Scalia v. CE Security LLC et al

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
ANN M. DONNELLY, United States District Judge:
On January 5, 2021, the Secretary of the United States Department of Labor1 brought this
action against Alexander Gavrilov and his two companies, CE Security LLC (“CES”) and
Concord Limousine 1, LLC, alleging that they did not pay “spotholders” overtime or maintain
adequate and accurate records, in violation of Sections 207(a), 211(c), 215(a)(2), and 215(a)(5)
of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. (ECF No. 1 at 1, 12–13.)
The defendants assigned the spotholders to various Con Edison worksites; the spotholders drove
to the sites, placed traffic cones in parking spots to prevent other drivers from taking the spots,
stayed until Con Edison finished the job or released them, and then removed the traffic cones.
The Secretary seeks to recover back wages and liquidated damages for the spotholders and to
enjoin the defendants from future violations of the FLSA. (Id. at 1.) After carefully considering
1 Under Federal Rule of Civil Procedure 25(d), the successor of a party who is a public official is
automatically substituted as the party to the suit.
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LORI CHAVEZ-DEREMER, Secretary of Labor,
United States Department of Labor,
Plaintiff,
– against –
CE SECURITY LLC, CONCORD LIMOUSINE
1 LLC, and ALEXANDER GAVRILOV, as an
individual,
Defendants.
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MEMORANDUM DECISION AND
ORDER
21-CV-57 (AMD) (RML)
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the trial evidence, the arguments of counsel, and the controlling law, the Court finds that the
spotholders are employees under the FLSA, awards back wages and liquidated damages in the
amounts described in Section VI of this opinion, and grants injunctive relief as described in
Section VII of this opinion.
PROCEDURAL HISTORY
The Secretary brought this action on January 5, 2021. (ECF No. 1.) The Court denied
the Secretary’s motion for summary judgment on March 27, 2024 (ECF No. 41), because there
were genuine disputes of material facts about whether the spotholders should be classified as the
defendants’ employees under the FLSA, or as independent contractors. (ECF No. 51 at 18.) The
Court found that some factors, including the spotholders’ lack of opportunity for profit or loss,
lack of specialized skills, and the importance of the spotholding work to the defendants’
business, favored finding that the spotholders were employees, but there were factual disputes
about the degree of control the defendants exerted over the spotholders, whether and how the
defendants enforced rules and determined disciplinary measures for violating the rules, and
whether the spotholders worked regular shifts or had other jobs. (Id. at 13–18.)
LEGAL STANDARD
“In an action tried on the facts without a jury . . . , the court must find the facts specially
and state its conclusions of law separately.” Fed. R. Civ. P. 52(a)(1). “The findings and
conclusions . . . may appear in an opinion or a memorandum of decision filed by the court.” Id.
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FINDINGS OF FACT2, 3
The Court held a four-day bench trial, beginning on June 17, 2025, at which fifteen
witnesses testified. (ECF Minute Entries dated June 17–18, 20, 23, 2025.)
The Defendants’ Spotholding Business
a. The Defendants
From January 5, 2018 through March 1, 2023, the defendants CES and Concord engaged
in the business of providing spotholding services to a single client, Con Edison. (ECF No. 64,
Joint Stipulations (“Joint Stips.”) ¶¶ 26, 66.)4 Spotholders, as explained in more detail below,
secure parking spaces for Con Edison in New York City, so that Con Edison can do its work.
The defendants shared interrelated operations, centralized control of labor relations, common
management, common owners, and financial control, and operated as a single, integrated
enterprise. (Id., Joint Stips. ¶¶ 1–5.) Alexander Gavrilov is the sole owner and President of CES
and the sole member and owner of Concord. (Id., Joint Stips. ¶¶ 10–25, 36.) Atif Waheed is the
Vice President and general manager of Concord, and Eric Kaviar is Vice President and legal
2 After the parties submitted initial post-trial briefing, the Secretary moved to strike two portions of the
defendants’ post-trial brief (ECF No. 82): (1) a visual aid illustrating certain of the spotholders’ hours at
issue in this case, attached as Exhibit A (ECF No. 82-1), and (2) the citations to Rule 56.1 statements
and underlying deposition transcripts. (ECF No. 83.) The defendants opposed. (ECF No. 84.) The
Court denies the motion and admits the evidence into the trial record. The Court addresses the
defendants’ evidence in the Findings of Fact.
3 The findings of fact are based on the trial testimony, exhibits, deposition transcripts, and the Court’s
evaluation of the witnesses’ credibility. Citations to “Tr.” are to the trial transcript, citations to “Sec.
Ex.” are to the Secretary’s exhibits, and citations to “[Name] Dep.” are to the deposition transcripts.
The Court incorporates into the trial record the designated portions of the depositions to which the
defendants did not object. (See ECF No. 64 at 23–27.) See also Fed. R. Civ. P. 32(a). The Court has
also considered the parties’ proposed findings of fact, and the facts to which the parties stipulated in the
joint pretrial order. (ECF No. 64 at 4–14; ECF Nos. 81, 82.) As explained in n.2 above, the Court
considers the exhibits and deposition testimony that the defendants cite, even if that evidence was not
designated in the joint pretrial order.
4 In their Joint Pretrial Order, the parties stipulated to certain facts. (See ECF No. 64 at 4–14.) The joint
stipulations were in evidence and binding on the parties. (Tr. 5:2-8.)
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counsel of Concord. (Id., Joint Stips. ¶ 36.) Concord began providing spotholding work for Con
Edison in 2013 or 2014. (Id., Joint Stips. ¶¶ 53–54.) Gavrilov formed CES as a subsidiary of
Concord in 2016 to handle accounting and payroll for the spotholders. (Id., Joint Stips. ¶¶ 30–
32; Sec. Ex. 19.) The defendants are organized under New York law and have their principal
offices at the same building in Brooklyn. (ECF No. 64, Joint Stips. ¶ 9.)
b. The 2016 Con Edison Contract and Expansion of Spotholding Business
When Concord started in the spotholding business, drivers from its limousine business
did the spotholding work. (ECF No. 64, Joint Stips. ¶¶ 50–51, 54.) In 2016, the defendants
entered into a larger, $13 million contract with Con Edison, and agreed to provide spotholding
services from May 20, 2016 through June 30, 2018. (ECF No. 64, Joint Stips. ¶ 55; Sec. Ex. 10.)
Concord expanded its arrangement with Con Edison again, entering into a $67.64 million
contract for July 1, 2018 through December 15, 2021. (ECF No. 64, Joint Stips. ¶ 65; Sec. Ex.
11 at 1.) These contracts required Concord to comply with the Fair Labor Standards Act. (ECF
No. 64, Joint Stips. ¶ 67; Sec. Ex. 10 at 20; Sec. Ex. 11 at 21.) From 2018 onward, about 60 to
80% of Concord’s annual income came from the spotholding business, and CES derived all of its
revenue from spotholding. (Tr. 168:19–169:20; Gavrilov Dep. 47:9-11.) Without the
spotholders, CES and Concord could not have fulfilled their contractual obligations to Con
Edison. (ECF No. 64, Joint Stips. ¶¶ 103–04.)
c. The Defendants’ Classification of Spotholders as Contractors
In 2016, shortly after Con Edison offered Concord the $13 million contract, Gavrilov met
with Waheed and in-house counsel Eric Kaviar to discuss the contract; Oleg Gorshkov, the
defendants’ outside accountant, joined the meeting later. (ECF No. 64, Joint Stips. ¶¶ 55–56;
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Tr. 170:7-22.) The meeting was “very short.” (Tr. 173:6-13; Gavrilov Dep. 145:1-9.)5 Kaviar
recommended, without any explanation or legal analysis, that the defendants classify the
spotholders as independent contractors. (ECF No. 64, Joint Stips. ¶¶ 59–60; Tr. 172:2-4, 195:6-
10, 348:8-10, 348:19–349:4, 395:9-15, 398:22-25; Kaviar Dep. 110:9-17.) In making his
decision, Kaviar reviewed only the Con Edison contract, which required Concord to comply with
the FLSA. (ECF No. 64, Joint Stips. ¶ 58; Tr. 194:19–195:10, 347:25–348:7, 396:10–398:25.)
Nevertheless, despite the contract language, nobody asked Kaviar any follow-up questions, nor
did they discuss the FLSA or whether the spotholders were properly classified as independent
contractors under the FLSA. (Tr. 173:21–174:2, 348:14-18, 395:20–396:9; Gavrilov Dep.
139:16-23, 141:6-19; Waheed Dep. 80:13-15, 98:12-14.)6
At Kaviar’s suggestion, Gorshkov also joined the meeting to discuss the contract. (Tr.
170:13-22, 174:3-5, 196:6-14.) Gorshkov agreed that the spotholders should be classified as
independent contractors, a conclusion based on his accounting expertise and knowledge of the
IRS code. (Tr. 174:6-9, 196:6-18, 376:12–377:12, 379:11-13.) Gorshkov had no experience
with the FLSA, and no one at the meeting asked him to analyze the issue under the FLSA. (Tr.
376:25–377:12.) Based on this meeting, the defendants classified the spotholders as independent
5 Gavrilov testified on direct examination that the meeting lasted “at least two hours.” (Tr. 172:14-18.)
At his deposition, however, he estimated that the meeting was “about forty five minutes,” and that
Gorshkov was there for fifteen to twenty minutes, which is consistent with Gorshkov’s testimony.
(Gavrilov Dep. 145:1-9; Tr. 375:17-25.) None of the participants in the meeting disputed the substance
of the discussion.
6 In their post-trial brief, the defendants cite the parties’ Rule 56.1 statements, which describe, among
other things, that “Gavrilov asked whether further research or legal analysis was necessary, and Kaviar
responded that he was confident in his conclusion but would ‘work on it a little bit deeper.’” (ECF No.
82 at 30 (citing ECF Nos. 35-1 ¶ 77, 35-2 ¶ 64).) But this is irrelevant, because the defendants concede
that they never discussed the FLSA.
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contractors and did not pay them overtime premium from 2016 through at least early 2021.
(ECF No. 64, Joint Stips. ¶¶ 63, 117–18.)
This was the only discussion the defendants had about the proper classification of
spotholders, until the Department of Labor commenced the FLSA investigation that later gave
rise to this litigation. (Id., Joint Stips. ¶ 63.)
