United States District Court, S.D. New York
PHILIP VASTO, ZAO YANG, ALEX TORRES, AND XIAOJ ZHENG, individually and on behalf of all others similarly situated, Plaintiffs,
CREDICO (USA) LLC, CROMEX INC., and MEIXI XU, Defendants.
OPINION & ORDER
A. Engelmayer United States District Judge.
Philip Vasto, Zao Yang, Alex Torres, and Xiaoj Zheng bring
this action on behalf of themselves and similarly situated
persons, alleging violations of the Fair Labor Standards Act,
29 U.S.C. § 201, et seq. (“FLSA”),
the New York Labor Law, N.Y. Lab. Law § 650, et
seq. (“NYLL”), the Arizona Wage Act, Ariz.
Rev. Stat. § 23-350, et seq.
(“AWA”), and the Arizona Minimum Wage Act, Ariz.
Rev. Stat. § 23-362, et seq. (2015)
served as field agents securing low-income customers to
acquire wireless telephones pursuant to a federal subsidy
program. They claim primarily that they were misclassified as
independent contractors, as opposed to as employees, and
therefore were denied statutorily required minimum wage and
overtime compensation. They seek to hold three parties liable
for this misclassification: Cromex, Inc.
(“Cromex”), their direct employer, Meixi Xu,
Cromex's owner, and Credico (USA) LLC
(“Credico”), the company that subcontracted with
Cromex to administer the federal subsidy program. Plaintiff
Torres also alleges that he was denied minimum wage and
timely payment of wages as required under Arizona law during
his stint with another Credico subcontractor. Finally,
plaintiffs Vasto and Yang separately allege that they were
terminated in retaliation for complaining about their
classification as independent contractors.
now are the parties' cross-motions for summary judgment.
These motions raise four issues: (1) whether plaintiffs were
employees rather than independent contractors under the FLSA,
NYLL, and AMWA; (2) if so, whether Credico and Xu may (or, in
the case of Xu, must) be considered plaintiffs'
employers; (3) whether, even if plaintiffs are employees,
they are exempt from FLSA and NYLL requirements as outside
salespeople; and (4) whether plaintiffs Vasto and Yang have
adequately supported their retaliation claims so as to
survive summary judgment.
first three legal issues in this case coincide substantially
with those addressed in this Court's recent decision in
Martin v. Sprint United Management Co., No. 15 Civ.
5237 (PAE), 2017 WL 4326109 (S.D.N.Y. Sept. 27, 2017). To the
extent the issues overlap, the facts here compel the same
result. For the reasons that follow, the Court holds that,
even assuming arguendo that plaintiffs were
employees rather than independent contractors, (1) Credico
cannot be held liable as plaintiffs' joint employer, and
(2) the outside sales exemptions to the FLSA and NYLL apply.
Further, assuming arguendo that Xu was
plaintiffs' employer, plaintiffs have failed to
demonstrate a clear assertion of rights under the FLSA so as
to sustain a retaliation claim. These rulings collectively
preclude liability for all defendants on all counts. The
Court therefore grants summary judgment in favor of
defendants and denies plaintiffs' cross-motion for
partial summary judgment.
federal government subsidizes provision of cell phones to
low-income subscribers through a program called Lifeline
Assistance. JSF ¶¶ 96-100. Lifeline participants
receive a free wireless phone and a free preset bundle of
minutes and messages, with the option to purchase additional
minutes and messages above this preset amount. See
Credico 56.1 ¶ 140; First Williams Decl., Ex. 56 at 2.
Sprint, a telecommunications carrier, participates in the
Lifeline Assistance program through what Sprint calls the
Assurance Wireless campaign. JSF ¶ 101. To conduct the
Assurance Wireless campaign (i.e., to promote and market
Lifeline services), Sprint contracts with third-party
Outreach Agencies (“OAs”). Id. ¶
Credico is one of those OAs, tasked with assisting Sprint in
implementing the Assurance Wireless campaign. Id.
