Update on Orozco v Plackis: was franchisor’s principal the employer of franchisor’s employee? Fifth Circuit reverses — three takeaways

By John A Hughes and Stephanie Zosak

We reported in September 2013 about Orozco v Plackis, a case out of the US District Court for the Western District of Texas in which the plaintiff (a cook in a franchised restaurant) filed an action under the Fair Labor Standards Act (the FLSA) against Craig Plackis, owner of the Craig O’s Pizza and Pastaria franchised restaurant chain. The plaintiff filed suit alleging that he was not paid overtime and minimum wage as required by the FLSA.

At the conclusion of the jury trial, the jury found, among other things, that Plackis was the plaintiff’s employer. Plackis then appealed to the US Court of Appeals for the Fifth Circuit.

The Circuit Court reversed the District Court’s denial of Plackis’s motion for judgment as a matter of law, holding that there was legally insufficient evidence for a reasonable jury to conclude that Plackis was the plaintiff’s employer under the FLSA and the ‘economic reality test’. Under the economic reality test, courts consider whether the alleged employer: (1) possessed the power to hire and fire employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records…

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