The Spotholders
Nine spotholders testified about their experiences working for the defendants: Dennis
Danville, Catrice Brown, Gerald Celestine, Kamal Olalekan, Folusho Babatunde, Ansel
Campbell, Christopher Guevara, Anthony Smith, and Olubukola Ogunsemowo.7 The Court
credits their testimony, which was consistent, credible, and supported by the documentary
evidence, in its entirety. In broad terms, their testimony established the following:
• Most of the spotholders got their positions by answering the defendants’
advertisements. The job required no experience or special qualifications, and
once they took the job there was little training. Before they started, the
spotholders had to sign a form contract — which the defendants prepared — for
an indefinite duration. The contract set forth the terms of the relationship between
the defendants and spotholders, the rules the spotholders had to follow, and the
consequences violating them (see Section II.b–c);
• The defendants paid the spotholders hourly wages, which the defendants set and
changed unilaterally (see Section II.d);
7 329 spotholders are the subjects of this action. (ECF No. 64 at 3–4, 33–43.) The parties stipulated that
the “[d]efendants agree not to argue that this number of spotholders is insufficient to establish the
representativeness of the spotholders on whose behalf the Secretary seeks back wages and liquidated
damages, and further agree that additional spotholder testimony would be cumulative.” (ECF No. 77 at
1.) Accordingly, the Court treats the nine spotholders’ testimony as representative of the spotholders
who worked overtime hours for the relevant time period of January 5, 2018 through March 28, 2020.
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• The defendants’ dispatch office contacted spotholders, often on short notice, with
the start date, time, and location of a particular job (see Section II.e.i);
• The standard shift length for most of the relevant time period was twelve hours,
although it could be shorter under some circumstances. A shift could also be
longer by hours or even days (see Section II.f);
• The defendants required the spotholders to contact the dispatch office when they
arrived at a jobsite, when they set up their cones, and before leaving a jobsite, and
both the dispatch office and supervisors in the field, or “spot checkers,” regularly
checked on them during shifts (see Section II.e.ii);
• The defendants, through the dispatch office and spot checkers, regularly
disciplined spotholders for violating the rules. Discipline included withholding
job assignments and threatening termination (see Section II.e.iii).
a. Spotholding Generally
Spotholders save parking spaces for Con Edison workers. The spotholder drives to a
jobsite, parks, and places traffic cones, as instructed by the defendants, to keep people from
parking their cars around the Con Edison structure that needs work. (Tr. 8:15-19, 124:19-22,
213:14-20, 282:8–283:2, 310:25–311:8, 343:5-9, 412:16-21, 444:14-16, 477:23–478:8; Gavrilov
Dep. 69:14–70:6.) If cars are parked at a jobsite, the spotholder monitors the area and puts cones
in the space when the car leaves, a process that continues until enough spots are secured.
(Tr. 13:19-25, 20:8–21:2, 97:22-25, 282:15-25, 415:5-17, 449:9-13.)
In this case, the defendants required the spotholders to stay in or near their cars until the
defendants let them go; that could happen in one of several ways: (1) the defendants sent a
spotholder to take the next shift (Tr. 22:2-9, 70:8-22, 285:25–286:6, 317:6-14, 421:14-19, 451:4–
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452:4, 479:17-20); (2) the defendants’ supervisors notified the spotholder that the job was closed
and they were no longer needed at that jobsite (Tr. 22:10-17, 123:21–124:11, 317:6-11); or
(3) Con Edison notified the spotholder that Con Edison no longer needed him or her (Tr. 239:21–
240:19, 421:14-19, 451:4-15).
b. Hiring
The defendants advertised for spotholders on Craigslist, in newspapers, on the radio, and
on a television billboard on the defendants’ building in Brooklyn. (ECF No. 64, Joint Stips.
¶ 68.) The defendants did not look for or hire spotholders who placed their own advertisements
(id., Joint Stips. ¶ 69), and nothing in the record suggests that the spotholders advertised their
services. The spotholders learned about the job from the defendants’ advertisements or by word
of mouth and then applied for the job. (Tr. 8:20–9:2, 74:19-21, 75:2-5, 118:24–119:15, 246:15–
247:3, 276:18-22, 305:5-17, 412:25–413:13, 444:20–445:13, 470:3-11.)8
Applicants came to the defendants’ Brooklyn location. They gave their contact
information and showed proof that they had a driver’s license, a car, and car insurance. (ECF
No. 64, Joint Stips. ¶¶ 70–74; Tr. 9:3-11, 75:2-11, 119:2–120:2, 246:17–247:7, 305:11–306:4,
413:5-18, 445:8-13, 470:5-11.) The qualifications were minimal. They did not need have a
particular kind of car; a spotholder could use “[w]hatever car you have.” (Tr. 480:8-9.) Nor did
spotholders need to have formal education or degrees, specialized skills, or previous spotholder
experience. (ECF No. 64, Joint Stips. ¶¶ 70–71; Tr. 75:6-11, 119:25–120:6, 156:4-14, 247:1-7,
341:8-10, 413:16-18, 471:3-8.) Generally, aside from confirming that the applicant had a
8 Folusho Babatunde and Ansel Campbell worked for a different spotholding company that was going out
of business; the defendants offered jobs to that company’s spotholders. (Tr. 276:18–277:19; 305:5–17.)
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driver’s license and car insurance, the “only question” asked during the interview was whether
the applicant “[had] done this work before.” (Tr. 247:1-7.)
The defendants had the applicants sign a form contract, which Kaviar drafted. (ECF
No. 64, Joint Stips. ¶¶ 77–80.) The spotholders could not negotiate the terms of the contract.
(Id., Joint Stips. ¶ 79; Tr. 10:19–11:1, 161:23–162:12 (discussing Sec. Exs. 24, 25), 163:11-23,
321:7-15, 342:24–343:4, 400:7-15; Gavrilov Dep. 97:18-20; Waheed Dep. 176:4-13; Kaviar
Dep. 51:11-14.) The two versions of the contract that the defendants used during the relevant
time period included the following provisions:
Concord Contract (Sec. Ex. 24) CES Contract (Sec. Ex. 25)
• “[Spotholder] must have a safe and
functional car which must be insured.”
¶ 1.
• “For my vehicle used in this business I
will have valid registration and insurance
at all times.” ¶ 1.
• “[Spotholder] can reject offered job, all
accepted jobs must be completed.” ¶ 3.
• “[Spotholder] may accept or reject
assignments and take vacations as he/she
deems desirable.” ¶ 14.
• “[Spotholder] must contact Concord . . .
when arriving/leaving the work site
location, in addition to Con Edison
closing the work site and releasing you
from work site.” ¶ 11.
• “[Spotholder] must call [CES] when
he/she arrives at the site and advise of
arrival. Also, the [spotholder] must again
call once the site has been secured. The
[spotholder] must call the base when the
site closes for his/her shift.” ¶ 9.
• “[Spotholder] must remain on site at all
times and be prepared to stay until work is
finished as determined by Con Edison.”
¶ 15.
• “[Spotholder] cannot leave the site at any
time during his/her shift except for
emergencies . . . [s]hould the [spotholder]
need to leave the location for any
emergency such as bathroom break, the
[spotholder] must first call the base and
obtain prior permission confirmed by text
or e-mail.” ¶ 3.
• Spotholder “will not smoke” and “will not
sleep while on location.” ¶¶ 7–8.
• “There will be no sleeping on job by the
[spotholder] and no social visits.” ¶ 11.
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• “[Spotholder] will be responsible for
items distributed to them . . . orange
hardhat, pair of safety gloves, safety vest,
flash light, 10 safety cones.” Ex. 24 at 2.
• “[Spotholder] must bring to the site six
cones, the [CES] provided timesheet, an
orange vest and a flashlight.” ¶ 8.
The defendants used the contracts to tell spotholders how to do the job, what the rules
were, and what the consequences were for violating them. (ECF No. 64, Joint Stips. ¶ 82;
Tr. 162:17-19, 342:7–343:4; Waheed Dep. 181:9-17.) As discussed further below, the
spotholders consistently testified that they understood that these and other rules applied to them
and that they expected the defendants to enforce them. (See, e.g., Tr. 17:21–18:3 (“You
understood that [sleeping] was prohibited because at some point you were told and at some point
the supervisor would come and check to see that you were not sleeping”), 18:23–19:1, 82:24–
83:4, 128:4-10, 221:15-21, 248:10-16, 252:15–253:1, 278:22–279:12, 279:20-25, 307:8-23,
414:17–415:17, 446:13–447:5, 472:7-17.) The contracts were open-ended; there were no end
dates or timeframes for completion. (ECF No. 64, Joint Stips. ¶ 81; Sec. Exs. 10–11.) The
defendants did not tell the spotholders that the job was temporary, and the spotholders “had the
understanding that it would be an open-ended job.” (Tr. 10:3-18; see also Tr. 75:12-16, 120:7-
13, 277:24–278:1, 306:10-12, 413:24–414:1, 445:21-23, 471:13-20.)
c. Orientation
According to the witnesses, the orientation or training was minimal or nonexistent. Some
spotholders described an “orientation” that “covered what you need and how to work on the job.”
(Tr. 11:5–12:6; see also Tr. 247:15–248:3, 342:11-17, 414:2-11, 440:12–441:8, 445:24–446:5,
471:21–472:6, 489:5-17.) Another spotholder said that he learned on the job “as [he] went
along” and a supervisor, or “spot checker,” told him what to do. (Tr. 121:10-22, 146:10-17.)
For new hires, the training generally covered the proper use of hard hats; how to identify
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manhole covers, services boxes, transformer manholes, and metal sidewalk vaults; safety
protocols; and how to measure parking spots. (ECF No. 64, Joint Stips. ¶ 76; Tr. 247:15–248:3,
414:4-11, 489:8-17.) Three spotholders testified that the defendants hired them from another
spotholding company and did not train them. (Tr. 276:3-10, 278:9-13, 294:6-16, 304:15-19,
306:13-23; 445:24–446:5.) At least three of the four spotholders with no prior experience got
their first assignment the same week that they were hired. (Tr. 120:3-6, 120:22-23, 247:2-7,
247:12-14, 471:3-8; 472:21-25.)
As explained above, the defendants required spotholders to use specific equipment —
including hard hats, safety gloves, safety vests, flashlights, and safety cones — some of which
the spotholders leased or purchased from the defendants. (ECF No. 64, Joint Stips. ¶ 74; Tr.
