1012-00004 · Stonefield Logistics Group · Factual Investigation & Analysis

texas-payday-law-analysis-memorandum.docx DOCUMENT Finance & Banking

27 / 35 ← → ✕

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

FROM: James Underwood, Lead Associate, and Devon Archer, Working Associate Calderwood & Harkness LLP 2200 Ross Avenue, Suite 3600 Dallas, TX 75201

TO: Bernard Crawford, Responsible Partner, Labor & Employment Renata Vasquez, Billing Partner, Labor & Employment Calderwood & Harkness LLP

DATE: May 22, 2025

RE: Delano v. Stonefield Logistics Group Inc., Case No. 3:25-cv-01847-RBC — Supplemental State-Law Analysis: Texas Payday Law and Texas Labor Code Claims

CLIENT: Stonefield Logistics Group Inc.

MATTER NO.: 04417.00329

I. EXECUTIVE SUMMARY

This memorandum supplements the initial case assessment memorandum dated May 9, 2025, by providing a detailed analysis of plaintiff Marcus Delano's parallel state-law claims under the Texas Payday Law ("TPL"), codified at Texas Labor Code Chapter 61, and related provisions of the Texas Labor Code. The initial memorandum addressed the FLSA collective action theories and the federal economic reality test for independent contractor classification. This supplemental memorandum focuses on the state-law dimensions of the case that were not fully addressed in the prior analysis, including the distinct classification test applied under Texas common law, the scope and limitations of the TPL as a remedial vehicle, and the procedural interplay between the FLSA collective action and any potential state-law class claims.

Our key conclusions are as follows:

First, the Texas Payday Law does not independently create an overtime obligation. The TPL is a wage-payment statute that requires the timely and complete payment of wages already owed to an employee under an employment agreement, oral or written, or under another applicable statute such as the FLSA. Texas has no state-law overtime mandate analogous to FLSA § 207(a)(1). Accordingly, Delano's TPL claim for unpaid overtime is entirely derivative of his FLSA claim — if the FLSA establishes that overtime wages are owed, the TPL provides a supplemental enforcement mechanism with distinct (though limited) remedies. If the FLSA claim fails, the TPL overtime claim fails with it.

Second, the TPL expressly excludes independent contractors from its coverage. If Delano is properly classified as an independent contractor under Texas law, the TPL claims fail at the threshold. However, the classification analysis under Texas law employs the common-law "right of control" test, which differs in certain respects from the FLSA's "economic reality" test. While the two tests share substantial factual overlap, the Texas test places greater emphasis on the right to control the means, manner, and details of work performance, and affords somewhat greater weight to contractual designations and the worker's capital investment. Notwithstanding these distinctions, the control factors present in SLG's driver arrangements — including the RouteSync dispatch platform, GPS telematics monitoring, mandatory acceptance rates, uniform requirements, subcontracting prohibitions, and the 12-month non-compete clause — create non-trivial risk under both the federal and state frameworks.

Third, the interaction between the FLSA and state theories presents important procedural considerations. The FLSA collective action and the Texas state-law claims may proceed on parallel tracks within the federal litigation under 28 U.S.C. § 1367 supplemental jurisdiction. However, the procedural vehicles differ: the FLSA claim proceeds under the § 216(b) opt-in collective mechanism, while any class-wide pursuit of the Texas state-law claims would require compliance with the more stringent requirements of Federal Rule of Civil Procedure 23. Plaintiff's complaint as filed asserts both FLSA § 216(b) collective claims and supplemental state-law claims, though plaintiff has not yet moved for Rule 23 certification of the Texas claims.

Fourth, the statute of limitations for the TPL claims is shorter than the FLSA limitations period plaintiff is asserting. The two-year limitations period for private TPL actions would limit state-law recovery to the period from April 30, 2023 forward, compared to the three-year period from April 30, 2022 that plaintiff claims under the FLSA willful-violation standard. This difference reduces the collective-wide state-law damages exposure from approximately $36.98 million to approximately $23.89 million.

We recommend that SLG's defensive strategy coordinate the state-law independent contractor defense with the FLSA defense, assert the shorter statute of limitations for TPL claims, prepare to oppose any Rule 23 certification motion on the state claims, and ensure that the motion to compel arbitration for the approximately 640 ICOA v3.0 signatories expressly encompasses the TPL claims alongside the FLSA claims.

II. BACKGROUND

A. Procedural Posture

Marcus Delano filed his complaint in this action on April 30, 2025, in the United States District Court for the Northern District of Texas, Dallas Division, asserting claims under the Fair Labor Standards Act, 29 U.S.C. § 216(b), and the Texas Payday Law, Texas Labor Code Chapter 61, as supplemental state-law claims under 28 U.S.C. § 1367. The case was assigned to the Honorable Rebecca Chen, United States District Judge, and designated Case No. 3:25-cv-01847-RBC. The Honorable Timothy Farrell, United States Magistrate Judge, has been assigned to handle pretrial matters, including discovery disputes and the anticipated motion for conditional certification.