¶¶ 113-17. To that end, in September 2013, Sprint
and Credico entered into an Amended and Restated Outreach
Agency Agreement (the “OA Agreement”) effective
September 1, 2013, amending an original agreement dated
September 15, 2012. Id. ¶ 114; First Williams
Decl., Ex. 15 at 511. Attached to the OA Agreement was a copy
of Sprint's Standard Operating Procedures
(“SOPs”). JSF ¶ 106; First Williams Decl.,
Ex. 13. Under the OA Agreement, Credico is authorized to
solicit and collect applications for Sprint's Assurance
Wireless Program within designated areas. JSF ¶¶
113, 117. Instead of collecting applications itself, however,
Credico outsources sales and marketing to subcontractors, to
which it refers as “independent sales offices”
(“ISOs”). Id. ¶¶ 14-15. ISOs,
in turn, recruit and hire individual “agents” who
sell and market products on behalf of Credico's clients.
Id. ¶¶ 19-20.
Cromex is one such ISO, and it is owned by defendant Xu.
Id. ¶¶ 29, 39. Xu oversees Cromex's
day-to-day operations. Id. ¶ 40. Since it began
operating in 2014, Cromex has provided sales and marketing
services for Credico's clients only, and revenues
generated from the Assurance Wireless campaign account for a
“significant portion” of Cromex's income.
Id. ¶¶ 30-31. The subcontractor agreement
between Credico and Cromex extends to Cromex the contractual
obligations that Credico owes to Sprint and sets forth the
territories in which Cromex is authorized to operate.
Id. ¶¶ 50, 54. It requires further that
Cromex (1) comply “with all applicable federal, state,
county, and local laws, ordinances, regulations and
codes”; (2) “comply and have its own employees
comply with the Credico USA Code of Business Ethics and
Conduct, ” as well as “any Credico USA Client
Dress Code, Conduct Policy, and Operational
Requirements”; (3) “[a]dher[e] to any Client
pre-conditions to performing Services, such as drug testing
and background checks with authorized providers and
compliance with Client branding”; (4) “[t]rain
its employees in accordance with Credico USA's Client
requirements which may include, but [are] not limited to,
attending class periodically”; and (5)
“[s]olicit business on behalf of Credico USA Clients
regarding their products or services . . . using the
techniques and information as set out in Credico USA
Clients' Training Guides.” Credico 56.1
were hired by Cromex as field agents to work on the Assurance
Wireless campaign. JSF ¶¶ 10, 139, 193. Vasto
worked for Cromex in New York from approximately March 2015
through May 2015. Id. ¶ 2. Yang did the same
from approximately February 2015 through April 2015, Torres
from approximately January 2015 through mid-March 2015, and
Zheng from approximately February 2015 to August
Id. ¶¶ 4, 7, 11. Field agents like
plaintiffs were referred to as “account
executives” and could later be promoted to
“corporate trainers.” Id. ¶¶
128-29. Plaintiffs Yang, Zheng, and Torres were all promoted
to corporate trainers, and Zheng was subsequently promoted to
senior corporate trainer. Id. ¶¶ 200-01.
Responsibilities of Field Agents
agents on the Assurance Wireless campaign solicited and
collected applications from potentially qualifying Lifeline
Program applicants. Id. ¶¶ 149, 181-84.
Agents worked on only one campaign at a time. First Savytska
Decl., Ex. 1 at 175.
forth in the OA Agreement, field agents were required to
“inform and educate potential [c]ustomers about
Assurance Wireless, seek to determine and advise on an
individual's qualification for the program and engage the
eligible [c]ustomers in the [a]pplication process for
Assurance Wireless.” First Williams Decl., Ex. 15 at
512. Field agents distributed Sprint-provided materials,
visiting “targeted community locations and attending
public or private community events.” Id.
initially addressing potential applicants for phones pursuant
to the Lifeline Program, field agents were required, as set
forth in the SOPs, to begin by “utiliz[ing] an approved
pitch that meets [Assurance Wireless] standards and clearly
indicates only qualified applicants may receive . . .