11:9-23; Sec. Ex. 24 at 2; Sec. Ex. 25 ¶ 8.) One spotholder, Olubukola Ogunsemowo, testified
that she had to purchase ten cones from Concord for $100. (Tr. 470:17–471:2, 492:9-17.) As
noted above, the defendants required the spotholders to use their own cars; they did not have
supplemental business insurance and did not change their car insurance to account for the
spotholding work after becoming spotholders. (ECF No. 64, Joint Stips. ¶ 73; Tr. 25:15–26:3,
75:6-11, 87:1-6, 130:23–131:8, 253:24–254:12, 286:9-20, 318:3-17, 413:16-18, 422:11-15,
452:9-15, 480:4-15; Sec. Ex. 24 ¶ 1; Sec. Ex. 25 ¶¶ 1, 14.)
d. Pay
The defendants paid the spotholders a flat hourly rate for each hour they worked. (ECF
No. 64, Joint Stips. ¶ 113.) Gavrilov set their hourly pay rate based on the rate that Con Edison
paid the defendants, and the spotholders had no opportunity to negotiate the rate, even when the
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defendants lowered it.9 (ECF No. 64, Joint Stips. ¶¶ 114–15; see Tr. 202:22–204:4; see also
Tr. 9:24-25, 36:13-25, 120:14-19, 134:4-12 (Q: “Did you ever try to negotiate your pay when
you worked at Concord?” A: “I asked. I didn’t get no kind of feedback or anything. I got
demoted, though. They took my pay from 14 down to 13.50.”), 247:8-9, 290:6-20 (Q: “Could
you negotiate your hourly rate with Concord?” A: “There’s no room for that.” Q: “Did anyone
explain to you why your hourly rate changed so much?” A: “Like I said, again, there’s no room
for that. . . . They were the owners. You can’t really ask questions.”), 320:22-24, 425:13-18,
453:15–454:8, 486:5-9.) One spotholder, Anthony Smith, testified that the defendants “never
explained” why they lowered spotholders’ hourly pay rates; “if you complained too much you
might not get a [spotholding] job.” (Tr. 453:15–454:8.)
The defendants paid the spotholders based on the hours that the spotholders recorded on
their timesheets. (ECF No. 64, Joint Stips. ¶¶ 121–25; Tr. 287:16-19, 422:19–423:5, 452:25–
453:14, 482:20–483:1.) After the spotholders set up the cones, they used a smartphone app
called Geotag to send a photograph of the worksite to the dispatch office. (ECF No. 64, Joint
Stips. ¶ 90; Tr. 14:9-23.) Geotag logged the time and address where the spotholder took the
picture; the dispatchers told the spotholders to use the timestamp on the photograph as the
starting time for their shifts on their timesheets. (Tr. 14:9-23.) The defendants did not pay the
spotholders for the time they worked before they took the photograph driving to the worksite,
parking, and setting up the cones. (Tr. 14:24–15:11.) Nor did the defendants pay overtime
premiums for the hours the spotholders worked in excess of 40 hours per workweek, until at least
9 The defendants lowered spotholders’ hourly rate from $15 to about $13.50 when Con Edison reduced
the rate paid to the company. (Tr. 202:22–204:4; see Sec. Ex. 27.)
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February or March 2021. (ECF No. 64, Joint Stips. ¶¶ 117–18.) The defendants never rewarded
the spotholders with raises or bonuses for good work. (Id., Joint Stips. ¶¶ 119–20.)
The spotholders had no opportunity to make money, apart from their hourly wages for the
time that they spent spotholding. Nor could they find their own replacements. The form contract
provided that the spotholder could not “make arrangements to be replaced without prior written
approval by a Supervisor of [CES]. Should the [spotholder] fail to obtain prior written [CES]
approval from his Supervisor for the replacement, then all remuneration for that non-approved
replacement will be forfeited.” (Sec. Ex. 25 ¶ 11; see also Tr. 166:17-19, 345:1-13.) According
to the spotholders, they also could not subcontract their assignments to someone else. (Tr. 32:6-
13, 78:24–79:4, 124:12-14, 255:12-22, 281:24–282:3, 310:2-14, 418:10-13, 448:19-22, 477:19-
22.)
The defendants never offered the spotholders the opportunity to invest in the company or
to enter into any kind of business arrangements with the defendants. (Tr. 88:10-25 (Q: “Was
there any opportunity for to you invest in Concord’s business in any way?” A: “I don’t
understand what you mean by that.”), 111:14-18, 118:18-23, 260:9–261:2 (Q: “[A]re you aware
that spotholders at CE Security were permitted to form their own entities and hire other
spotholders to work for them? Were you aware of that?” A: “I don’t understand your question.
Can you repeat that.”), 297:3-11 (Q: “Were you ever made aware that as a spotholder you were
permitted to form your own business and hire other spotholders to work for you?” A: “That
never happens.”), 334:4–335:5 (Q: “Are you aware . . . that there were many spot holders
. . . [who] formed a company, let’s say ABC, Inc., and that company then did spotholding for
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those spot holders?” A: “I didn’t know that. . . . I didn’t know all that you are talking about.”),
434:7-10, 463:6-10, 499:4-6.)10
e. Assignments and Supervision
i. Concord Dispatch Office Assignments
The dispatch office monitored emails for spotholder requests from Con Edison. When a
dispatcher received a request, he or she called or texted spotholders, often on short notice. (ECF
No. 64, Joint Stips. ¶ 101; Tr. 30:9-17, 76:19–77:8 (the dispatcher would say, “oh, we have this
available . . . how soon could you get there . . . could you be there as soon as possible. It was a
24-hour business, so it could be any time.”), 122:10-17 (“Sometimes they would send a job right
then and there and tell us to be there ASAP.”), 146:18-23 (“Sometimes they would call me an
hour before the job telling me, this is an ASAP. That means get there as soon as you can.”),
211:16-23, 473:13-24 (“At times it has to be ASAP . . . [i]t might be 30 minutes before the
assignment or one hour before the assignment.”); Sec. Ex. 30 at 113 (DEF0007491) (“urgent
request” from Con Edison to dispatch a spotter “en route ASAP to 300 E 77 Street”), 115–16
(DEF0007596, 7598) (Con Edison requesting an “ASAP dispatch” at 11:46 a.m., and the
spotholder arrived at 12:15 p.m.), 129 (DEF0009703) (Con Edison requesting a spotholder at
2:12 p.m. for 3:00 p.m. the same day), 346–47 (DEF0042592–93) (Concord dispatching eight
spotholders at once on short notice).)
Some spotholders testified that the dispatch office took into account their preferences, for
example, shift times or areas of the city. (See, e.g., Tr. 11:24–12:17 (spotholder testifying that he
10 The defendants’ records show that they paid some corporate entities for spotholding services. (Tr.
562:4-13.) This case pertains only to individual spotholders, and as discussed in Section III.a, the
Secretary excluded the corporate entities from the damages computations. (Tr. 562:4-24; Sec. Exs. 27–
28.)
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“preferred to work [the] afternoon shift, to midnight” and “[s]ometimes the overnight shift,
Monday to Thursday”), 307:4-7; but see, e.g., Tr. 228:19–229:12 (former dispatcher describing
consequences for spotholders who did not accept jobs due to the location).) The dispatch office
gave the assigned spotholder the start date, start time, and location for a job. (ECF No. 64, Joint
Stips. ¶¶ 100–01; Tr. 31:4-13, 211:24–212:6, 281:5-9, 287:10-12, 308:12-18, 416:6–417:1,
473:25–474:12.)
ii. Concord’s Supervision of Spotholders
In addition to sending time-stamped photographs of the jobsite to the dispatch office, the
defendants required spotholders to contact the dispatch office when they got to the assigned
location and when they set up their cones. (ECF No. 64, Joint Stips. ¶ 90; Tr. 13:5-16, 14:9-23,
124:15-22, 211:6-15, 213:14-23, 216:1-17, 282:8-14, 312:20–313:14, 343:10-13, 449:4-8,
478:18–479:2; see, e.g., Sec. Ex. 30 at 38 (DEF004419).) They also required spotholders to
contact them before leaving a jobsite. (Sec. Ex. 24 ¶ 11; Sec. Ex. 25 ¶ 9.) A Con Edison
foreperson had to sign off on the spotholders’ timesheets. (Sec. Ex. 24 ¶¶ 11–12; Tr. 239:21–
240:19, 421:14-19, 451:4-15.)
The defendants’ dispatch office regularly checked in with the spotholders during their
shifts to ensure compliance with the rules and to get progress updates. (Tr. 16:4-10, 81:3-23,
124:23–125:2, 214:4–216:21, 283:25–285:6, 449:14-24, 479:3-10.) The dispatch office also
checked in with spotholders when preparing their regular reports to Con Edison at noon and
midnight. (Tr. 214:4-17.) The dispatchers called spotholders for other reasons, for example, to
find out if cars were blocking access to a Con Edison site. (Tr. 214:23–215:16.) According to
former dispatch office employee Takeia Galloway, the dispatchers made these calls to
spotholders “[e]very day” they were on the job. (Tr. 217:7-15.) The dispatchers sometimes
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required spotholders to call them every two hours. (Tr. 314:9-14.) The defendants also expected
the spotholders to report any issues at a jobsite. (Tr. 84:14-25, 220:22–221:14 (“sometimes . . .
the police[] come by and give [the spotholders] problems” and “[the Department of] [S]anitation
used to come by and harass them as well” about the spots they were holding); see Sec. Ex. 30 at
76–78 (DEF0005275, DEF0005317, DEF0005337), 141 (DEF0011398), 300–01 (DEF0035724–
25) (June 1, 2020 email from Concord dispatcher to Con Edison describing that the “spotter was
approached by police to move from location for safety reasons but spotter told police that we are
working and police said okay stay at your own risk .. now the officer has instructed our spotter to
move from this area due to them closing the street. As of now, the spotter will relocate to the
safest nearby area until he is able to return.”).)
The defendants employed spot checkers to monitor the spotholders, and ensure that they
followed the rules. (ECF No. 64, Joint Stips. ¶¶ 91–96; Tr. 16:11-18 (spotholder Dennis
Danville testified that spot checkers came by “[a]t least once per shift”), 81:24–82:11 (spotholder
Catrice Brown testified that “by the end of my employment there, [spot checkers] came every
shift”), 125:3-17 (spotholder Gerald Celestine testified that “[s]ometimes, the first day [at a
jobsite] you might have a spot checker come”), 220:17-20, 248:18–249:1 (spotholder Kamal
Olalekan testified that “the supervisor” came to the jobsite “[e]very day”), 314:15-24 (spotholder
Ansel Campbell testified that the “supervisor will pass through . . . [o]nce a day”), 343:15–344:4,
449:25–450:6 (spotholder Anthony Smith testified that “the supervisor who did the regular
routine check” would come to the jobsite), 478:6-17.) The spot checkers “were supposed to
observe everything” at the jobsites. (ECF No. 64, Joint Stips. ¶ 94 (internal quotation marks
omitted).) They made sure that the spotholders used the right number of cones, placed the cones
correctly, and kept cars from parking in the designated spots. (Id. ¶ 95.) Spotholder Kamal
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Olalekan testified that a spot checker sent him home “several” times, when a member of the
public insisted on parking in a spot that the spotholder was trying to hold. (Tr. 251:22–252:14.)
