Santiago v. Construction Cleaning Pros AZ LLC

• Court: District Court, D. Arizona
• Decided: May 2, 2025
• Docket: 2:23-cv-01511
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Demetrio Santiago, No. CV-23-01511-PHX-KML

10 Plaintiff, ORDER

11 v.

12 Construction Cleaning Pros AZ LLC, Karl Lautz, and Unknown Lautz, 13 Defendants. 14 15 Plaintiff Demetrio Santiago performed construction cleaning work for defendant 16 Construction Cleaning Pros AZ, LLC and its owners, defendants Karl and Lisa M. Lautz 17 (collectively “CCP”). Santiago claims CCP failed to pay wages owed to him under the 18 Fair Labor Standards Act (FLSA), the Arizona Minimum Wage Act (AMWA), and the 19 Arizona Wage Act (AWA). 20 Santiago moved for partial summary judgment on one ground: that he was an 21 employee, not an independent contractor, under the FLSA. The court agrees and his 22 motion is granted. 23 I. Background 24 The following facts are presented in the light most favorable to CCP.1 CCP is an

25 1 CCP argues summary judgment cannot be granted because Santiago failed to provide a separate statement of facts as L.R. Civ. P. 56.1(a) requires. (Doc. 31 at 2.) But as 26 Santiago points out, this court’s standard case management order suspends L.R. Civ. P. 56.1(a). See https://www.azd.uscourts.gov/sites/azd/files/judge- 27 orders/KML%20Case%20Management%20Order.pdf. And although the standard case management order did not issue in this transfer case, Santiago’s motion makes clear the 28 issue on which he is seeking judgment and provides citations to the relevant factual support. CCP does not explain how a statement of facts, even if required, would have 1 Arizona construction cleaning business. (Doc. 30-2 at 5.) Santiago worked as a cleaner 2 for CCP between May and June 2023. (Doc. 30-3 at 3.) CCP would text Santiago to offer 3 work for the day and Santiago could accept or decline. (Doc. 30-4 at 4.) On at least one 4 occasion, Santiago declined to work for CCP because he “had other work.” (Doc. 30-4 5 at 4.) 6 On the days Santiago worked for CCP, CCP would “drop[ Santiago off] at a job 7 site with cleaning supplies” (Doc. 31 at 6) and would “periodically stop at project sites to 8 check in” on his progress (Doc. 31-1 at 2). CCP “routinely” stopped by the project site 9 during Santiago’s lunch break. (Doc. 31-1 at 2.) Santiago told CCP the work he had 10 performed and CCP then inspected it. (Doc. 30-4 at 4; Doc. 30-6 at 4.) If Santiago’s work 11 was not to CCP’s standards, CCP required him to re-do it. (Doc. 30-4 at 4; Doc. 30-6 12 at 4.) 13 The parties agreed Santiago would be paid $150 per day in cash. (Doc. 30-4 at 2.) 14 Santiago asked to be paid daily, and generally CCP did so after the work was 15 “satisfactorily completed on that day.” (Doc. 30-4 at 2.) But sometimes CCP did not pay 16 Santiago if it determined his work was inadequate or if CCP itself was not paid until after 17 the “overall project” was completed. (Doc. 30-4 at 2; Doc. 30-8 at 7.) 18 The last week Santiago worked for CCP, CCP refused to pay him because it felt 19 his work was not satisfactorily completed. (Doc. 30-8 at 7.) Santiago then brought this 20 complaint alleging CCP’s failures to pay him violated the FLSA, AMWA, and AWA. 21 (Doc. 1 at 1.) After the parties conducted discovery, Santiago moved for partial summary 22 judgment claiming CCP misclassified him as an independent contractor and he was 23 instead an employee under the FLSA. (Doc. 30 at 1.)2 In response, CCP argued there is a 24 dispute of fact as to whether Santiago was an employee and also claimed CCP is not 25 “covered by the FLSA.” (Doc. 31 at 1–2.) It failed to move for summary judgment on the 26

27 made a material difference to its opposition and was not prejudiced by its absence. 2 Santiago’s motion (Doc. 30), reply (Doc. 32), and table of contents for motion exhibits 28 (Doc. 30-1) do not have ECF-generated headers. Citations are to their internal paginations. 1 FLSA coverage ground itself, though, and the court therefore declines to consider that 2 argument.3 Because there is no genuine dispute as to any material fact regarding 3 Santiago’s employee status and CCP’s argument is not properly raised in response to a 4 motion for summary judgment, Santiago’s motion is granted. 5 II. Legal Standard 6 A court must grant summary judgment “if the movant shows that there is no 7 genuine dispute as to any material fact and the movant is entitled to judgment as a matter 8 of law.” Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 9 (1986). The movant bears the burden of presenting the basis for the motion and 10 identifying evidence it believes demonstrates the absence of a genuine issue of material 11 fact. Id. at 323. A genuine dispute exists if “the evidence is such that a reasonable jury 12 could return a verdict for the nonmoving party,” and material facts are those “that might 13 affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 14 477 U.S. 242, 248 (1986). 15 “The evidence of the non-movant is to be believed, and all justifiable inferences 16 are to be drawn in his favor.” Id. at 255. But a non-movant cannot rest on mere 17 allegations or denials and must instead show there is “sufficient evidence supporting the 18 claimed factual dispute . . . to require a jury or judge to resolve the parties’ differing 19 versions of the truth at trial.” Id. at 249 (quoting First Nat. Bank of Ariz. v. Cities Serv. 20 3 CCP argues the FLSA does not apply because it never made more than $500,000. 21 (Doc. 31 at 4 (citing 29 U.S.C. § 203(s)(1)(A)(ii).) Generating revenue of more than $500,000 represents only one way the FLSA may apply. See 29 U.S.C. § 207(a)(1) 22 (FLSA also provides individual coverage to employees “engaged in commerce or the production of goods for commerce”). In any event, CCP should have filed its own motion 23 for summary judgment if it wanted a ruling on whether the FLSA’s $500,000 revenue provision applied. Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 24 49, 66 (1987) (finding defendants “should have moved for summary judgment” on threshold issue and “the case proceeds to trial on the merits” because they failed to do 25 so). The Ninth Circuit has warned “great care must be exercised” when a court is considering whether to grant summary judgment on an issue not raised in a procedurally- 26 proper manner. KST Data, Inc. v. DXC Tech. Co., 980 F.3d 709, 714 (9th Cir. 2020). Accordingly, both because CCP raised the issue in a procedurally-improper way and its 27 argument would not fully dispose of the claim even if considered, the court declines to address the argument now. Santiago will ultimately bear the burden of proving FLSA 28 coverage at trial. 1 Co., 391 U.S. 253, 289 (1968)). 2 III. Employee Status 3 Determining whether an individual qualifies as an employee or an independent 4 contractor depends upon “[e]conomic realities, not contractual labels.” Real v. Driscoll 5 Strawberry Associates, Inc., 603 F.2d 748, 755 (9th Cir. 1979). Although CCP called 6 Santiago an independent contractor, that labeling is immaterial. The “subjective intent of 7 the parties to a labor contract” cannot override the ultimate “economic realities.” Id. 8 The Ninth Circuit has identified factors distinguishing employees from 9 independent contractors, including: (1) the degree of the employer’s right to control the 10 manner in which the work is performed; (2) the employee’s opportunity for profit or loss 11 depending upon his managerial skill; (3) the employee’s investment in equipment or 12 materials required for his task, or employment of helpers; (4) whether the employee’s 13 services require special skill; (5) the degree of permanence of the working relationship; 14 and (6) whether the service rendered is an integral part of the employer’s business. Id. 15 at 754. Although Driscoll’s list is not exhaustive, it provides a useful framework for 16 evaluating the parties’ relationship. See id. (“The presence of any individual factor is not 17 dispositive of whether an employee/employer relationship exists. Such a determination 18 depends ‘upon the circumstances of the whole activity.’”) (quoting Rutherford Food 19 Corp. v. McComb, 331 U.S. 722, 730, (1947)); see also Donovan v. Sureway Cleaners, 20 656 F.2d 1368, 1370 (9th Cir. 1981). Based on the Driscoll factors and all other 21 circumstances, Santiago was an employee. 22 a. Right to Control 23 The first Driscoll factor evaluates the employer’s right to control the manner in 24 which an employee worked. Driscoll, 603 F.2d at 754. “The extent of the employer’s 25 right to control the means and manner of the worker’s performance is a primary factor.” 26 Lutcher v. Musicians Union Local 47, 633 F.2d 880, 884 (9th Cir. 1980). 