lifeline service.” Id. at 536. One such pitch,
for example, could be: “Would you like to find out if
you qualify for free lifeline service from Assurance
Wireless?” Id. The SOPs also address the
remainder of the interaction between field agents and
potential applicants. For example, the SOPs state that field
agents “must ask potential applicants if they currently
have a lifeline phone” and “if they have applied
with [Assurance Wireless] or any lifeline carrier
recently.” Id. at 537.
their Credico-provided tablets, field agents uploaded
completed Lifeline Program applications to a third-party
vendor called Solix so that the applications could be either
approved or denied. JSF ¶¶ 153-59. If an applicant
was approved, the enrollee received a free phone, and the
government would pay Sprint, via subsidy, for providing that
service. Id. ¶¶ 96, 100. Agents, for their
part, would receive a commission from Cromex. Id.
¶ 187. If an applicant was determined not to be
qualified, the agent received no pay for that customer.
Id. ¶ 188.
The Schedules of Field Agents
reported to work at Cromex's New York City office.
Credico 56.1 ¶¶ 27, 94. The parties dispute whether
agents were required to come to work every day. Defendants
point to testimony suggesting scheduling flexibility, see
Id. ¶¶ 89, 106, while plaintiffs rely on
Cromex's Account Executive Manual, which provided field
agents with a daily schedule and prohibited unexplained
absences, see Pl. 56.1 ¶¶ 37, 41.
Plaintiffs claim they typically worked between 60 and 70
hours per week. Pl. 56.1 ¶ 71. In any event, it is
undisputed that agents working on the Assurance Wireless
campaign picked up tablets each day from the Cromex office
and participated in morning “atmosphere”
meetings, during which agents received guidance as to how to
solicit Assurance Wireless applications. JSF ¶¶
like plaintiffs spent the majority of their time soliciting
and accepting applications in the field. Id. ¶
181; see also Vasto Decl. ¶¶ 11-12; Torres
Decl. ¶ 8; Zheng Decl. ¶ 4; Yang Decl. ¶ 5.
Plaintiffs were supervised by (and communicated exclusively
with) Cromex personnel, who would assign agents a particular
location (in New York City) in which to begin their day. JSF
¶¶ 148, 202-18; Pl. 56.1 ¶ 51; Credico Counter
56.1 ¶ 51. Upon their return to the Cromex office at the
end of the work day, agents would report their application
numbers and either return their tablets or take them home.
JSF ¶¶ 170-71; Pl. 56.1 ¶ 42; Credico Counter
56.1 ¶ 42. Credico, like Cromex, received agents'
application data. Credico 56.1 ¶ 156.
The Hiring of Field Agents
was directly responsible for its own hiring decisions. JSF
¶ 19. To that end, Cromex conducted its own recruitment
and interviews. Id. ¶ 127. Cromex also made its
own promotion decisions. Id. ¶ 133.
Accordingly, Cromex recruited, interviewed, hired, and
promoted plaintiffs. Id. ¶¶ 192-93, 200.
of their onboarding, Cromex field agents signed
“Independent Sales Representative Agreements.”
Id. ¶ 196. These agreements allowed either
party to terminate the agreement at will. Id. ¶
198. The agreements also permitted plaintiffs to offer their
services to other companies engaged, like Cromex, in direct
sales, provided that this other work did not interfere with
ongoing work performed for Cromex. Id. ¶ 197.
Sprint's SOPs also required that field agents collecting
Lifeline Program applications on the Assurance Wireless
campaign submit to background checks. Id. ¶
The Training of Field Agents
was responsible for training its field agents, including
plaintiffs. Id. ¶¶ 134, 169199. Field
agents also participated in a “Management Training
Program” devised by Credico but implemented through
subcontractors. Pl. 56.1. ¶ 33-34; First Savytska Decl.,
Ex. 1 at 71. Credico also conducted in-person audits of ISOs
to ensure compliance with clients' requirements. JSF
The Classification and Compensation of Field Agents
ISOs like Cromex would decide independently whether to
classify agents as independent contractors or employees.