The spot checkers also confirmed that the spotholders were following the defendants’ work rules.
(ECF No. 64, Joint Stips. ¶¶ 94, 96; Tr. 17:21–18:10, 82:23–83:4, 221:15–222:21, 248:10–249:1,
278:22–280:15, 419:22–420:23, 446:13–447:17.)
iii. Concord’s Rule Enforcement and Discipline
The defendants, through the dispatch office and the supervisors, regularly disciplined
spotholders for violating the rules. For example, they sent them home before the job was done,
“suspended” them, threatened termination, or withheld job assignments for as long as a month.
(Tr. 127:2-13, 128:17–129:2, 236:14–19 (former dispatch office employee Galloway testified
that “[t]he longest I’ve seen a driver [suspended] [was] over a month.”), 249:14–251:8, 450:7–24
(spotholder Anthony Smith did not “get a job for like a week or [ ] two or something like that”
after a supervisor discovered he was not at the jobsite “so they called the [dispatch] office”),
472:18–20 (Q: “Did they say what would happen if you left the site?” A: “Consequences, like,
they can fire you and lay you off.”). While supervisors were sometimes lenient, they could also
be arbitrary and severe, “depend[ing] on how [the dispatcher] feels.” (Tr. 222:8-21; see Tr.
127:19–128:3 (Q: “Did you have an understanding of what the consequences were . . . for
breaking any rules at Concord?” A: “No, not exactly, you know, because it was under their
discretion.”).)
According to Galloway, the defendants used a “discipline board” — a whiteboard on the
wall in the dispatch office where all the dispatchers worked in the same room — to keep track of
disciplined and suspended spotholders, and which spotholders to call for assignments. (Tr.
222:22–223:19.) Zack Muradian, who ran the dispatch office, instructed dispatchers to write the
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car numbers of the spotholders “that he [didn’t] want . . . working” on the discipline board; if a
spotholder’s car number was on the board, the dispatchers “couldn’t give him a job.” (Tr. 223:2-
19.) Muradian “yell[ed]” at spotholders over the phone; he told them “don’t call . . . [y]ou’re not
getting a job,” and that the dispatch office “[wi]ll call you when we need you.” (Tr. 223:20-
224:13.) Suspensions — and the length of the suspensions — were arbitrary. Galloway testified
that the decision to suspend a spotholder “depend[ed] on how Zack feels . . . [h]e’ll send you
home, he’ll take you off for a couple of days. It really depends on how he feels.” (Tr. 222:12-
21.) Muradian kept suspended spotholders on the discipline board until he “fe[lt] like he
want[ed] to take [the spotholder] off” the board. (Tr. 224:14-16.) Suspensions could last days,
weeks, or months. (Tr. 224:14-25, 233:7-21.)
Muradian claimed that the board was not a “discipline board,” but an “information board”
where dispatchers posted information about individual spotholders’ cars. (Tr. 610:20–613:2.)
The board was a way for all the dispatchers to “input” information about the spotholders to the
team so they could “service [ ] Con Edison the best way possible.” (Tr. 612:17-24.) He
conceded, however, that he put spotholders on the board so that other dispatchers would “be
aware that this individual sometimes might be a problem on a site,” and that he “would lean
towards the person that’s always on location over not on location,” so “you would be kind of
choosing the better out of the worse.” (Tr. 611:21–612:12.) Muradian “assume[d]” that other
dispatchers understood that was why the “problem” spotholders’ car numbers were on the board,
and testified that “it was a discussion between” all the dispatchers. (Tr. 612:13–613:2.)
Although Muradian may have minimized what went on in the dispatch office, the Court
finds that his testimony was generally credible. Muradian and Galloway, whom the Court also
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credits, agreed that the board was used to decide which spotholders would get jobs, and that
drivers who were on the board did not get jobs. (Tr. 223:2-19, 232:8-13, 611:21–613:2.)
The spotholders expected the defendants to discipline them for breaking the defendants’
rules. They understood that the defendants’ rules applied to them, and they expected the
defendants to enforce them. (See, e.g., Tr. 17:21–18:3 (“You understood that [sleeping] was
prohibited because at some point you were told and at some point the supervisor would come and
check to see that you were not sleeping”), 18:23–19:1, 82:24–83:3, 83:16-22, 128:4-10, 221:15–
222:21, 251:11–253:1, 278:22–279:12, 279:20-23, 446:13–447:5, 472:7-20.) Of the nine
spotholders who testified, seven were disciplined for violating the defendants’ rules. The
defendants gave Dennis Danville a warning after a supervisor thought he had fallen asleep
(Tr. 18:4-19), and gave Catrice Brown a warning for being away from her car without informing
the dispatch office (Tr. 100:10–101:7). The defendants suspended Olubukola Ogunsemowo for a
week when she left the site to use a nearby bathroom. (Tr. 477:9-16.) The defendants sent
Gerald Celestine home early because he could not find a jobsite, even though the dispatchers had
sent him the wrong picture of the structure (Tr. 127:2-13, 140:6–142:12), and sent Kamal
Olalekan home early for sleeping on two occasions, though he was not sleeping the second time
(Tr. 249:14–251:8). The defendants also suspended Gerald Celestine — who lived in his car
with his dog and accepted nearly every job assignment the defendants offered him — for at least
a month for perceived insubordination. (Tr. 122:20–123:4, 132:18–133:3, 144:8–145:5.) A
supervisor discovered that Anthony Smith left a jobsite, so the defendants sent him home that
day and withheld assignments from him for at least a week. (Tr. 450:7-24.) The defendants
threatened Ansel Campbell with termination when he tried to correct a paperwork error — Con
Edison had put the wrong date on his timesheet when signing him out — that could have resulted
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in his not being paid for two weeks of work, then downgraded the discipline to a two-week
suspension. (Tr. 314:25–317:2.) Some of the spotholders knew of others who were sent home
for infractions, and generally understood that suspension and termination were both potential
consequences for noncompliance with the defendants’ rules. (See, e.g., Tr. 128:4-16, 285:20-22,
436:10-17, 477:5-16; Sec. Ex. 25 ¶ 12; Waheed Dep. 181:9-19.)
Additionally, the spotholders consistently testified the defendants withheld assignments if
they declined jobs even though the form contracts permitted them to reject jobs. (Tr. 31:25–
32:5, 58:14–59:9, 228:22–229:12, 281:13-23 (spotholder Folusho Babatunde testified that there
was “a penalty for you to get any job” if you reject an assignment, and that Muradian told him
there would be a “[t]wo-week suspension”), 417:18-22 (Q: “[C]ould you reject an assignment?”
A: “Not without consequences.”); Sec. Ex. 24 ¶ 3, Sec. Ex. 25 ¶ 14.)
f. Schedule
The spotholders worked long shifts that could stretch into days or weeks, depending on
the assignment and whether the dispatch office sent a relief spotholder to take over. They often
did not know before they accepted an assignment how long it would last. The assignments often
did not include an end date or time. (Tr. 104:10–105:22 (spotholder describing that an
assignment would only “[s]ometimes . . . have an end time”).)
The standard shift was supposed to be twelve hours. (Tr. 21:5-11.)11 Sometimes, Con
Edison would close out a job or release a spotter before twelve hours. (Tr. 21:12–22:23.) Other
times it took days for Con Edison to finish a job. (See, e.g., Sec. Ex. 30 at 119 (DEF0007877)
(Concord dispatcher informing Con Edison that “we have been trying to locate the [p]erson
11 During most of the relevant time period of January 5, 2018 through March 28, 2020, the standard shift
was twelve hours, but the defendants decreased it to eight hours towards the end of the relevant time
period. See Sec. Ex. 30 at 400–01 (DEF0047312–13) (reflecting eight-hour shifts).
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who[se] car is next to structure but no luck so far we will continue to search”), 327
(DEF0037936) (Concord dispatcher reminding Con Edison that two spotholders have been on
one location for sixteen days), 348 (DEF0042595) (Concord dispatcher reminding Con Edison
that seven spotholders have been on one location for ten days).) At times, Con Edison wanted
spotholders to remain onsite after they had secured spots and Con Edison started work. (Tr.
240:9-19, 310:25–311:15; see Ex. 30, at 267 (DEF0034639) (Con Edison asking Concord
dispatcher to keep spotholder “on location” until Con Edison completed transformer
replacement).)
Sometimes a shift lasted longer than twelve hours because the defendants did not send a
replacement spotholder. (Tr. 288:23–289:11 (spotholder testifying that she learned a job was
going to be twenty-four hours because “[a]t the end of the [twelve-hour] shift . . . [y]ou call the
[dispatch office] and they tell you they can’t find relief,” and that “[i]n most cases you can’t say
no” to staying for another shift without notice “because the management”), 422:4-10 (spotholder
testifying “I would gladly stay” if the defendants did not send a relief spotholder because “you
were there and you would get paid for it”), 451:19–452:6 (spotholder testifying “if you don’t get
a relief then I’m stuck, I have to stay there” or else he “would get in trouble”).)
Spotholders regularly worked overtime hours each week (see generally Sec. Ex. 27),12
and their work for the defendants was their primary, or sole, source of income (see, e.g., Tr.
37:4-7, 291:15-17, 322:1-3, 426:12-18, 454:22-24, 487:11-13). Of the nine spotholders who
12 The defendants attached visual aids to their post-trial brief illustrating in bar charts the “Hour
Variation” in the spotholders’ monthly hours. (ECF No. 82-1.) According to the defendants, these
charts show that the schedules were like a contractor’s schedule. (See ECF Nos. 82 at 28.) But the
charts are based on the data in the Secretary’s calculation — which only captured workweeks where the
spotholders logged over forty hours in their timesheets. (See Sec. Ex. 27.) The charts do not show all
the hours the spotholders worked. The charts demonstrate that spotholders regularly worked overtime.
(See, e.g., ECF No. 82-1 at 14 (showing the spotholder worked overtime hours at least one week per
month during all but three months from January 2018 to December 2020).)
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testified, only two had any other work: Dennis Danville, who generally worked full-time for the
defendants and had an unrelated part-time, home-based retail business (Tr. 12:20–13:4, 32:14–
33:7, 45:5–46:1), and Catrice Brown, who took on additional spotholding work for another
company in 2022, after the relevant time period, when Concord no longer offered enough hours
(Tr. 74:14-15, 89:2-6, 94:25–95:4). Under the form contract, the spotholders could work for
another company only if it did not “interfere” with their work for the defendants. (Sec. Ex. 24
¶ 5.) One spotholder testified that “there’s no way” to work for a second company “because of
the time we work.” (Tr. 487:1-7.)