27 CCP alleges it “rarely, if ever, directed, instructed, supervised or controlled the 28 manner or means in which [Santiago] performed construction cleaning services” 1 (Doc. 31-1 at 3), but admits it determined the location and scope of Santiago’s work 2 (Doc. 30-4 at 4), set standards for his work (Doc. 30-6 at 4), “periodically stop[ped] at 3 project sites to check in” on Santiago’s progress and “routinely” stopped by project sites 4 during Santiago’s lunch break (Doc. 31-1 at 2), received reports of the work Santiago 5 completed, inspected his work on completion, and required Santiago to re-do his work if 6 it was not to CCP’s standards. (Doc. 30-4 at 4; Doc. 30-6 at 4.) 7 “The right to control does not require continuous monitoring of employees.” Eans 8 v. Lund, No. CV-22-01532-PHX-DLR, 2023 WL 7327985, at *3 (D. Ariz. Nov. 7, 2023) 9 (quotations omitted); see also Chao v. Westside Drywall, Inc., 709 F.Supp.2d 1037, 1064 10 (D. Or. 2010), as amended (May 13, 2010) (“[T]he fact that the laborers are not 11 supervised in detail at all times does not necessarily mean they are not ‘employees.’”). 12 Although CCP did not specify precisely how responsibilities were divided between 13 Santiago and other cleaners, it is undisputed “his general duties were determined by 14 [CCP].” Eans, 2023 WL 7327985, at *3; see also Chao, 709 F.Supp.2d at 1064 (finding 15 defendants exercised control where they made all decisions about what materials were 16 used for the project, which project sites work crews were assigned to, and “regularly 17 visited the job sites to provide supervision and instruction”). 18 CCP also argues it did not exercise the requisite level of control because Santiago 19 sometimes refused work and could work for other companies. (Doc. 31 at 6; Doc. 31-1 20 at 2.) This fact supports CCP’s position. Ramos v. Probuilds LLC, No. CV-23-01111- 21 PHX-DMF, 2023 WL 8651038, at *4 (D. Ariz. Nov. 7, 2023), report and 22 recommendation adopted, 2024 WL 169683 (D. Ariz. Jan. 16, 2024). But it is not 23 determinative. See Washington v. Freedom of Expression LLC, No. CV-21-01318-PHX- 24 MTL, 2024 WL 4455483, at *6 (D. Ariz. Oct. 9, 2024) (finding workers were employees 25 even when they could work for other employers). 26 CCP also argues without supporting evidence that it did not train Santiago. 27 (Doc. 31 at 6.) But as a manual worker, CCP’s lack of training provides little basis to 28 conclude Santiago was an independent contractor. Baker v. Barnard Constr. Co., Inc., 1 860 F.Supp. 766, 771 (D.N.M. 1994) (“A laborer on a construction site, who is told 2 where and when to dig, does not exhibit characteristics of an independent contractor if 3 the company does not actually tell him how to use a shovel.”), aff’d sub nom. Baker v. 4 Flint Engineering & Const. Co., 137 F.3d 1436 (10th Cir. 1998). 5 Finally, although the parties dispute who determined the payment terms, it is clear 6 from the available facts that CCP was ultimately in control. Romero v. Synergy 7 Restoration LLC, No. CV-24-01602-PHX-MTL, 2025 WL 33546, at *4 (D. Ariz. Jan. 6, 8 2025) (finding employer-employee relationship where employer “determined the rate and 9 method of payment”). CCP required every worker to sign an agreement setting a “daily 10 flat rate” of $150. (Doc. 31-1 at 2.) Santiago requested his daily rate be paid in cash, but 11 CCP admits it did “not always” pay him daily for the work he completed. (Doc. 30-4 12 at 4.) CCP refused to admit or deny whether Santiago was paid for his work until CCP 13 was paid for an overall project, noting it was “possible” and “job dependent” (Doc. 30-7 14 at 6), but Lautz sent Santiago text messages saying he would not be able to pay Santiago 15 for his last project until CCP itself was paid. (Doc. 30-8 at 4–7.) Finally, CCP admitted it 16 was unwilling to pay Santiago the agreed-upon rate for the work he completed on his 17 final project because it believed Santiago’s work was deficient. (Doc. 31-1 at 3.) See 18 Driscoll, 603 F.2d at 756 (finding company’s ability to “ultimately determine the 19 amount” workers were paid was “[p]articularly significant[]” to concluding workers were 20 employees). Based on the totality of the circumstances, the control factor cuts in 21 Santiago’s favor. 