Credico 56.1 ¶ 166; Pl. Counter 56.1 ¶ 166. In this
case, plaintiffs' Independent Sales Representative
Agreements classified each plaintiff as an independent
contractor, Credico 56.1 ¶ 69, and Cromex paid them as
such, JSF ¶ 145. After this lawsuit was filed, however,
Credico decided that it would no longer contract with ISOs
that classified agents as independent contractors. JSF ¶
Cromex agents, plaintiffs were paid on commission, receiving
$10 per approved Assurance Wireless application. Id.
¶ 139. These payments came from Cromex, id.
¶ 143, but the parties dispute who determined
agents' pay. Defendants contend based on the deposition
testimony of presidents of other ISOs that ISOs independently
determined their agents' pay rates. Credico 56.1 ¶
161-62. Plaintiffs counter that Credico provided ISOs with
commission schedules listing individual agents' pay rates
and mandated that ISOs pay commissions pursuant to the
established rates. Pl. Counter 56.1 ¶ 161-62; First
Savytska Decl., Ex. 37 at 31098.
earned an average of $136 per week during his time at Cromex.
Pl. 56.1 ¶ 84. Zheng earned an average of approximately
$466 per week. First Savytska Decl., Ex. 84. Three of
Yang's pay statements are in the record, showing weekly
earnings of $40, $220, and $590. Pl. 56.1 ¶ 85; Credico
Counter 56.1 ¶ 85. Torres has no pay statements, but
estimates his average weekly pay was approximately $300 per
week. Pl. 56.1 ¶ 86.
The Suspension and Termination of Field Agents
parties dispute the precise contours of Credico's ability
to suspend or terminate field agents. It is undisputed that
Credico had the authority to “deactivate”-i.e.,
remove from the Assurance Wireless campaign-a field agent
suspected of fraud or failure to abide by the SOPs. JSF
¶ 179; Credico 56.1 ¶ 46. Credico in fact exercised
that authority in deactivating Cromex agents. JSF ¶ 180.
But plaintiffs also assert that Credico has
“suspended” agents and “required”
their termination. Pl. 56.1 ¶¶ 137, 139, 144,
146-47; First Savytska Decl., Ex. 62 (Credico email
instructing offices to “eliminate 20% of their lowest
performers”); First Savytska Decl., Ex. 67 (Credico
“Compliance Improvement Plan” describing agent
misconduct that could trigger mandatory probation or
termination); First Savytska Decl., Ex. 64 (Credico email
indicating an agent would be suspended). Credico responds
that it had no authority to terminate agents; rather,
“deactivated” agents were merely removed from the
Assurance Wireless campaign and not necessarily terminated.
Credico Counter 56.1 ¶¶ 137, 144, 147; First
Williams Decl., Ex. 4 at 131-32 (Credico president Jesse
Young testifying ISOs owners could remove somebody from the
Assurance Wireless campaign without Credico's approval).
Credico suggests further that it deactivated agents only to
prevent fraud and noncompliance with client requirements.
Credico 56.1 ¶ 46.
The Terminations of Vasto and Yang
Vasto and Yang repeatedly complained about their treatment as
independent contractors. Pl. 56.1 ¶¶ 89-90. Rather
than seek reclassification as employees, however, each sought
greater professional latitude in their positions, consistent
with their expectations regarding independent contracting
work. Vasto, for example, “complained that [he] had the
right as an independent contractor to conduct business on the
terms of an independent contractor, i.e., to have more
freedom.” First Williams Decl., Ex. 28 at 198. Vasto
objected specifically that he could not “choose [his]
days, ” “could not chose the time [he] worked,
” “could not choose [his] break period, ”
and “could not control anything.” Id.