As explained above, the defendants did not allow the spotholders to leave the jobsite even
briefly, for example, to use the bathroom, unless the dispatch office gave them permission. (ECF
No. 64, Joint Stips. ¶ 99; Sec. Ex. 25 ¶ 3 (form contract requiring spotholders to “call the
[dispatch office] and obtain prior permission confirmed by text or e-mail” in order to “leave the
location for any emergency such as bathroom break”); Tr. 19:5-18, 129:5–130:5, 217:22–218:12,
280:1-15, 344:23-25, 415:18–416:1, 447:4-17, 475:11–476:14.) Even then, the dispatch office
sent relief late or not at all. (Tr. 19:5-18, 83:5-12, 129:5–130:14, 280:1-15; 447:4-17, 475:11–
476:14.) Takeia Galloway testified that the spotholders called her “all the time” for permission
to use the bathroom; she “tr[ied] to cover for them” “[b]ecause nine times out of ten, they don’t
want to wait till the supervisor gets there [because] they take too long,” “[s]o they would want to
really go ahead and go to the bathroom and they don’t want to tell that to Zack [Muradian]
because that would be a problem.” (Tr. 217:22–219:9; see also Tr. 476:3-10 (spotholder
Anthony Smith testifying that Muradian “wouldn’t allow you to leave the site” to use the
bathroom).) If the dispatch office did not give the spotholder permission to leave the jobsite, the
spotholder had limited choices: wait for the dispatcher to send relief, which could take hours;
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risk disciplinary action by leaving the post to use restroom, if one was nearby; or using bottles,
bags, or camping toilets. (Tr. 19:5-18, 23:10–24:20, 83:5–84:11, 129:5–130:5, 217:22–219:9,
280:1-15, 415:18–416:1, 475:14–476:14.)
Investigation and Reclassification of Spotholders
a. The U.S. Wage and Hour Division’s Investigation and Backpay Calculation
In 2019, the U.S. Wage and Hour Division (“WHD”) opened an investigation into the
defendants, led by Assistant District Director (“ADD”) Joe Xiong. (Tr. 526:4-13.) As part of
the investigation, ADD Xiong reviewed the defendants’ business records, including pay records
and time records for spotholders, and interviewed some of the workers. (ECF No. 64, Joint
Stips. ¶ 126; Tr. 526:12–527:4.) The defendants’ records generally included the spotholders’
names, dates of work and pay dates, and the number of hours for which the defendants paid
spotholders per day. (ECF No. 64, Joint Stips. ¶¶ 123–25; Tr. 529:5-17, 531:14–532:5.) The
defendants also produced additional records up through June 2021 of spotholders’ hours and pay.
(Tr. 531:1-8; see Sec. Exs. 12–15.)
According to the defendants’ records, 329 individual spotholders worked more than 40
hours for the defendants during at least one Sunday to Saturday workweek in the relevant time
period. (See Sec. Ex. 27; Tr. 528:22–529:4, 532:11–536:9.)13 The defendants never paid
overtime to spotholders before February 2021, and they continued to deny overtime pay to
certain spotholders through June 19, 2021. (ECF No. 64, Joint Stips. ¶ 117; Sec. Ex. 27.) Based
solely on the defendants’ records, specifically the Internal Revenue Service (“IRS”) Form 1099,
the Secretary calculated that if the spotholders were considered employees under the FLSA, the
13 ADD Xiong only included individual spotholders, not other spotholder businesses, in his analysis.
(Tr. 562:4-24; Sec. Exs. 27–28.)
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defendants failed to pay $3,079,486.27 in overtime pay and wages to 329 spotholders for the
period from January 5, 2018 through June 12, 2021. (Sec. Exs. 27–28; see generally Tr. 524:6–
565:22.) To calculate the overtime pay, ADD Xiong entered data from the defendants’ 1099
forms into an Excel spreadsheet and calculated the overtime rate premium for hours worked
above 40 hours in a workweek. (Tr. 532:11–536:9.) ADD Xiong used the hours for each
workweek reflected in the defendants’ records. (Tr. 580:11-17.) Because the defendants’
records do not show hourly rates, ADD Xiong divided the total gross pay per week by the total
hours worked per week to calculate each spotholder’s effective hourly rate of pay. (Tr. 534:6-8,
572:19–573:4; Sec. Exs. 12, 27.) ADD Xiong accounted for the changes in the New York State
minimum wages over the years, and, based on the Department of Labor’s standard handbook
used the higher of: (1) an employee’s actual rate of pay, or (2) any applicable statutory minimum
wage to determine the wages and overtime pay that a spotholder should have been paid if
classified as an employee under the FLSA. (Tr. 567:25–569:1.) The Court credits ADD Xiong’s
testimony and analysis because it is reasonable and based solely on the defendants’ own records.
b. Defendants’ Reclassification of Spotholders as Employees
In about February or March 2021, after the Secretary filed this action, the defendants
reclassified the spotholders as employees for the purposes of overtime pay, pending the outcome
of this litigation. (ECF No. 64, Joint Stips. ¶ 64.) If they prevail in this litigation, the defendants
intend to resume treating spotholders as independent contractors for FLSA purposes. (Tr. 347:2-
6; Kaviar Dep. 77:10-14; Waheed Dep. 127:23–128:5.)
CONCLUSIONS OF LAW
The question before the Court is whether the spotholders were employees, as the
Secretary asserts, or independent contractors, as the defendants say they were. According to the
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Secretary, the spotholders are employees “as a matter of economic reality” because they earned
hourly wages working long shifts in difficult conditions, had to check in regularly with the
defendants’ dispatch office and supervisors, could not negotiate the terms of their relationship
with the defendants, and were regularly subjected to arbitrary extensions of their shifts, as well
as discipline for failure to accept assignments or minor rule infractions. (ECF No. 81 at 8–9
(citing Brock v. Superior Care, Inc., 840 F.2d 1054, 1058 (2d Cir. 1988)).) In short, the plaintiff
argues, the spotholders “were not in the spotholding business for themselves,” but rather,
“provided the day-to-day services necessary for [the defendants] to fulfill their contracts with
Con Edison,” from which the defendants “derived the vast majority of their millions of dollars of
revenue.” (Id.) The defendants, on the other hand, argue that they did not exercise sufficient
continuous, regimented control over the spotholders because the spotholders chose whether to
take assignments, worked irregular hours, were not formally disciplined by the defendants, and
could work for other companies. (See ECF No. 82 at 6–29.)
In a civil action for damages, the plaintiff bears the burden of proving each element of his
claims by the “preponderance of evidence.” See, e.g., Wang v. XBB, Inc., No. 18-CV-7341, 2022
WL 912592, at *3 (E.D.N.Y. Mar. 29, 2022) (quoting Hassoun v. Searls, 968 F.3d 190, 202 (2d
Cir. 2020)). “To be held liable under the FLSA, a person must be an ‘employer.’” Herman v.
RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999). An “employer” is “any person acting
directly or indirectly in the interest of an employer in relation to an employee,” and an
“employee” is “any individual employed by an employer.” 29 U.S.C. § 203(d), (e)(1). The
“determination of whether an employer-employee relationship exists for purposes of the FLSA
should be grounded in ‘economic reality rather than technical concepts.’” Barfield v. New York
City Health & Hosps. Corp., 537 F.3d 132, 141 (2d Cir. 2008) (quoting Goldberg v. Whitaker
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House Coop., Inc., 366 U.S. 28, 33 (1961)). Courts should not focus on “isolated factors but
rather upon the circumstances of the whole activity.” Id. (quoting Rutherford Food Corp. v.
McComb, 331 U.S. 722, 730 (1947)).
In this circuit, courts apply the “Brock factors” to determine whether an employee-
employer relationship exists. Those factors are “(1) the degree of control exercised by the
employer over the workers, (2) the workers’ opportunity for profit or loss and their investment in
the business, (3) the degree of skill and independent initiative required to perform the work,
(4) the permanence or duration of the working relationship, and (5) the extent to which the work
is an integral part of the employer’s business.” Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61,
67 (2d Cir. 2003) (citing Brock, 840 F.2d at 1058–59). While “[t]he existence and degree of
each factor is a question of fact,” the “legal conclusion to be drawn from those facts — whether
workers are employees or independent contractors — is a question of law.” Brock, 840 F.2d at
1059. No factor “‘is dispositive,’ nor were they, as a whole, ‘exclusive,’” and courts must
consider “the totality of the circumstances” of the relationship. Barfield, 537 F.3d at 142–43
(quoting Brock, 840 F.2d at 1059). The “ultimate concern is whether, as a matter of economic
reality, the workers depend upon someone else’s business for the opportunity to render service or
are in business for themselves.” Brock, 840 F.2d at 1059.
Applying the Brock factors to the facts of this case, the Court easily concludes that there
was an employer-employee relationship between the defendants and the spotholders.
Brock Factors
a. Degree of Control
First, the evidence established convincingly that the defendants “exercised substantial
control over the manner and conditions of [the spotholders’] work,” including in hiring,
compensation, scheduling, and supervising the spotholders’ work. Id. at 1061.
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i. Hiring and Terms of Relationship
The evidence at trial established that the defendants controlled the hiring of and
contractual relationship with the spotholders. First, the defendants either advertised for
spotholders or contacted spotholding companies that were going out of business. (ECF No. 64,
Joint Stips. ¶ 68; Tr. 276:18–277:19; 305:5-17.) They did not seek spotholders who advertised,
and there is no evidence in the record that any of the spotholders advertised their services. (ECF
No. 64, Joint Stips. ¶ 69.) Second, the defendants required the spotholder applicants to sign a
form contract that the defendants’ lawyer drafted. (ECF No. 64, Joint Stips. ¶¶ 77–80.) The
spotholders had no opportunity to negotiate the contract terms or their working conditions, which
were described in the contract. (ECF No. 64, Joint Stips. ¶¶ 77–80; Tr. 10:19–11:1, 163:11-23,
321:7-15, 342:24–343:4, 400:7-15; Gavrilov Dep. 97:18-20; Waheed Dep. 176:4-13; Kaviar
Dep. 51:11-14.) Third, the spotholders had no control over their pay. The defendants set the
hourly wages without negotiation or the spotholders’ input. (ECF No. 64, Joint Stips. ¶¶ 114–15;
Tr. 290:4-20 (there was “no room” to negotiate their hourly rate because the defendants “were
the owners,” and “[spotholders] can’t really ask questions”), 453:15–454:8 (the defendants
“never explained” why they lowered spotholders’ hourly pay rates, and the spotholders “did
complain but if you complained too much you might not get a [spotholding] job”).)