Stonefield Logistics Group Inc. filed its Answer on June 2, 2025, asserting fourteen affirmative defenses, including: (1) independent contractor status under both federal and state law; (2) failure to state a claim upon which relief can be granted; (3) statute of limitations; (4) arbitration and collective/class action waiver (as to ICOA v3.0 signatories); (5) good-faith reliance on outside counsel's classification advice; (6) lack of standing for collective claims; (7) failure to exhaust administrative remedies (as to certain state-law claims); and (8) various other affirmative defenses as detailed in the filed Answer. The Answer preserves all defenses relevant to both the FLSA and TPL theories.

Plaintiff filed a Motion for Conditional Certification of the FLSA Collective Action on July 14, 2025, seeking to certify a collective of all delivery drivers engaged by SLG under ICOAs at any of its fourteen distribution hubs during the period from April 30, 2022 through the present. Defendant's response to the conditional certification motion is due August 13, 2025. We are currently preparing that response in coordination with the broader defense strategy.

Plaintiff's state-law claims are brought as supplemental claims under 28 U.S.C. § 1367, which grants federal courts supplemental jurisdiction over state-law claims that form part of the same case or controversy as the claims within the court's original jurisdiction. The federal court's jurisdiction over the FLSA claims is not in dispute, and the TPL claims arise from the identical factual nucleus — the classification and compensation of SLG's delivery drivers.

B. Parties. Defendant Stonefield Logistics Group Inc. SLG is a Delaware-incorporated, Texas-headquartered transportation and logistics company with its principal offices located at 4200 Commerce Gateway Blvd., Suite 800, Irving, Texas 75039. SLG specializes in last-mile and regional freight delivery services throughout the South-Central United States. The company operates fourteen distribution hubs across four states: Texas (Fort Worth, Dallas, Houston, San Antonio, Austin, El Paso, Lubbock, and Corpus Christi), Oklahoma (Oklahoma City and Tulsa), Louisiana (Baton Rouge, New Orleans, and Shreveport), and Arkansas (Little Rock). SLG engages approximately 1,450 drivers under Independent Contractor Operating Agreements ("ICOAs") to perform delivery services.

SLG is a portfolio company of Ridgepoint Capital Partners Fund III, LP, a private equity fund managed by Ridgepoint Capital Management LLC. Ridgepoint acquired a 72% equity stake in SLG in July 2019 for approximately $285 million. The remaining equity is held by SLG management and certain legacy investors. For fiscal year 2024, SLG reported revenue of $312.7 million and EBITDA of $28.4 million. SLG's key management contacts for this matter are Margaret Hollis, General Counsel, and Aaron Turcotte, Vice President of Human Resources and Compliance. Nathan Okonkwo, a Managing Director at Ridgepoint Capital Management LLC, serves as the Ridgepoint board observer and is authorized to receive privileged communications regarding this litigation.

Named Plaintiff Marcus Delano. Delano is a former delivery driver who was engaged at SLG's Fort Worth distribution hub, designated HUB-01, located at 1015 Railhead Parkway, Fort Worth, Texas 76106. Delano performed delivery services for SLG from approximately March 2021 through September 2024, a period of approximately three and a half years. Delano signed ICOA v1.0, the original 2018 version of the Independent Contractor Operating Agreement, which was drafted by Pennfield & Daye LLP of Fort Worth. Critically, ICOA v1.0 does not contain an arbitration clause or collective/class action waiver; the arbitration provision was not added until the January 2023 revision (ICOA v3.0). Delano alleges that he regularly worked between 55 and 65 hours per week, was paid on a per-delivery basis without overtime compensation, and was misclassified as an independent contractor when the operational realities of his engagement established an employment relationship.

Plaintiff's Counsel. Delano is represented by Claudia Hartwell and Jordan Brashear of Hartwell & Brashear PLLC, located at 500 N. Akard Street, Suite 1750, Dallas, Texas 75201. Hartwell & Brashear is a plaintiff-side employment litigation firm with a track record of pursuing worker misclassification claims in the logistics and delivery industries. The firm has previously litigated delivery driver misclassification cases against regional carriers in the Northern District of Texas, and counsel should be expected to be well-versed in both FLSA and Texas state-law theories.

C. Factual Overview Relevant to State-Law Claims

The factual background of Delano's engagement, which forms the evidentiary basis for both the federal and state-law claims, is summarized below with particular attention to the control factors relevant to the Texas common-law classification analysis.