Yang, for his part, “constantly present[ed] proposals
to be an independent contractor” so that he could
pursue his own ideas for event marketing. First Savytska
Decl., Ex. 41 at 241-42.
and Yang claim that they were terminated as a result of these
complaints. See Pl. 56.1 ¶ 91. They cite two
sources for this conclusion: (1) statements of supervisors
that Yang was a “troublemaker” and “not
trying to follow the system, ” First Savytska Decl.,
Ex. 41 at 239, and (2) an audio recording of a Credico
consultant informing Vasto that he was terminated because he
failed to sign up enough customers and his co-workers found
him “difficult to work with, ” First Savytska
Decl., Ex. 19.
27, 2015, plaintiffs filed the initial complaint in this
action, bringing claims against Credico, Cromex, Xu, and
Jesse Young in the Northern District of Illinois. Dkt. 1.
Plaintiffs amended three days later, Dkt. 6, and, in October
of that year, moved for conditional certification of a
collective under the FLSA, Dkt. 38. Judge Shadur of the
Northern District of Illinois denied the motion. Dkt. 41.
Plaintiffs thereafter moved to transfer the case to this
District, Dkt. 42, and Judge Shadur granted the motion, Dkt.
46. Plaintiffs again moved for conditional certification,
Dkt. 62, and this Court granted the motion as to all persons
who conducted face-to-face marketing work for Credico and its
subcontractor ISOs in the United States, while classified as
independent contractors, at any point during the three years
preceding the issuance of court-approved notice, Dkt.
Meanwhile, defendant Young moved to dismiss plaintiffs'
claims against him, Dkt. 106, and the Court granted the
motion, Dkt. 161.
discovery, Credico, Dkt. 211, and Cromex and Xu, Dkt. 218,
moved for summary judgment. Plaintiffs opposed and
cross-moved for partial summary judgment. Dkt. 225. At the
time it resolved the summary judgment motions in the
companion case of Martin v. Sprint/United Management
Co., No. 15 Civ. 5237 (PAE), the Court issued an order
stating that the decision on the motions here would issue in
October. See Dkt. 246.
Applicable Legal Standards for a Motion for Summary
prevail on a motion for summary judgment, the movant must
“show 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). The movant bears
the burden of demonstrating the absence of a question of
material fact. In making this determination, the Court must
view all facts “in the light most favorable” to
the non-moving party. Holcomb v. Iona Coll., 521
F.3d 130, 132 (2d Cir. 2008); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
movant meets its burden, “the nonmoving party must come
forward with admissible evidence sufficient to raise a
genuine issue of fact for trial in order to avoid summary
judgment.” Jaramillo v. Weyerhaeuser Co., 536
F.3d 140, 145 (2d Cir. 2008). “[A] party may not rely
on mere speculation or conjecture as to the true nature of
the facts to overcome a motion for summary judgment.”
Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010)
(internal quotation marks and citation omitted). Rather, the
opposing party must establish a genuine issue of fact by
“citing to particular parts of materials in the
record.” Fed.R.Civ.P. 56(c)(1)(A); see also Wright
v. Goord, 554 F.3d 255, 266 (2d Cir. 2009).
disputes over facts that might affect the outcome of the suit
under the governing law” will preclude a grant of
summary judgment. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). In determining whether there are
genuine issues of material fact, the Court is “required
to resolve all ambiguities and draw all permissible factual
inferences in favor of the party against whom summary
judgment is sought.” Johnson v. Killian, 680
F.3d 234, 236 (2d Cir. 2012) (quoting Terry v.
Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)) (internal
quotation marks omitted).
