The successor company to floral delivery company FTD can't use a prior employment contract's arbitration clause to sidestep a class action lawsuit brought by former outside sales reps, who claimed the company miscategorized them as being exempt from overtime pay after they were assigned to work from home at the onset of the Covid-19 pandemic.
Vifrancis Virgilio started with the flower delivery company as a field business consultant in February 2016. Brian Graser began as an account manager in February 2019. FTD Companies Inc. filed for bankruptcy in July 2019, during which it transferred assets to Gateway Mercury Holdings. Assets then were transferred to a new limited liability company under the Florists' Transworld Delivery name.
Virgilio and Graser said although they kept their jobs, they had to sign new employment agreements, including a sales commission plan and title change letter. They say neither document contained or referenced the arbitration provision in their original employment agreements.
According to Rowland, the company originally classified Virgilio and Graser as exempt from overtime pay per the federal Fair Labor Standards Act because they did sales jobs outside the corporate office. But in March 2020, amid the onset of Covid mitigations, the company required the men to work from home. They say this change removed their FLSA exemption eligibility and should make them entitled to overtime pay. Virgilio left the company in October 2021, Graser in January 2022.
Rowland said the pre-bankruptcy employment agreement “contained a valid, written arbitration provision,” but the workers argued the new FTD LLC is only a third party to their contract with FTD Companies. They further argued the asset purchase agreement with Gateway Mercury didn’t automatically transfer the rights under the initial contract.
Upon analyzing the asset purchase agreement, Rowland explained it clearly stipulated any FTD Companies employees who accepted an offer from FTD LLC would be classified as transferred from one company to the other, and further that FTD Companies would formally terminate employment of all transferred employees right before closing the deal.
“Agreements to arbitrate must be in writing,” Rowland wrote. “Here, there is no evidence of any written, post-bankruptcy arbitration agreement between plaintiffs and FTD LLC.”
FTD also asked Rowland to dismiss the claim outright for failure to state a claim. But she rejected that request as well, saying Virgilio and Graser alleged their job classifications switched in March 2020 from outside sales to inside sales, and the FLSA only classifies outside sales representatives as exempt from earning overtime pay.
Rowland said FTD cited several cases in support of its position that the workers remained exempt, but none changed her mind. Only one specifically addressed the issue of employee misclassification, and that one actually supported Virgilio and Graser, she said.
In Lucero v. Leona’s Pizzeria, a January 2015 opinion also from the Northern District of Illinois, a judge would not dismiss the lawsuit of a worker who said the restaurant miscategorized his job title.
“The court found dismissal inappropriate because the defendant was 'not left to guess at when the plaintiff contends he was underpaid,’ ” Rowland wrote. “Instead, the complaint put the defendant on notice of its wrongdoing: due to the misclassification, the defendant underpaid the plaintiff during all weeks in which he worked for the defendant. Similarly, here, the complaint clearly puts FTD LLC on notice as to which dates or times plaintiffs were underpaid namely, every week from March 2020 forward.”
Rowland gave FTD until Jan. 31 to answer the complaint.
The former FTD sales reps are represented in their action by attorney Kimberly De Arcangelis, of the firm of Morgan & Morgan, of Orlando, Florida.
FTD is represented by attorneys Mark W. Wallin and Christina M. Janice, of Barnes & Thornburg, of Chicago.