22 b. Profit/Loss Opportunities 23 The second Driscoll factor assesses the employee’s opportunity for profit or loss 24 depending upon his managerial skill. Driscoll, 603 F.2d at 754. Here, Santiago did not 25 exercise any managerial skill and only completed a “detailed construction clean” of areas 26 CCP assigned him for a daily flat rate (Doc. 30-4 at 2). See Monge v. DH Brewing Inc., 27 No. CV-24-01294-PHX-MTL, 2025 WL 33541, at *5 (D. Ariz. Jan. 6, 2025) (“Payment 28 of a fixed wage weighs in favor of employee status.”). Although Santiago could decline 1 to work for CCP on a particular day, his “ability to increase [his] profits . . . [was] 2 limited” because his “pay [was] capped by what [CCP was] willing to pay [him].” 3 Collinge v. IntelliQuick Delivery, Inc., No. 2:12-CV-00824 JWS, 2015 WL 1299369, 4 at *4 (D. Ariz. Mar. 23, 2015). 5 CCP misunderstands this factor, arguing Santiago could simply decline work from 6 CCP to maximize his profits. (Doc. 31 at 6–7.) But this factor “focuses on the 7 relationship between the alleged employer and the alleged employee,” analyzing 8 Santiago’s opportunity to maximize profits through managerial skill as he performed 9 work for CCP, not his freedom to work for other employers. Freedom of Expression LLC, 10 2024 WL 4455483, at *6 (finding argument “[p]laintiffs could have” taken other jobs 11 “unpersuasive”). That Santiago “was able to have other jobs while working [for CCP] 12 does not suggest that [he] had the opportunity for profit” in his relationship with CCP. 13 See Smith v. City of Phoenix, No. 2:14-CV-0936-HRH, 2015 WL 6811660, at *4 (D. 14 Ariz. Nov. 6, 2015) (“Employees may work for more than one employer without losing 15 the protections afforded by the FLSA.”). This factor weighs in Santiago’s favor. 16 c. Investment in Equipment or Materials 17 The third Driscoll factor evaluates an employee’s investment in equipment or 18 materials required for his task, or employment of helpers. Driscoll, 603 F.2d at 754. “In 19 making a finding on this factor, it is appropriate to compare the worker’s individual 20 investment to the employer’s investment in the overall operation.” Dyrhaug v. Tax 21 Breaks Inc., No. CV-13-01309-PHX-BSB, 2015 WL 13567067, at *8 (D. Ariz. Sept. 15, 22 2015) (quotations omitted). An employer’s greater investment in equipment and materials 23 compared to the employee’s is “probative of the workers’ economic dependence on the 24 person who supplies the equipment or facilities.” Torres-Lopez v. May, 111 F.3d 633, 641 25 (9th Cir. 1997). 26 CCP does not dispute it provided Santiago with all materials necessary for his 27 work but claims doing so is “irrelevant” because Santiago did not “show[] up at a 28 factory.” (Doc. 31 at 7.) This factor is not limited to factory workers. See, e.g., Donovan, 1 656 F.2d at 1372 (evaluating capital investment of dry-cleaning operators); Freedom of 2 Expression LLC, 2024 WL 4455483, at *8 (analyzing capital investment of club dancers). 3 This factor clearly weighs in favor of Santiago. 4 d. Amount of Skill 5 The fourth Driscoll factor evaluates the level of “special skill” needed to perform 6 the service rendered. Driscoll, 603 F.2d at 754. “A minimal level of skill weighs in favor 7 of finding that an individual was an employee, rather than an independent contractor.” 8 Dyrhaug, 2015 WL 13567067, at *9. CCP argues without support that Santiago’s work 9 required “some skill” but claims this factor is “no more relevant in this context then [sic] 10 in a landscaper or a house cleaner context.” (Doc. 31 at 7.) Those workers, CCP argues, 11 are “are generally independent contractors.” (Doc. 31 at 7.) 12 On the contrary, this factor weighs in favor of Santiago. Driscoll, 603 F.2d at 755 13 (finding work “consist[ing] primarily of physical labor” did not require specialized skill); 14 see also Romero, 2025 WL 33546, at *5 (finding no specialized skill where employee’s 15 work laying tile “consisted entirely of manual labor”); Peralta v. Custom Image Pros 16 LLC, No. CV-23-00358-PHX-JAT, 2023 WL 8455120, at *3 (D. Ariz. Dec. 6, 2023) 17 (same). Here, Santiago performed manual labor, “deep clean[ing]” construction sites. 18 (Doc. 30-3 at 3.) And contrary to CCP’s argument, landscapers and house cleaners are 19 frequently classified as employees under the FLSA. See, e.g., Perez v. Super Maid, LLC, 20 55 F. Supp. 3d 1065, 1078 (N.D. Ill. 2014) (finding maids were incorrectly classified as 21 independent contractors); Steen v. Maids in USA, No. 3:23-CV-00072, 2023 WL 22 8260894, at *3 (S.D. Tex. Nov. 29, 2023), report and recommendation adopted, 2023 23 WL 8702171 (S.D. Tex. Dec. 15, 2023) (same); De Luna-Lopez v. A Lawn & Landcare 24 Servs. Co., LLC, No. 3:11-CV-1782-M, 2013 WL 4504767, at *5 (N.D. Tex. July 29, 25 2013) (finding landscapers were employees under the FLSA). 