff Aug is what it sounds like-a staffing service whereby EDS provides personnel to supplement American's IT workforce. (Cuccarese Decl. ¶ 4.) Individual Staff Aug employees-or "Staff Augs," as the parties refer to them-work from American office space, amongst American employees, and report to American supervisors. (Id. at ¶¶ 4, 7, 14-15) Some Staff Augs are EDS employees, while others are independent contractors whom EDS retains through staffing agencies and places with American. (Id. at ¶ 4.)

Kelley and Tammye Cunningham, plaintiffs in this case, were Staff Augs that EDS retained and placed with American through a staffing agency. (Def. 56.1 ¶ 87; Cuccarese Decl. ¶ 4.) Kelley Cunningham ("Kelley") worked on a project upgrading American's telephone systems from March 2002 through November 2005. (Def. 56.1 ¶ 132-33.) His primary task was to replace Private Branch Exchange ("PBX") boxes- switch stations, basically, for telephone systems-with newer models, and to ensure that the replacement boxes did not cause service interruptions. (Id. at ¶ 133; K. Cunningham Decl. ¶ 2.) Tammye Cunningham ("Tammye") performed audits of American's telephone lines from June 2004 to May 2005. (Def. 56.1 ¶ 149.) This work entailed checking traffic on particular lines, recommending disconnection of lines that received little use, and confirming that American was not being billed for disconnected lines. (T. Cunningham Decl. ¶¶ 9-12.) During their time as Staff Augs, both Cunninghams worked from American office space and were supervised by American managers. (Def. 56.1 ¶¶ 118-19; 125-26.)

A contract called the Information Technology Services Agreement (the "Agreement") governs EDS's relationship with American. (Id. at Ex. 7 ("Agrmnt").) Among other things, the Agreement requires that EDS house certain specified software applications on computers it uses for American-related work, (Id. at¶ 15), and it prohibits EDS from using third-party software or appointing personnel to any of six "key" American-related positions, including Manager of the American account, without American's consent. (Agrmnt. at 2, 15, 26, 35.) A series of subsidiary agreements set performance standards-called "service levels"-that EDS must meet, mainly with regard to the speed and continuity of network services and the efficiency of EDS's response to IT problems. (Def. 56.1 ¶ 62-64.) American has access to EDS records about billing and work performance so that it may track EDS's compliance with the service levels. (Id. at ¶¶ 56-57, 65-67.)

This is EDS's second summary judgment motion invoking the air carrier exemption to the FLSA's overtime requirements. In denying the first motion, the Court found that the evidence EDS had submitted improperly focused upon the relationship between the Cunningham plaintiffs and American, rather than upon the legally germane relationship between American and EDS. Cunningham v. Electronic Data Systems Corp., 579 F. Supp. 2d 538, 541 (S.D.N.Y. 2008) (finding that satisfaction of the air carrier exemption depends on "whether plaintiffs' employer was under the ownership or control of an air carrier and whether the employer provided transportation-related services . . . .") (emphasis in original). The Court invited defendant to submit a renewed motion supported by proper evidence. Id. at 542. On this second motion, EDS includes portions of its contract with American and offers a supplemented series of affidavits. This supplemented record, however, relies heavily on contractual language that is of limited value in understanding the actual nature of the relationship between American and EDS. Defendant's other evidence focuses on American's control of Staff Augs, specifically, and does not provide sufficient information about the overall relationship between the two corporations. As it is defendant's burden to prove that the air carrier exemption applies, the paucity of the record undermines its motion.

LEGAL STANDARD

Summary judgment is proper if the moving party shows that "there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "In deciding whether there is a genuine issue of material fact as to an element essential to a party's case, the court must examine the evidence in the light most favorable to the party opposing the motion, and resolve ambiguities and draw reasonable inferences against the moving party." Abramson v. Pataki, 278 F.3d 93, 101 (2d Cir. 2002) (internal quotation marks omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

DISCUSSION

As the Court explained in its first summary judgment opinion, the FLSA requires employers to pay employees "time-and-a-half"-a rate of one and a half times the employees' regular rate-for all hours worked in excess of forty in a single work week. Cunningham, 579 F. Supp. 2d at 539. This overtime pay requirement, however, does not apply to the workforce of any employer who is an air carrier subject to the Railway Labor Act. 29 U.S.C. § 213(b)(3) (overtime requirements do not apply to "any employee of a carrier by air subject to the provisions of title II of the Railway Labor Act"). Commonly known as the "air carrier exemption," the scope of this FLSA exception is commensurate with the reach of the RLA: if an employer is a "carrier" under the RLA, the FLSA's time-and-a-half rule does not apply to its employees. Thus, whether an employer falls within the air carrier exemption depends primarily on an analysis of the RLA, rather than the FLSA itself. See Verrett v. The SABRE Group, Inc., 70 F. Supp. 2d 1277, 1281 (N.D. Okla. 1999).

The RLA seeks to promote peaceable resolution of labor disputes in the air and rail transportation industries that might otherwise cause severe interruptions to interstate commerce.*fn1 45 U.S.C. § 151a ("The purposes of the chapter are . . . [t]o avoid any interruption to commerce or to the operation of any carrier engaged therein . . . ."); Virginian Ry. Co. v. System Fed'n No. 40, 300 U.S. 515, 553 (1937). To that end, the RLA prescribes an "almost interminable" mediation and negotiation process that labor and management in these industries must exhaust before resorting to self-help. See Detroit and Toledo Store Line R.R. Co. v. United Transp. Union, 396 U.S. 142, 149 (1969). The RLA's goal of minimizing work stoppages that might affect air and rail transportation stands in contrast to the objectives of the nation's other major labor relations statute, the National Labor Relations Act ("NLRA"), which "encourages self-help as a persuasive tactic so long as each party's behavior meets certain norms." See Shaunta M. Knibb, The Jurisdictional Shadowland Between the NLRB and the National Mediation Board, 72 Wash. L. Rev. 241, 246 (1997) (citing 29 U.S.C. § 163 (1996) ("Nothing in this subchapter, except as specifically provided for herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strike . . . .")). The NLRA applies to all private employers except those that are subject to the RLA. 29 U.S.C. § 152(2). The ...


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