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Benion v. Lecom, Inc.

United States District Court, E.D. Michigan, Southern Division

November 23, 2016



          David M. Lawson United States District Judge

         In this case brought under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., the plaintiffs have moved to amend their complaint to add a count for common law and statutory conversion. Plaintiff Harry Benion and three others commenced this action against LeCom, Incorporated and LeCom Communications, Inc. alleging that these companies misclassified them as independent contractors in order to avoid the minimum wage and overtime obligations established by the FLSA. The basis of their proposed conversion count is that the defendants also imposed backcharges and illegally withheld compensation for substandard work and lost equipment. The defendants oppose the motion, disputing the truth of the allegations in the proposed amended complaint that there was an employer-employee relationship and that the plaintiffs were entitled to the compensation as wages. But denying the truth of well-pleaded allegations is no basis to resist a motion to amend. However, because adding the new count for conversion would be futile (for the reasons stated below), the motion to amend the complaint will be denied.


         Defendants LeCom Communications, Inc. and LeCom, Inc. (collectively “LeCom”) contract with Comcast Cable Company to perform telecommunication installations and repair services for Comcast's customers in Michigan. The plaintiffs allege that LeCom hires both employees and independent contractors, whose sole job responsibilities are to install and repair cable services. The plaintiffs allege that all of the cable installers perform the same type of work and are under LeCom's control and direction regardless of how LeCom classifies them. The plaintiffs contend that the defendants misclassified the plaintiffs as independent contractors, thus denying them the protections of employees under the FLSA, which includes overtime pay for hours worked in excess of 40 hours per week.

         The plaintiffs also contend that the defendants withheld compensation. For example, if a customer reports signal loss for any reason after a repair or installation, the technician must return to the job site; if he or she fails to do that, s/he will be penalized by not being compensated for the job. LeCom also unilaterally deducts money from the technicians' wages if LeCom believes, correctly or incorrectly, that a technician lost equipment that LeCom issued to the technician. Even if LeCom pays a technician for completing a job, LeCom may still retroactively apply backcharges if LeCom believes a job was billed incorrectly and resulted in overpayment. Technicians are not allowed to challenge LeCom's decision to withhold pay, and LeCom has the authority to terminate any technician at any time, and for any reason.

         The plaintiffs' original complaint was brought under the FLSA, and it also included a count alleging unjust enrichment to recover the unpaid wages that were withheld or back charged. On the defendants' motion, the Court dismissed the claim of unjust enrichment because the parties' relationship was governed either by subcontractor agreements or oral contracts of employment, and no contract would be implied in law where an express contract governs the same subject matter. The Court noted that if the backcharges and other costs withheld by the defendants caused the plaintiffs' wages to fall below minimum wage, then they can recover under the FLSA. Otherwise, the recovery must come under a breach of contract theory focusing on the employment contract. The plaintiffs filed a motion for reconsideration, which was denied.

         In the present motion, the plaintiffs want to amend the complaint to include a count of conversion in an attempt to recover the allegedly withheld compensation. The plaintiffs' proposed amended complaint is identical to the original complaint except for the following addition:

Defendant's conduct, as set forth above, in applying chargebacks and withholding Plaintiffs' wages, violates Michigan law making it a crime for employers “to demand or receive any remuneration as a condition to hiring or continued employment”, MCL § 750.351, and constitutes a distinct act of dominion over Plaintiffs' personal property (Plaintiffs' earned but unpaid wages) for Defendants' own use, rendering them liable for conversion pursuant to Michigan common law and statute, MCL 600.2919a.

         The defendants oppose the motion.


         Under Federal Rule of Civil Procedure 15(a)(2), a party seeking to amend the pleadings at this stage of the proceedings must obtain leave of court. “The court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). But leave may be denied on the basis of undue delay, bad faith by the moving party, repeated failure to cure defects by previously-allowed amendments, futility of the proposed new claim, or undue prejudice to the opposite party. Foman v. Davis, 371 U.S. 178, 182 (1962); Duggins v. Steak ‘N Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999); Fisher v. Roberts, 125 F.3d 974, 977 (6th Cir. 1997).

         A court may deny a motion for leave to amend when the proposed amendment would be futile. United States ex rel. Harper v. Muskingum Watershed Conserv. Dist., __ F.3d __, __, Slip op. at 12, Docket No. 15-4406 (Nov. 21, 2016). “A proposed amendment is futile if the amendment could not withstand a Rule 12(b)(6) motion to dismiss.” Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000).

         The proposed conversion count would be brought under Michigan law. The plaintiffs argue a Michigan statute makes illegal an employer's act of demanding or receiving any remuneration as a condition to hiring or continued employment. See Mich. Comp. Laws § 750.351. The plaintiffs reason that the defendants' taking of deductions and chargebacks from the plaintiffs amounts to appropriating the plaintiffs' personal property, and constitutes unlawful conversion in violation of Michigan Compiled Laws § 600.2919a. See Aroma Wines & Equip, Inc. v. Columbian Distribution Servs., Inc., 497 Mich. 337, 871 N.W.2d 136 (2015).

         The defendants impliedly argue (although they do not say so explicitly) that adding the count of conversion would be futile, because the plaintiffs have failed to show that there was any personal property in terms of unpaid wages, and the plaintiffs have not shown that the defendants converted anything to their own use. The defendants contend that it has not been determined that the plaintiffs were employees, ...

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