“[U]nilaterally dictat[ing]” a worker’s hourly wage is probative of an employer-employee
relationship. Brock, 840 F.2d at 1057–58, 1060–61; see also Xue v. Koenig, No. 19-CV-7630,
2022 WL 4279185, at *6–7 (S.D.N.Y. Sept. 14, 2022) (finding employee status where the
company had “unilateral[]” ability to set hourly wages and change them over time). The
defendants had exclusive control over the terms of the relationship, their job, and their pay,
establishing that the spotholders “provid[ed] services as ‘the [defendants] desire[d] and
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receiv[ed] the compensation the [defendants] dictate[d].’” Vasquez v. NS Luxury Limousine
Serv., Ltd., No. 18-CV-10219, 2021 WL 1226567, at *5 (S.D.N.Y. Mar. 31, 2021) (quoting
Goldberg, 366 U.S. at 32). This is “a telltale sign that a worker is an employee.” Id.
Accordingly, this factor weighs decisively in the Secretary’s favor.
ii. Assignments and Schedule
The defendants controlled the spotholders’ job assignments and schedules. While in
some instances dispatchers considered the spotholders’ preferences — for shifts or areas in the
city (see, e.g., Tr. 11:24–12:17, 307:4-7) — there were also consequences for spotholders who
did not accept assignments. (See, e.g., Tr. 228:19–229:12.) Dispatchers regularly contacted
spotholders with urgent, or “ASAP,” assignments — assignments that required the spotholders to
drive to jobsites across the city. (See, e.g., Tr. 76:23–77:8, 122:10-17; Sec. Ex. 30 at 115–16.)14
The spotholders’ shifts were long, the conditions harsh, and the rules inflexible. The
spotholders had no control over when their shift was over. The defendants or Con Edison
sometimes released the spotholders early if Con Edison finished working at a jobsite. (Tr.
21:12–22:23, 69:15-25, 318:21–319:8, 483:23–484:2.) The spotholders did not have control
even when their shift was supposed to end after twelve hours. Rather, they had to stay until their
relief showed up, even if the next worker was late or never showed up at all. (Tr. 289:2-11,
318:21–319:15, 422:4-10, 451:22–452:6.) Indeed, spotholders learned that they had to stay for
another twelve-hour shift “at the end of the [initial twelve-hour] shift,” when a supervisor told
them “they can’t find relief.” (Tr. 289:2-6.) “In most cases,” the spotholders could not “say no.”
14 See also Tr. 146:18-23 (“Sometimes they would call me an hour before the job telling me, this is an
ASAP. That means get there as soon as you can.”), 211:16-23, 473:13-24 (“At times it has to be ASAP
. . . [i]t might be 30 minutes before the assignment or one hour before the assignment.”); Sec. Ex. 30 at
113 (DEF0007491) (“urgent request” from Con Edison to dispatch a spotter “en route ASAP”), 129
(DEF0009703) (Con Edison requesting a spotholder at 2:12 p.m. for 3:00 p.m. the same day), 346–47
(DEF0042592–93) (Concord dispatching eight spotholders at once on short notice).
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(Tr. 289:7-11.) If there was no relief, they were “stuck” and had to stay for the extra shift or “get
in trouble.” (Tr. 451:19–452:6.) The defendants’ ability to compel the spotholders to stay for an
extra shift without notice is additional evidence of an employer-employee relationship. See
Arena v. Plandome Taxi, Inc., No. 12-CV-1078, 2014 WL 1427907, at *5, 7 (S.D.N.Y. Apr. 14,
2014) (a transportation company “dictat[ing] the hours the drivers worked” supported finding
employee status).
It is undisputed that the defendants would not let the spotholders give a job assignment to
another spotholder or find their own relief, facts that also show the defendants’ control over
them. (See, e.g., Sec. Ex. 25 ¶ 11; Tr. 166:17-19 (Gavrilov testifying to the same), 344:23–
345:13 (Waheed testifying to the same).) See Gayle v. Harry’s Nurses Registry, Inc., No. 07-
CV-4672, 2009 WL 605790, at *6 (E.D.N.Y. Mar. 9, 2009), aff’d, 594 F. App’x 714, 717 (2d
Cir. 2014); cf. Saleem v. Corp. Transportation Grp., Ltd., 854 F.3d 131, 143 (2d Cir. 2017)
(noting the drivers’ practice of “hiring their own helpers” supported independent contractor
finding) (citation modified).
iii. Economic Dependence
The evidence also established the “economic reality” that the spotholders depended on
the defendants for work. They were willing to work under difficult and often humiliating
conditions because they needed the work. They could not take breaks without permission, which
they often did not get from the dispatch office, even to use the bathroom. (See, e.g., Tr. 217:22–
219:9.) If they did not have permission to leave the jobsite, or if there was no bathroom nearby,
the spotholders had to use bottles, bags, or camping toilets. (Tr. 19:5-18, 23:10–24:20, 83:5–
84:11, 98:19–99:23 (“When you get to a[n] area and you see what kind of location it is, you see
that there’s no bathroom or there’s no store, you either hold it or you just do without, because the
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whole purpose is to get the hours, to get the money.”), 280:1-15, 415:18–416:1, 475:14–476:14.)
Spotholder Christopher Guevara, who started working for the defendants when he was 18 years
old, testified that he “would gladly stay” for another twelve-hour shift if the defendants did not
send relief because “you were there and you would get paid for it.” (Tr. 412:22-23, 421:6-10,
422:4–10.) Gerald Celestine took the job when he “was going through something,” was “staying
in [his] van” with his dog, and “wanted to get [his] life back together,” so he “really didn’t reject
no jobs;” Celestine’s longest job assignment was for “a month straight, 24 hours,” and he “never
left the site” during that time. (Tr. 122:20–123:5, 132:2–133:3.) This evidence clearly shows
that “as a matter of economic reality, the [spotholders] depend[ed] upon [the defendants] for the
opportunity to” work as spotholders. Brock, 840 F.2d at 1059 (citations omitted).
While the spotholders could theoretically work for another company, they could do so
only if it would “not interfere” with their work for the defendants. (Sec. Ex. 24 ¶ 5.) As a
practical matter, this was impossible. The defendants needed spotholders to be available for last-
minute work with unpredictable hours. According to the spotholder Olubukola Ogunsemowo,
there was “no way” to work for a second company “because of the time we work.” (Tr. 487:1-
7.) This aspect of the relationship is yet further proof that the spotholders were the defendants’
employees. C.f. Saleem, 854 F.3d at 141 (2d Cir. 2017) (“The fact that [p]laintiffs could (and
did) work for [the defendant’s] business rivals and transport personal clients . . . without
consequence suggests . . . that [the defendant] exercised minimal control . . . [because] a
company relinquishes control over its workers when it permits them to work for its
competitors[,] [and because] when an individual is able to draw income through work for others,
[that person] is less economically dependent on his [or her] putative employer.”). Because the
defendants were “primarily responsible for assigning work,” and “dictating compensation, the
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‘degree of control’ is considered to be high.” Vasquez, 2021 WL 1226567, at *6 (citations
omitted).
iv. Supervision and Discipline
In Brock, supervisors “unequivocally expressed the right to supervise” workers, visited
job sites once or twice a month, and required workers, who were nurses, to submit notes
regarding their cases. 840 F.2d at 1060. Observing that “[a]n employer does not need to look
over his workers’ shoulders every day in order to exercise control,” the Second Circuit found that
the defendant exercised control over its workers. Id. at 1060 (citing Donovan v. DialAmerica
Marketing, Inc., 757 F.2d 1376, 1383–84 (3d Cir. 1985)).
Here, the defendants exerted far more control over the spotholders. As explained above,
the spotholders had to contact the dispatch office, including when they arrived at a jobsite, and
before they left at the end of a shift. Supervisors checked on them regularly for updates, to
ensure compliance with the rules, and to prepare reports for Con Edison. (Tr. 16:4–17:18, 81:3–
82:16, 124:23–125:17, 214:4–216:21, 283:25–285:17, 449:14–450:6, 479:3-10.) Spot checkers
visited jobsites without notice to monitor job performance and confirm that the spotholders were
following the defendants’ rules. (See, e.g., Tr. 16:11-18 (spot checkers came by “at least once
per shift”), 285:7-17, 449:23–450:6.) This extensive supervision is evidence of the defendants’
control. See Brock, 840 F.2d at 1060.
The defendants disciplined the spotholders for perceived violations of rules, which is an
obvious sign of control, and kept track of the punishments on the “discipline board.” (Tr.
222:22–224:25, 233:7-21.) As explained above, dispatchers and supervisors punished
spotholders if they fell asleep, left the site to use the bathroom, or violated any of the other rules;
they sent workers home, withheld assignments, “suspended” them, and threatened termination.
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(See, e.g., Tr. 127:2-13, 128:17–129:2, 236:14–19 (“[t]he longest I’ve seen a driver [suspended]
[was] over a month.”), 472:18-20 (Q: “Did they say what would happen if you left the site?”
A: “Consequences, like, they can fire you and lay you off.”).)
The defendants argue that discipline was not a sign of control because it was “ad hoc”
and depended “on the mood or discretion of the dispatcher.” (ECF No. 82 at 13.) They also
suggest that the discipline was not especially severe, because the “the most common”
consequence was “that a dispatcher might offer fewer calls temporarily.” (Id.) Even if this is
correct, the fact that the defendants punished a group of workers who were economically
dependent on them — so much so that they were willing to work consecutive 12-hour shifts
under harsh conditions — is evidence of control. See Hart v. Rick’s Cabaret Int’l, Inc., 967 F.
Supp. 2d 901, 917–18 (S.D.N.Y. 2013) (“The mere threat of imposition of such [discipline]
operated as a sword of Damocles over the [workers], helping ensure [worker] compliance with
the [defendants’ rules].”).
Accordingly, the Court finds that the evidence demonstrates that the defendants
“exercise[d] substantial control” over the spotholders’ work, Brock, 440 F.2d at 1060–61, and
this factor weighs in favor of finding the spotholders were employees.
b. Opportunity for Profit or Loss
The second Brock factor — the workers’ opportunity for profit and loss or to invest in the
business — also favors the spotholders. The spotholders had no opportunity for profit or loss.
