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Harris v. Reliable Reports Inc.

United States District Court, N.D. Indiana

March 10, 2014

MATTHEW HARRIS, individually and on behalf of all similarly situated individuals, Plaintiff,



Plaintiff Matthew Harris filed a forty-four-page complaint against Defendant Reliable Reports Inc. alleging violations of the Fair Labor Standards Act ("FLSA"), breach of contract, violation of the state wage and hour laws of six states, and claims for unjust enrichment. He seeks certification of the FLSA claims as a collective action and the other claims as a class action. Reliable has moved to dismiss the complaint in its entirety for failure to state a claim under Federal Rule of Procedure 12(b)(6) and to strike the collective and class action allegations (DE 18).

A. Standard for Evaluating a Motion to Dismiss

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim is to test the sufficiency of the pleading, not to decide the merits of the case. See Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). Federal Rule of Civil Procedure Rule 8(a)(2) provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." However, "recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 661, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007))[1]. As the Supreme Court has stated, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. Rather, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). A complaint is facially plausible if a court can reasonably infer from factual content in the pleading that the defendant is liable for the alleged wrongdoing. Id. (citing Twombly, 550 U.S. at 570). To be plausible, a complaint must provide enough facts to raise a reasonable expectation that discovery will reveal evidence supporting the plaintiff's allegations. See Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009). The Seventh Circuit has synthesized the standard into three requirements. See id. "First, a plaintiff must provide notice to defendants of her claims. Second, courts must accept a plaintiff's factual allegations as true, but some factual allegations will be so sketchy or implausible that they fail to provide sufficient notice to defendants of the plaintiff's claim. Third, in considering the plaintiff's factual allegations, courts should not accept as adequate abstract recitations of the elements of a cause of action or conclusory legal statements." Id.

B. Plaintiff's Complaint

In his complaint, Plaintiff Matthew Harris alleges that he worked for defendant Reliable Reports Inc. as a field reporting specialist ("field rep") from March 2011 to April 2013. Reliable operates in twenty-two states, employing field reps to inspect residential and commercial properties. A field rep's job includes logging into Reliable's computer network over the internet from home; downloading the addresses of properties to be inspected; calling to arrange inspection appointments and preparing route maps; loading coordinates into their GPS units, driving to inspection sites, inspecting and photographing properties; responding to calls and text messages from Reliable, insurance agents, and property owners during the lunch break; contending with traffic delays; logging into the computer network at the end of the day to enter hours worked and miles traveled for the day; and completing online inspection reports for each property inspected from home.

Harris claims that Reliable promises new recruits they can expect to earn an hourly wage of at least $13.32, citing Reliable's compensation plan adopted in August 2010, which provides that this is the minimum production level each field rep is expected to attain. New field reps are compensated at $13.32 per hour during their sixteen-week training period. Field reps also receive $13.32 per hour for holiday pay and other paid time off. After completing their training, field reps are paid according to a piece rate system, under which they receive a set fee for each completed inspection that varies according to the type of inspection performed. The piece rate fee is payable when a report of the inspection is completed and passes Reliable's internal quality review verification process.

According to Harris, field reps travel hundreds of miles away from their homes each day. They are not paid for the travel time to their first appointment of the day or from their last appointment of the day unless the travel time is more than two hours, in which case the time exceeding two hours will be counted as hours worked.

Harris claims that field reps must work during their lunch period, driving to appointments, getting gas, and responding to calls and texts. According to Reliable's employee manual, employees may take up to an hour for lunch, but only 20 minutes of the lunch period is counted as hours worked. However, the policy was later changed so that meal breaks would be counted as hours worked only if they did not exceed twenty minutes. Meal breaks exceeding twenty minutes were to be excluded from hours worked. Harris asserts that the United States Department of Labor requires a meal break of no less than thirty uninterrupted minutes.

Harris further claims that the employee manual contains a contractual mileage reimbursement provision promising payment at the rate allowed by the IRS. However, as of August 2010, Reliable instituted a policy of capping the mileage reimbursement at 30% of a field rep's piece rate pay. Because of the cap, Harris received $9, 938.67 for at least 30, 756 miles traveled in 2012. If he had been reimbursed at the IRS rate of $0.555 for all those miles, he would have received $17, 069.58, a 41.7% increase. He maintains that failing to reimburse for all miles traveled has the result of reducing wages to below minimum wage. In addition, field reps must bear the cost of job-related expenses, including a cell phone with data service, a digital camera, internet service, a computer and printer, a GPS unit, business cards, and other supplies, which, by Harris's estimate, amounts to $2, 000 to $3, 000 annually. He contends that these unreimbursed expenses also reduce wages to below minimum wage.

Harris alleges that he consistently worked sixty to sixty-five hours a week, but in 2012 his total earnings were only $21, 334.19, which, he claims, assuming an average work week of 62 hours, yields an hourly rate of $7.53 per hour before expenses. He asserts that he was instructed not to report all his actual hours and miles. He quotes from emails from his supervisors challenging the time he reported, telling him he could not report more than forty hours, and in one case telling him that, since overtime could not be authorized, he would have to do some work on his own time.

In his collective action allegations, Harris states that he is bringing his FLSA claims on behalf of himself and all similarly situated current and former field reps Reliable employed at any time during the last three years. He asserts the described class members are similarly situated because they have worked in the same or similar positions, were subject to the same or similar practices, policies, and compensation plan, and their claims are based on the same factual and legal theories. He describes the issues as: whether field reps' commute time is compensable; whether Reliable's meal break policy is lawful; whether Reliable is complying with the federal minimum wage law; whether Reliable has illegally retaliated against its employees; and whether Reliable's FLSA violations were willful.

The class he seeks to certify pursuant to Rule 23(b)(2)and (b)(3) is all current and former field reps who were employed by Reliable at any time since August 2010. He contends that the factual and legal questions common to the class are: whether Reliable's failure to pay its field reps $13.32 per hour constitutes a breach of contract; whether Reliable breached its contract and duty of good faith and fair dealing with the class by failing to pay field reps for every hour and mile actually worked; whether capping the mileage reimbursement at 30% of each field rep's pay constitutes a breach of contract; whether Reliable's failure to pay mileage at the IRS rate constitutes a breach of contract; and whether Harris and the class members are owed wages under the wage and hour laws of twenty-two states in which Reliable employs field reps.[2]

Count I of Harris's complaint incorporates the 125 previous paragraphs of the complaint and further alleges Reliable failed to pay Harris and the class members for work performed during a continuous workday, failed to pay overtime, required off-the-clock work for which it failed to pay, failed to pay for driving time that was part of the field reps' workday and principal activities, did not give them a full thirty-minute uninterrupted meal break, did not pay for meal breaks where work was performed, failed to keep accurate records, actively prevented field reps from reporting their actual hours worked, deducted amounts from their pay that reduced their hourly rates below the minimum wage, and failed to pay the minimum wage for off-the-clock work in excess of forty hours a week. He further alleges that the FLSA violations were knowing and willful.

Count II alleges that Reliable breached contractual obligations with Harris and the class members to pay them at least $13.32 per hour and ...

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