parties' cross-motions for summary judgment raise four
issues: (1) whether plaintiffs were employees rather than
independent contractors under the FLSA, NYLL, and AMWA; (2)
if so, whether Credico and Xu may (or, in the case of Xu,
must) be considered plaintiffs' employers; (3)
whether, even if plaintiffs are employees, they are exempt
from FLSA and NYLL requirements as outside salespeople; and
(4) whether plaintiffs Vasto and Yang have adequately
supported their retaliation claims so as to survive summary
Martin, this Court holds that, even assuming
arguendo that plaintiffs were employees rather than
independent contractors, (1) Credico cannot be held liable as
plaintiffs' joint employer, and (2) the outside sales
exemptions to the FLSA and NYLL apply. These rulings preclude
liability altogether for Credico and compel dismissal of
Torres's claims under Arizona law. They also compel
dismissal of plaintiffs' minimum wage and overtime claims
against Cromex and Xu. The Court then turns to
plaintiffs' claims of retaliation and holds that, even
assuming arguendo that Xu was plaintiffs'
employer, Vasto and Yang cannot sustain a claim for
retaliation under the FLSA. Accordingly, defendants'
motions must be granted and plaintiff's motion dismissed.
Credico as Joint Employer
seeks summary judgment on the ground that the evidence would
not permit a finding that it was a “joint
employer” of plaintiffs. In other words, it argues,
even assuming plaintiffs were employees, they were employees
only of Cromex, and therefore only Cromex can be held liable
for any FLSA and NYLL violations. For the reasons that
follow, the Court agrees.
Applicable Legal Standards
FLSA defines “employer” as “any person
acting directly or indirectly in the interest of an employer
in relation to an employee.” 29 U.S.C. § 203(d).
The Supreme Court has emphasized that this is an expansive
definition with “striking breadth.”
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318,
326 (1992). An individual may simultaneously have multiple
“employers” for the purposes of the FLSA, in
which event, “all joint employers are responsible, both
individually and jointly, for compliance with all of the
applicable provisions of the [FLSA].” 29 C.F.R. §
an employer-employee relationship exists for purposes of the
FLSA should be grounded in ‘economic reality rather
than technical concepts.'” Barfield v. N.Y.C.
Health & Hosps. Corp., 537 F.3d 132, 141 (2d Cir.
2008) (quoting Goldberg v. Whitaker House Coop.,
Inc., 366 U.S. 28, 33 (1961)). Courts determine
whether defendants are plaintiffs' joint employers based
on “the circumstances of the whole activity, ”
Rutherford Food Corp. v. McComb, 331 U.S. 722, 730
(1947), viewed in light of “economic reality, ”
Goldberg, 366 U.S. at 33; see also
Barfield, 537 F.3d at 141-42 (employment is “to be
determined on a case-by-case basis by review of the totality
of the circumstances”). “Above and beyond the
plain language, moreover, the remedial nature of the statute
further warrants an expansive interpretation of its
provisions so that they will have ‘the widest possible
impact in the national economy.'” Herman v. RSR
Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999)
(quoting Carter v. Dutchess Cmty. Coll., 735 F.2d 8,
12 (2d Cir. 1984)).
it comes to ‘employer' status under the FLSA,
control is key.” Lopez v. Acme Am. Envtl. Co.,
Inc., No. 12 Civ. 511 (WHP), 2012 WL 6062501, at *3
(S.D.N.Y. Dec. 6, 2012); see also Herman, 172 F.3d
at 135 (“[C]ontrol of employees is central to deciding
whether appellant should be deemed an employer.”). In
assessing economic reality, the Second Circuit has
articulated two tests for evaluating whether an employment
relationship existed for the purposes of the FLSA: one
relating to formal control and the other to functional
formal control test inquires “whether the alleged
employer (1) had the power to hire and fire the employees,
(2) supervised and controlled employee work schedules or
conditions of employment, (3) determined the rate and method
of payment, and (4) maintained employment records.”
Carter, 735 F.2d at 12 (quoting Bonnette v. Cal.
Health & Welfare Agency, 704 F.2d 1465, 1470 (9th
Formal control does not require continuous monitoring of
employees, looking over their shoulders at all times, or any
sort of absolute control of one's employees. Control may
be restricted, or exercised only occasionally, without
removing the employment relationship from the protections of
the FLSA, since such limitations on control do not diminish
the significance of its existence.
Hart v. Rick's Cabaret Int'l, Inc., 967
F.Supp.2d 901, 939 (S.D.N.Y. 2013) (citing Herman,
172 F.3d at 139) (internal ...