They earned an hourly wage, at rates the defendants set and sometimes lowered. (ECF No. 64,
Joint Stips. ¶¶ 113–15; Tr. 9:24-25, 36:17-25, 120:14-19, 247:8-9, 290:11-12, 320:22-24,
425:13-18, 453:15-16, 486:5-9.) They never earned bonuses or raises. (Id., Joint Stips. ¶¶ 119–
20.) The only way to earn more money was to work more hours. (Tr. 37:1-3, 65:17-20, 88:10-
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12, 112:2-4, 155:23–156:1.) When workers “earn only an hourly wage for their labor and have
no downside exposure,” this second factor “weighs heavily in favor of the [workers’] status as
employees.” Gayle v. Harry’s Nurses Registry, Inc., 594 F. App’x 714, 716–17 (2d Cir. 2014)
(summary order) (upholding finding that nurses were employees based on “economic realities”
of the relationship with the defendants); cf. Arena v. Delux Transp. Servs., Inc., 3 F. Supp. 3d 1,
11–12 (E.D.N.Y. 2014) (independent contractor driver controlled “how much overall money he
earned as a result of the number of calls he took and fares he earned”) (citations omitted).
Nor did the spotholders make “‘large capital expenditures’” as part of their work, which
is “highly relevant” in determining whether an individual is an employee or an independent
contractor. Saleem, 854 F.3d at 1440 (2d Cir. 2017) (quoting Dole v. Snell, 875 F.2d 802, 810
(10th Cir. 1989)) (citations omitted). While the spotholders bought the equipment that the
defendants required, sometimes from the defendants, their outlay for that equipment — hard
hats, safety gloves, safety vests, flashlights, and safety cones (ECF No. 64, Joint Stips. ¶ 74) —
was well within the range that courts have found to be “negligible,” weighing strongly in favor
of employee status. See Saleem, 854 F.3d at 144 (“annual investment of $400” (in 1989 dollars)
“in tools or equipment [was] negligible” (quoting Dole, 875 F.2d at 810–11)). The spotholders
were not trying “to generate a return on . . . investment” when they bought equipment like
hardhats, boots, and cones. Id. (quoting Dole, 875 F.2d at 811) (citations omitted). They were
just doing what the defendants directed them to do. Nor does the fact that they used their own
cars and had to maintain insurance mean that they were independent contractors. See Campos v.
Zopounidis, No. 09-CV-1138, 2011 WL 2971298, at *6–7 (D. Conn. July 20, 2011) (finding on
summary judgment that the plaintiff-driver was an employee even though he used his own
vehicle, because plaintiff’s investment was still less than defendant’s).
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Accordingly, this factor weighs in favor of finding that the spotholders were employees.
c. Degree of Skill
The third Brock factor — the degree of skill and independent initiative — also favors the
spotholders. If workers do not need to have special skills, or if no “independent initiative” is
required to perform the work, they are more likely employees. Vasquez, 2021 WL 12264567, at
*7. As described above, spotholding did not require specialized skill. Spotholders had to drive
to a location, save parking spots for Con Edison workers, and monitor the location. (Tr. 8:15-19,
124:19-22, 213:14-20, 282:8-14, 310:25–311:5, 343:5-9, 412:16-21, 444:14-16, 477:23–478:8;
Gavrilov Dep. 69:14–70:6.) If other drivers got angry about losing a spot, the spotholder was not
supposed to argue with them. (Tr. 62:25–64:15, 298:24–299:22.) As Gavrilov put it, the “job is
very, very simple,” all spotholders have to do is sit in the car and make sure spots stay open.
(Gavrilov Dep. 108:22–25, 145:21-22.) Indeed, because the spotholders did not need to have
special skills, the defendants did not look for workers with experience or special training. (ECF
No. 64, Joint Stips. ¶¶ 69–73.) See Saleem v. Corp. Transp. Grp., Ltd., 52 F. Supp. 3d 526, 541
(S.D.N.Y. 2014), order clarified, No. 12-CV-8450, 2014 WL 7106442 (S.D.N.Y. Dec. 9, 2014),
and aff’d sub nom. Saleem v. Corp. Transportation Grp., Ltd., 854 F.3d 131 (2d Cir. 2017); see
also Gustafson v. Bell Atl. Corp., 171 F. Supp. 2d 311, 326 (S.D.N.Y 2001); Ethelberth v.
Choice Sec. Co., 91 F. Supp. 3d 339, 351 (E.D.N.Y. 2015) (“[D]riving is not” a “specialized
skill.”).
Accordingly, this factor also weighs in favor of finding that the spotholders were
employees.
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d. Permanence or Duration of the Working Relationship
The next factor is the permanence or duration of the relationship. This factor, too, weighs
in favor of finding an employer/employee relationship. A worker who is “transient” and
“typically works for several employers” is generally more likely to be an independent contractor.
Brock, 840 F.2d at 1060–61; see also Saleem, 52 F. Supp. 3d at 543 (S.D.N.Y. 2014) (“Generally
speaking, independent contractors often have fixed employment periods and transfer from place
to place as particular work is offered to them, whereas employees usually work for only one
employer and such relationship is continuous and of indefinite duration.” (quoting Baker v. Flint
Eng’g & Const. Co., 137 F.3d 1436, 1442 (10th Cir. 1998))).
The defendants’ contracts provided for open-ended periods with no end dates or
timeframes for completion. (ECF No. 64, Joint Stips. ¶ 81.) For almost all of the spotholders,
this was their only job,15 and many of them worked for the defendants for years. (See, e.g., Tr.
8:11-14 (spotholder worked for the defendants for approximately eight years), 74:11-15
(spotholder worked for the defendants for approximately five years), 118:12-15 (spotholder
worked for the defendants for approximately six years).) The defendants did not tell the
spotholders that the job was temporary, and the spotholders “had the understanding that it would
be an open-ended job.” (Tr. 10:3-18; see also Tr. 75:12-16, 120:7-13, 277:24–278:1, 306:10-12,
413:24–414:1, 445:21-23, 471:13-20.) They also regularly worked overtime. (See Sec. Ex. 27.)
The spotholders’ working relationship with the defendants was “continuous” and “of indefinite
15 Indeed, only one testifying spotholder had anything close to a second job during the relevant time
period. Dennis Danville, who typically worked the overnight twelve-hour shifts Monday through
Thursday, had an unrelated part-time, home-based retail business selling herbal products. (Tr. 12:7–
13:4, 32:14–33:7, 45:5–46:1.)
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duration,” which favors employee status. Saleem, 52 F. Supp. 3d at 543 (S.D.N.Y. 2014)
(citation omitted).
Also significant, as explained above, is the fact that the spotholders really could not work
for anyone else. See Section IV.a.iii. In short, the spotholders generally “work[ed] for only one
employer,” and the relationship was “continuous and of indefinite duration.” Saleem, 52 F.
Supp. 3d at 543 (S.D.N.Y. 2014) (citation omitted). This factor favors employee status.
e. Extent to Which Work Is Integral Part of Employer’s Business
The last factor is whether spotholding was an integral part of the defendants’ business. It
was. The defendants stipulated that they could not run their spotholding business or fulfill their
contractual obligations to Con Edison without the spotholders. (ECF No. 64, Joint Stips. ¶¶ 103–
04.) Moreover, the spotholding business was the largest source of the defendants’ annual income
for the relevant time period (Gavrilov Dep. 47:9-11, 53:5-14), and Defendant CES existed as an
entity for the sole purpose “to pay spotholders and to do the financial accounting for the
spotholders” (ECF No. 64, Joint Stips. ¶ 32). See Brock, 840 F.2d at 1059–60 (holding that
“nurses constituted the most integral part of [the defendant’s] business, which is to provide
health care personnel on request” and that this “weigh[s] heavily in favor” of determining that
the nurses were employees).
* * *
Accordingly the Court finds that “as a matter of economic reality,” the spotholders were
not “in business for themselves,” but rather depended on the defendants’ business to render
spotholding services, and thus were the defendants’ employees under the FLSA. Brock, 840
F.2d at 1059.
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Recordkeeping
The Secretary argues that the defendants violated the recordkeeping provisions of the
FLSA because they did not keep “records of daily and weekly hours, or hourly pay rates.” (ECF
No. 81 at 62–63 (citing 29 U.S.C. § 211(c); 29 C.F.R. § 516.2(a)(6)(i), (a)(7)).) The defendants
do not address these allegations.
Section 211 of the FLSA requires covered employers to “make, keep, and preserve such
records of the persons employed by him and of the wages, hours, and other conditions and
practices of employment,” as “prescribe[d] by” Department of Labor “regulation[s].” 29 U.S.C.
§ 211(c); see 29 C.F.R. Part 516. The implementing regulations require a covered employer to
keep records that include hours worked each workday, hours worked each workweek, wages due
for hours each workweek, total overtime premium pay, total wages paid each pay period, and the
dates of the payment and the pay period covered. 29 C.F.R. § 516.2(a). As ADD Xiong testified
and the documentary evidence shows, the defendants’ records did not include weekly hours or
hourly pay rates. (Tr. 529:5-17, 532:3-5, 539:23-25, 552:2-4, 555:1-4, 557:10-14, 572:19-22;
Sec. Exs. 12–13.) Accordingly, the Court finds that the defendants’ recordkeeping did not
comply with Section 211 of the FLSA.
Damages
Having determined that the spotholders are properly classified as employees under the
FLSA, the Court addresses the question of damages.
a. Back Wages
An employer who violates Section 207 of the FLSA “shall be liable to the employee or
employees affected in the amount of their unpaid minimum wages, or their unpaid overtime
compensation . . . .” 29 U.S.C. § 216(b). As described above, the Court credits ADD Xiong’s
testimony and calculation, which was based on the defendants’ own business records, of the
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unpaid wages owed to the spotholders who worked overtime hours during the relevant time
period. (Sec. Exs. 27–28; see generally Tr. 524:6–565:15.) The defendants do not dispute, or
even address, this calculation in their post-trial brief. (See ECF No. 82.)
ADD Xiong used the higher of: (1) an employee’s actual rate of pay, or (2) any
applicable statutory minimum wage to determine the wages and overtime pay that a spotholder
should have been paid if classified as an employee under the FLSA. (Tr. 567:25–569:1; see also
Sec. Ex. 27.) The FLSA provides that the overtime premium is “a rate not less than one and one-
half times the regular rate at which [someone] is employed.” 29 U.S.C. § 207; see also 29
C.F.R. § 778.107 (“If the employee’s regular rate of pay is higher than the statutory minimum,
his overtime compensation must be computed at a rate not less than one and one-half times such
higher rate.”). Furthermore, the FLSA also contains a savings clause that provides “[n]o
provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal
or State law or municipal ordinance establishing a minimum wage higher than the minimum
wage established under this chapter.” Bell v. ArchCare Cmty. Servs., Inc., No. 24-CV-1877,
2025 WL 1220187, at *6 (E.D.N.Y. Apr. 28, 2025) (alteration in original) (quoting 29 U.S.C.
§ 218(a)). If a state minimum wage is higher than the federal minimum wage, “[c]ourts in this
circuit agree that, when calculating actual damages, plaintiffs will recover under the higher state
minimum wage, even for a FLSA claim.” Id. (emphasis in original) (collecting cases).