26 This factor weighs in Santiago’s favor. 27 e. Duration of Employment 28 The fifth Driscoll factor assesses the permanence of the working relationship. 1 Driscoll, 603 F.2d at 754. “[T]rue independent contractors have a fixed employment 2 period and generally offer their services to different employers.” Donovan, 656 F.2d at 3 1372. 4 The parties dispute the duration of Santiago’s employment with CCP. Santiago 5 alleges he “performed jobs at multiple jobsites for [CCP] for at least two months, 6 possibly four.” (Doc. 30 at 9.) He further alleges, without support, that he maintained “an 7 ongoing working relationship . . . as opposed to a one job or fixed duration employment” 8 as a “full-time worker.” (Doc. 30 at 9.) 9 Similarly without support, CCP claims their relationship was “never a permanent 10 situation.” (Doc. 31 at 8.) Santiago appears to have worked on a job-by-job basis. After 11 receiving a text message from CCP, he could accept or decline work for a particular day 12 and at least once declined to work for CCP because “he had other work on a particular 13 day.” (Doc. 30-4 at 4.) To the extent these facts have been proven, they cut against 14 Santiago and this factor weighs in CCP’s favor. 15 f. Necessity of Services 16 The final Driscoll factor considers whether the worker’s services were integral to 17 the business. Driscoll, 603 F.2d at 754. CCP is a construction cleaning business and 18 Santiago performed construction cleaning on its behalf. (Doc. 30-3 at 3.) CCP does not 19 dispute this but only argues this factor alone “is not dispositive of whether an 20 employee/employer relationship exists.” (Doc. 31 at 8.) Because the parties agree 21 Santiago provided services integral to CCP’s business, this factor undisputedly weighs in 22 Santiago’s favor. 23 g. Conclusion 24 Five of six Driscoll factors weigh in Santiago’s favor. CCP controlled how 25 Santiago’s work was performed, Santiago did not have an opportunity for profit or loss 26 depending upon his managerial skill, CCP provided Santiago all necessary materials, 27 Santiago’s work did not require special skill, and his services were integral to CCP’s 28 business. And although the factors are not determinative, the circumstances of the whole 1 of the relationship are more akin to employment than an independent contractor making 2 his own business decision to contract with CCP. Even viewing the facts in the light most 3 favorable to CCP, Santiago was an employee. 4 IV. Remaining Proceedings 5 Having addressed Santiago’s motion for partial summary judgment, the court 6 concludes referral to a magistrate judge for additional settlement discussions would be 7 beneficial. 8 Furthermore, the court will set a firm trial date. The parties must file a statement 9 identifying the expected length of trial and propose dates between July 8 through July 17, 10 2025 and October 28 through November 21, 2025 when all parties, counsel, and 11 witnesses are available for trial. Trials are conducted between Tuesdays and Fridays. The 12 court will then issue an order setting a firm trial date. That order will also set the dates for 13 the final pretrial conference and will contain (a) deadlines for motions in limine and 14 Daubert motions, (b) the form for the completion of the parties’ joint proposed pretrial 15 order, and (c) instructions to the parties concerning their duties in preparing for the final 16 pretrial conference. 17 Accordingly, 18 IT IS ORDERED the Partial Motion for Summary Judgment (Doc. 30) is 19 GRANTED. 20 IT IS FURTHER ORDERED the Clerk of Court shall substitute defendant 21 “Unknown Jane Doe” with “Lisa M. Lautz.” 22 IT IS FURTHER ORDERED this action is referred to Magistrate Judge Alison 23 S. Bachus to conduct a settlement conference. The parties are directed to jointly call 24 Magistrate Judge Bachus’s chambers at (602) 322-7610 within 14 days to schedule a date 25 for the settlement conference. 26 / 27 / 28 / 1 IT IS FURTHER ORDERED no later than May 8, 2025, the parties shall file a 2|| statement proposing dates between July 8 through July 17, 2025 and October 28 through November 21, 2025 (excluding Mondays) when all parties, counsel, and witnesses are 4|| available for trial. 5 Dated this Ist day of May, 2025. 6 7 @£L f g UL AG TV. MAA Honorable Krissa M. Lanham 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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