Security workers misclassified as contractors win over $104,000 in unpaid overtime and retaliation damages.

Record source: CourtListener

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON EUGENE DIVISION DONOVAN MALLORY, Civ. No. 6:24-cv-01116-AA Plaintiff, OPINION & ORDER v. JASON SMITH; LOGAN NICHOLS; RACHEL BIVENS, Defendants. _______________________________________ AIKEN, District Judge. This case comes before the Court on Plaintiff’s Renewed Motion for Default Judgment. ECF No. 45. The Court concludes that this motion is appropriate for resolution without oral argument. For the reasons set forth below, the motion is GRANTED in part and DENIED in part. Default judgment shall be entered for Plaintiff in the amount of $104,607.50 for which Defendants are jointly and severally liable. LEGAL STANDARD Following the clerk’s entry of default under Federal Rule of Civil Procedure 55(a), the general rule is that the “factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (internal quotation marks and citation omitted). The court does not, however, accept as admitted legal conclusions or facts that are not well-pleaded. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007). “[N]ecessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). After the clerk has entered a defendant’s default, the court may enter default judgment against that party. Fed. R. Civ. P. 55(b)(2). The court’s decision whether to enter default judgment is discretionary. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The Ninth Circuit has identified seven factors (the “Eitel factors”) to guide a district court’s consideration of whether to enter default judgment: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a dispute concerning material facts[,] (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The “starting point,” however, “is the general rule that default judgments are ordinarily disfavored.” Eitel, 782 F.2d at 1472. When moving for default judgment, a plaintiff must establish the amount of damages by proof, unless the amount is liquidated or otherwise capable of computation. Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981). BACKGROUND I. Factual Background Defendants Jason Smith, Logan Nichols, and Rachel Bivens were members of now-defunct former Defendant Iron Shield, LLC (“Iron Shield”). Am. Compl. ¶¶ 8-9. ECF No. 25. Iron Shield provided uniformed security officers and security services at the customer’s place of business. Id. ¶ 16. Defendants are subject to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. and Oregon wage and hour laws, ORS Chapters 652 and 653. Id. ¶¶ 13-15. Plaintiff was employed by Iron Shield as a security officer from on or about July 1, 2022, until June 30, 2024. Am. Compl. ¶ 7. As a condition of his employment, Plaintiff was required to create an Oregon limited liability company and agree to be paid as an independent contractor subject to IRS Form 1099 reporting. Id. ¶ 17. The economic reality of the relationship between Plaintiff and Defendants was that of employee and employer. Id. ¶¶ 19-32. In January 2024, Defendants required Plaintiff to sign an Addendum to Agreement for Security Services which prohibited Plaintiff from performing security services outside of the work assigned to him by Defendants. Id. ¶ 28. The Addendum contained non-compete and non-solicitation provisions and was presented to Plaintiff as something he had to sign or find another place to work. Id. ¶ 29. Smith was “regularly present at Defendant Iron Shield’s premises, and participated in the management of Iron Shield’s day-to-day operations” and “had the power to hire and fire Iron Shield security officers, and otherwise control the terms of their employment.” Am. Compl. ¶ 10. Smith was the one who signed the contract purporting to classify Plaintiff as an independent contractor. Id. Nichols sometimes participated in the management of Iron Shield’s day-to-day operations and had the power to hire and fire security guards and otherwise control the terms of their employment. Am. Compl. ¶ 11. Nichols was jointly responsible for the decision to classify Plaintiff as an independent contractor. Id. Bivens participated in the management of Iron Shield and, jointly with Nichols and Smith, controlled the terms of employment for the security officers. Am. Compl. ¶ 12. Bivens was jointly responsible for the decision to classify Plaintiff as an independent contractor. Id. Bivens signed the Addendum that purported to reaffirm Plaintiff’s status as that of an independent contractor. Id. During his employment with Defendants, Plaintiff earned $25 per hour. Mallory Decl. ¶ 2. ECF No. 46. During the period of his employment, Plaintiff routinely worked more than 40 hours in a workweek and was not paid an overtime rate for the hours exceeding 40 in a workweek. Am. Compl. ¶ 30. Between July 2022 and May 2024, Plaintiff worked a total of 655 hours of overtime for which he was not paid an overtime rate. Leiman Decl. Ex. 1. ECF No. 47. On June 18, 2024, Plaintiff’s counsel notified Iron Shield’s former counsel that Plaintiff was asserting that he was misclassified as an independent contractor and that he was claiming the status of an employee and demanding payment of FLSA overtime. Am. Compl. ¶ 33. On June 30, 2024, Iron Shield notified that Plaintiff that his employment was being terminated “because he had hired a lawyer to pursue an overtime claim[.]” Id. ¶ 34, see also ¶ 56 (Plaintiff was notified by text message that he was terminated for retaining an attorney to assert his rights under the FLSA). Plaintiff was unable to secure a new job until August 10, 2024, which resulted in $6,000 in lost wages. Mallory Decl. ¶ 4. Plaintiff eventually secured new employment, but it paid less than he had earned working for Defendants. Id. ¶¶ 4-7. Between August 11, 2024, and August 4, 2025, Plaintiff worked for less than the $25 per hour he had earned working for Defendants. Id. This resulted in lost wages of $4,990 for a total of $10,990 in lost wages. Id. Since his termination, Plaintiff has suffered stress, anxiety, difficulty sleeping, and other emotional harms. Id. ¶¶ 9-12. II. Procedural Background Pl

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