Accordingly, the Court adopts ADD Xiong’s calculations and finds that the defendants
owe $3,079,486.27 in back wages to the 329 spotholders who worked overtime hours during at
least one workweek for the period from January 5, 2018 through June 12, 2021. (See Sec. Exs.
27–28.)
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b. Liquidated Damages
In addition to unpaid wages, an employer who violates Section 207 of the FLSA “shall be
liable to the employee or employees affected . . . an additional equal amount as liquidated
damages.” 29 U.S.C. 216(b). “Liquidated damages are not a penalty exacted by the law, but
rather compensation to the employee occasioned by the delay in receiving wages due caused by
the employer’s violation of the FLSA.” Herman, 172 F.3d at 142 (citation omitted). “Courts
have discretion to deny an award of liquidated damages where the employer shows that, despite
the failure to pay appropriate wages, the employer acted in subjective ‘good faith’ and had
objectively ‘reasonable grounds’ for believing that the acts or omissions giving rise to the failure
did not violate the FLSA.” Id. (quoting 29 U.S.C. § 260). “The employer bears the burden of
proving good faith and reasonableness, but the burden is a difficult one, with double damages
being the norm and single damages the exception.” Id. (citing Reich v. Southern New England
Telecommunications Corp., 121 F.3d 58, 71 (2d Cir.1997)). “To establish good faith, the
employer must take active steps to ascertain the dictates of the FLSA and then act to comply
with them.” Id. (citation omitted.)
The defendants argue that they acted in good faith when they classified the spotholders as
independent contractors, because they consulted with in-house counsel and their outside
accountant. (ECF No. 82 at 29–31.) They argue that “Courts in this Circuit routinely deny
liquidated damages where the employer took steps to investigate the legal requirements, sought
advice from professionals, or otherwise attempted in good faith to comply with the law.” (ECF
No. 82 at 31 (citing Barfield, 537 F.3d at 150; Herman, 172 F.3d at 142).) The Secretary argues
that the defendants have not met their “difficult burden,” and that one “cursory discussion[]”
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during which “they never discussed the FLSA at all” does not establish subjective good faith or
objectively reasonable grounds for the classification. (ECF No. 81 at 56–62 (citations omitted).)
At the approximately forty-five-minute meeting in 2016, Gavrilov, Waheed, and Kaviar,
the in-house counsel, discussed how to classify the spotholders. (ECF No. 64, Joint Stips. ¶¶ 57–
60; Tr. 170:13–174:14, 195:6-10, 347:18–350:6, 395:9-15.) Kaviar recommended classifying
them as independent contractors, but gave no legal analysis and did not mention the FLSA or its
requirements, even though the Con Edison contract explicitly required the defendants “to comply
with the Fair Labor Standards Act.” (ECF No. 64, Joint Stips. ¶¶ 57–60; Tr. 172:2-4, 195:6-10,
348:8-10, 348:19–349:4, 395:9-15, 398:22-25; Kaviar Dep. 110:9-17; Sec. Ex. 10 at 20; Sec. Ex.
11 at 21.) Gorshkov, an accountant, agreed that the spotholders should be classified as
independent contractors, but he was relying on the IRS code and his accounting expertise and,
not the FLSA, a law with which he was unfamiliar. (Tr. 174:6-14, 196:6-18, 376:12–377:12,
378:19–379:13.) Good faith requires the employer to “show at a minimum that it undertook to
apply the FLSA’s requirements to the particular job at issue.” Young v. Cooper Cameron Corp.,
No. 04-CV-5968, 2006 WL 1562377, at *9 (S.D.N.Y. June 6, 2006) (citing Reich, 121 F.3d at
71). The only document that Kaviar reviewed before making this recommendation was the Con
Edison contract. (ECF No. 64, Joint Stips. ¶ 58; Tr. 194:19–195:10, 347:25–348:7, 396:10–
398:25.) Kaviar never analyzed the job requirements under the FLSA to determine if
spotholders were contractors or employees. (Tr. 173:21–174:2, 348:14-18, 395:20–396:9;
Gavrilov Dep. 139:16-23, 141:6-19; Waheed Dep. 80:13-15, 98:12-14.)16
16 In their post-trial brief, the defendants cite the parties’ Rule 56.1 statements, which describe, among
other things, that “Gavrilov asked whether further research or legal analysis was necessary, and Kaviar
responded that he was confident in his conclusion but would ‘work on it a little bit deeper.’” (ECF No.
82 at 30 (citing ECF Nos. 35-1 ¶ 77, 35-2 ¶ 64).) But this is irrelevant, because the defendants concede
that they never discussed the FLSA.
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The defendants cite Barfield and Herman for the proposition that “[c]ourts in this Circuit
routinely deny liquidated damages where the employer took steps to investigate the legal
requirements, sought advice from professionals, or otherwise attempted in good faith to comply
with the law.” (ECF No. 82 at 31.) However, in both cases, the Second Circuit upheld the award
of liquidated damages because the defendants did not sufficiently analyze applicable FLSA
requirements. See Barfield, 537 F.3d at 150–51 (“[W]e agree with the district court that, as a
matter of law, defendants cannot carry the heavy burden necessary to avoid liquidated
damages.”); Herman, 172 F.3d at 142–43 (“Because appellant failed to prove both subjective
good faith and objective reasonableness, liquidated damages were properly assessed against
him.”). Here, while consulting in-house counsel and an outside accountant was “an active step,
its purpose was plainly not to ascertain the dictates of the FLSA with respect to the issue at
hand.” Barfield, 537 F.3d at 151 (quoting Herman, 172 F.3d at 142) (citation modified). The
meeting about the classification of the spotholders is therefore “insufficient, as a matter of law,
to warrant an exception to the FLSA liquidated damages requirement.” Id.
Accordingly, the Court awards liquidated damages of $3,079,486.27. Thus, the
combined total of back wages and liquidated damages is $6,158,972.54 to the 329 spotholders
who worked overtime hours during at least one workweek for the period from January 5, 2018
through June 12, 2021. (See Sec. Ex. 28 (showing the total back wages, liquidated damages, and
overall amounts due to each spotholder).)
Injunctive Relief
The Secretary argues that injunctive relief is appropriate because the defendants
misclassified the spotholders as independent contractors for years, including “more than a year
into the Department’s investigation,” and have made clear that they will resume treating
spotholders as contractors unless the outcome of this litigation prevents them from doing so.
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(ECF No. 81 at 63–64 (citing Tr. 347:2-6; Kaviar Dep. 77:10-14; Waheed Dep. 127:23–128:5).)
The defendants do not address the request for injunctive relief.
Under Section 217 of the FLSA, district courts may, “for cause shown,” “restrain
violations of Section 215,” including “any withholding of payment of minimum wages or
overtime compensation found by the court to be due to employees” under the FLSA. 29 U.S.C.
§ 217. “Prospective injunctions are essential because the cost of noncompliance is placed on the
employer, which lessens the responsibility of the [Department of Labor] in investigating
instances of noncompliance.” Solis v. SCA Rest. Corp., 938 F. Supp. 2d 380, 404 (E.D.N.Y.
2013) (quoting Martin v. Funtime, Inc., 963 F.2d 110, 114 (6th Cir.1992) (internal citation
omitted)). Courts consider the “previous conduct of the employer and the dependability of his
promises for future compliance” in determining whether a prospective injunction should be
granted. Solis, 938 F. Supp. 2d at 404–05 (quoting Dunlop v. Davis, 524 F.2d 1278, 1281 (5th
Cir. 1975)) (citation omitted); see also Brock v. Wackenhut Corp., 662 F. Supp. 1482, 1488
(S.D.N.Y. 1987) (citing the Dunlop standard).
“The resolution of the issue is close.” Brock v. Wackenhut Corp., 662 F. Supp. 1482,
1489 (S.D.N.Y. 1987). As for the defendants’ previous conduct, they decided after a brief
meeting to classify spotholders as contractors, and showed no interest in complying with, or even
understanding, the FLSA. This resulted in spotholders collectively losing millions of dollars in
unpaid overtime wages over the years. On the other hand, there is no evidence of deliberate bad
faith of the sort that courts in this circuit have found justifies injunctive relief. There is no
evidence that the defendants deliberately falsified records or engaged in retaliatory conduct
against employees for participating in this lawsuit. See, e.g., Solis, 938 F. Supp. 2d at 404–05.
However, as far as the “dependability of [the defendants’] promises for future compliance,” the
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record does not reflect that the defendants have taken any steps — such as updating or altering
their recordkeeping practices — to ensure compliance with wage and overtime requirements, nor
have they promised future compliance. Cf. Brock v. Wackenhut Corp., 662 F. Supp. 1482, 1489
(S.D.N.Y. 1987) (finding that the defendant’s “install[ation] [of] a sophisticated computer
system designed to assure that each employee’s hours of work . . . are accurately recorded so that
his or her hourly rate and overtime hours are properly computed . . . will eliminate the problems
involved in this action, which were in large measure due to inadequate staff” and declining to
impose injunctive relief). On balance, and because ultimately “[t]he imposition of an injunction
is not punitive, nor does it impose a hardship on the employer since it requires him to do what
the [FLSA] requires anyway,” Solis, 938 F. at 404 (citation omitted), injunctive relief is
appropriate, in view of the prior misclassification of the spotholders, the declared intent to return
to prior practices unless prevented from doing so, and the absence of any effort to understand the
FLSA.
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CONCLUSION
As explained above, the Court finds as a matter of law that the spotholders were
employees under the FLSA and are entitled to back wages and liquidated damages of
$6,158,972.54. The Court also grants an injunction pursuant to Section 217 of the FLSA
permanently restraining the defendants, their officers, agents, employees, and those persons in
active concert or participation with the defendants, from violating the provisions of Sections 207,
211(c), 215(a)(2), and 215(a)(5) of the FLSA, and orders the defendants to reimburse the
Secretary for the costs of this action. The Clerk of Court is respectfully directed to enter
judgment and close the case.
SO ORDERED.
___________________________
ANN M. DONNELLY
United States District Judge
Dated: Brooklyn, New York
March 6, 2026
s/Ann M. Donnelly
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