United States District Court, D. South Carolina, Columbia Division
ORDER AND OPINION
Margaret B. Seymour, Senior United States District Court
December 23, 2015, Plaintiffs Bryon Sill and Daniel
Yarborough (“Plaintiffs”) sued Defendant AVSX
Technologies, LLC (“AVSX”) and Bobby Johnson
(“Defendants”) for violations of South Carolina
Wage Payment Schedule, South Carolina Code Annotated
§§ 41-10-50 et seq., and Fair Labor
Standards Act (“FLSA”), 29 U.S.C. §§
201 et seq. ECF No. 1-1 ¶¶ 17-28.
Plaintiffs claim that they are entitled to unlawfully
withheld “holdbacks” and “overrides”
under the South Carolina Wage Payment Schedule. ECF No. 1-1
¶¶ 17-23. Plaintiffs' second claim is that they
were unlawfully characterized as independent contractors
rather than statutory employees pursuant to the FLSA.
Id. at ¶¶ 24-28. Plaintiffs' FLSA
claims assert that they were damaged by failure to provide
benefits and increased taxes. Id.
removed to federal court on February 24, 2016, under 28
U.S.C. § 1441. ECF No. 1 at 1. Defendants moved for
summary judgment on October 7, 2016. ECF No. 16. Plaintiffs
responded on November 18, 2016. ECF No. 24. Defendants
replied on December 1, 2016. ECF No. 27. Defendant AVSX filed
a motion in limine on December 7, 2016. ECF No. 28.
Plaintiffs filed a motion in limine on December 7, 2016. ECF
No. 29. With the consent of Plaintiffs, on January 19, 2017,
the court granted Defendants' motion for summary judgment
on the FLSA claims. Further, Plaintiff's consented to
dismissing the claims against Defendant Johnson.
AVSX “is engaged in the business of selling,
installing, and servicing home security systems, ”
which are then monitored by another company, Vector Security,
Inc. (“Vector”). ECF No. 16-1 at 3. Plaintiffs
were part of a group of individuals employed by Defendant
AVSX to sell the home security systems. Id. Another
group of individuals install and service the home security
system. Id. Plaintiffs worked at a competitor of
Defendant AVSX, Palmetto Alarm, but moved to Defendant AVSX
with one of the owners of Palmetto Alarm, Jamie Wilson
(“Wilson”), in April 2011. Id. at 3. The
sales team is structured like a triangle, Wilson is at the
top of the triangle and receives commissions for all of the
sales made; next are Plaintiffs, who receive commissions for
all of the salespeople below them; and so on.
August 2012 through May 2014, Plaintiffs were employed under
an independent contractor contract. Plaintiffs' August
2012 employment contracts “acknowledg[e] that they were
independent contractors rather than employees.” ECF
Nos. 16-5 (Plaintiff Yarborough), 16-6 (Plaintiff Sill).
Further, Plaintiffs' employment agreement states that
“[Plaintiff] agrees and understands that he/she is an
authorized agent of [Defendant AVSX], but not an employee for
Federal and State Income Tax purposes . . . . [Plaintiff] is
considered an Independent Contractor . . . .” ECF Nos.
16-5 at 2, 16-6 at 2. From May 2014 through December 2014,
Defendant AVSX employed Plaintiffs under a contract stating
that they were W-2 employees. ECF Nos. 16-7 (Plaintiff
Yarborough), 16-8 (Plaintiff Sill). The main differences in
the terms of the April 2011 signed contract and the May 2014
signed contract are a two-page addendum in the May 2014
contract explaining the override policy and the May 2014
contract identifying Plaintiffs as “employee[s]”
rather than “affiliate[s].” See id.
were paid on commission for the number of home security
systems that they sold, regardless of classification as
employee or affiliate. Customer would “make an initial
payment which covered the cost of the equipment and
installation as well as Plaintiffs' commission and agreed
to make monthly payments thereafter to compensate Defendant
[AVSX] for providing ongoing security services.” ECF
No. 24 at 1. Vector would retain ten percent of the initial
payment in case of “chargebacks.” A
“chargeback” occurs when a customer fails to keep
a contract for the full year. A “chargeback” is
the “amount paid by Vector to Defendant AVSX to fund
the contract initially, ” and would be “charged
back” to the individual if the customer canceled within
the first twelve months. Defendant AVSX retained ten percent
of the commission payment, called a “holdback, ”
in case of a “chargeback.” Id.; ECF No.
16-1 at 3. Ten percent is an industry standard. Id.
The “holdback” protects Defendant AVSX from a
customer default within the first twelve months. Id.
If the customer does not default, Plaintiffs would be paid
the ten percent the thirteenth month unless the
salesperson's “holdbacks” was exceeded by
“chargebacks.” ECF 16-1 at 3. The contract
contains various other items that a salesperson could be
charged for, including charges for “no shows or
cancel[lations] at the door”; if the salesperson has
too many accounts with a credit score below 650; and if a
client cancels a contract, for installation and removal of
the equipment along with equipment costs. Id. at 1.
As stated in the contract, employees were required to keep a
$1, 000 reserve in the event that “charge backs”
remain on their account at the time the employee leaves.
Id. Plaintiffs did not pay any money back to
Defendant AVSX when they left. Plaintiffs' contracts were
slightly different from others. The usual practice was that
“holdbacks” would go to team leaders in the
thirteenth month, not the salespeople. However, as part of
their contracts Plaintiffs were supposed to be given their
“holdbacks” when they were salespeople and also
as team leaders. ECF No. 36 at 55.
April 2011 through August 2012, Defendant AVSX paid Wilson
and Wilson paid Plaintiffs through his personal checking
account. ECF No. 16-1 at 4. Defendant AVSX paid Plaintiffs
directly from August 2012 through the end of their employment
in December 2014. See Id. at 1. Wilson left
Defendant AVSX in November 2013 and Plaintiffs took over as
sales team leaders.
April 2011 to August 2012, Wilson provided IRS Form
1099-Miscellaneous Income (“Form 1099”) to each
Plaintiff. ECF No. 16-2 at 3-4. From August 2012 through
November 2013, Defendant AVSX provided Form 1099 to each
Plaintiff. Id. at 4.
employment contract states that an employee is not required
to be exclusive but there is a $100 bonus for exclusivity and
an exclusive employee “cannot contract for a period of
36 months with Alarm Accounts outside [Defendant AVSX's]
relation for any services, referrals, nor solicit any Alarm
Accounts.” ECF Nos. 16-5 at 2; 16-6 at 1. If an
employee agrees to exclusivity, he also agrees to a
“non-compete” clause, which states he will not
provide “substantially similar services” within
the territory the employee served under Defendant AVSX. The
non-compete clause does not include an end date. Id.
at 4. Plaintiff Yarborough's 2011 contract states that
the affiliate can only sell contracts within a 60 mile radius
of his or her home base (i.e., city the affiliate is based
in), regardless of exclusivity. ECF No. 16-5 at 5. As stated at
the hearing held on January 19, 2017, both Plaintiffs agreed
to exclusivity. See ECF No. 40.
AVSX did not provide Plaintiffs with dedicated offices.
Id. at 2. Plaintiffs set their own hours, identified
and solicited their own customers. Id. Defendant
AVSX provides a “company identification badge, business
cards, and staff shirt.” ECF 16-5 at 3. Each Plaintiff
was required to present his identification badge “so
that clients can identify [Plaintiff] as an authorized agent
for [Defendant AVSX].” Id. Defendant AVSX also
provided marketing materials. Id. Plaintiffs were
given work cellphones and iPads. While company policy states
only team leaders drive company cars, Plaintiffs drove
company cars prior to their status as team leaders.
See ECF No. 36 at 67.
early 2014, Plaintiffs were told that if they did not change
their status to W-2 employees, they would not be allowed to
be team leaders, drive company vehicles, or go into certain
areas to work. Id. at 68-69. Plaintiffs agreed to
become W-2 employees. When Plaintiffs became W-2 employees,
Defendant AVSX reduced their commissions by ten percent. ECF
No. 16-1 at 6. Plaintiffs assert that they did not
receive any new benefits when they became W-2 employees. ECF
No. 36 at 73. Both the August 2012 and May 2014 employment
contracts automatically renewed every thirty days and
Defendant AVSX retained the right to terminate the contracts
with twenty-four hour notice. ECF Nos. 16-5 at 2, 16-7 at 2.
SUMMARY JUDGMENT STANDARD
court shall grant summary judgment if “there is no
genuine dispute as to any material fact and that the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56. The judge does not weigh evidence but
determines if there is a genuine issue for trial.
Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986).
The party seeking summary judgment bears the initial burden
of coming forward and demonstrating an absence of genuine
issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party has met its
burden, the nonmoving party must affirmatively demonstrate
that there is a genuine issue of material fact for trial.
Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). The court should grant