Compensation Structure. Delano was classified as an independent contractor under his ICOA and was compensated on a per-delivery basis. Per-delivery rates ranged from $14.50 to $38.00, depending on package weight, distance from the hub, and delivery type (standard delivery versus "white-glove" or specialized delivery service). The rates were set by SLG and published on a rate schedule that was updated periodically; drivers had no ability to negotiate individual rates. Based on payroll records and Delano's allegations, his average weekly gross pay during calendar year 2023 was approximately $1,247, and his average weekly hours were approximately 58, yielding an effective hourly rate of approximately $21.50 per hour. No overtime premium was paid for hours exceeding 40 in any workweek.

Control Factors Alleged by Plaintiff. The complaint and plaintiff's supporting declarations identify the following indicia of control exercised by SLG over its drivers' work, each of which is relevant to the Texas common-law classification analysis:

• Mandatory Branding: Drivers were required to wear Stonefield-branded uniforms, display SLG identification badges, and affix SLG-branded vehicle placards to their personal vehicles during all delivery operations.

• GPS Tracking: SLG provided a telematics device that was installed in each driver's vehicle. The device transmitted real-time GPS location data, speed information, and route compliance data to SLG's operations center. Drivers were not permitted to disable or remove the telematics device during working hours.

• Dispatch Platform: Deliveries were assigned through RouteSync, SLG's proprietary dispatch and routing platform. RouteSync generated optimized delivery routes and transmitted delivery assignments to drivers' mobile devices. Drivers had limited ability to deviate from RouteSync-assigned routes without hub manager approval.

• Mandatory Delivery Windows: The ICOA and SLG's operating policies required drivers to perform deliveries within a daily delivery window of 7:00 AM to 8:00 PM, Monday through Saturday. While drivers were not required to work every day within the window, deliveries accepted through RouteSync were subject to the time constraints specified on the platform.

• Minimum Acceptance Rate: SLG imposed a mandatory 85% minimum acceptance rate for delivery assignments offered through RouteSync, measured on a rolling 30-day basis. Drivers whose acceptance rate fell below 85% were subject to performance counseling, reduced delivery priority in the routing algorithm, and potential termination of their ICOA.

• Mandatory Training: All drivers were required to complete 16 hours of initial safety and customer-service training before commencing deliveries, plus 4 hours of quarterly refresher training. Training was conducted at SLG hub locations and was not separately compensated.

• Subcontracting Prohibition: The ICOA prohibited drivers from subcontracting their delivery assignments to third parties without prior written approval from SLG. According to Delano's declaration, such approval was "rarely, if ever, granted" in practice.

• SLG-Provided Equipment: SLG provided handheld barcode scanners, access to the RouteSync software application, and the GPS telematics hardware unit. Drivers were required to use these SLG-provided tools for all delivery operations.

• Non-Negotiable Rates: Per-delivery rates were established by SLG on a take-it-or-leave-it basis. Drivers had no ability to negotiate individual rates or to set their own pricing for delivery services.

ICOA Versions. Three versions of the Independent Contractor Operating Agreement are relevant to this litigation:

• ICOA v1.0 (2018): The original agreement, drafted by Pennfield & Daye LLP, Fort Worth. This version established the independent contractor relationship, set forth the per-delivery compensation structure, and included a 12-month, 50-mile non-compete clause. It did not contain an arbitration provision or collective/class action waiver. Delano and an indeterminate but significant number of other drivers signed this version.

• ICOA v2.0 (August 2020): A revised version that updated certain operational provisions, including vehicle specifications and insurance requirements, but did not add an arbitration clause. The substantive classification provisions remained largely unchanged from v1.0.

• ICOA v3.0 (January 2023): The most recent revision, which added a mandatory individual arbitration clause and a collective/class action waiver covering "any and all disputes arising out of or relating to" the ICOA. Approximately 640 of the 1,187 drivers who performed services during the relevant litigation period signed ICOA v3.0.

All three ICOA versions contain a 12-month, 50-mile non-compete clause restricting drivers from performing delivery or logistics services for any competing company within a 50-mile radius of any SLG hub for twelve months following termination of the ICOA.

III. OVERVIEW OF THE TEXAS PAYDAY LAW (TEXAS LABOR CODE CHAPTER 61)

A. Statutory Framework

The Texas Payday Law is codified at Texas Labor Code §§ 61.001 through 61.095. The TPL is the primary Texas statute governing the timing, manner, and payment of wages by employers to employees. It establishes the obligation of employers to pay wages in a timely manner, prescribes the frequency and method of wage payments, and provides enforcement mechanisms — both administrative and judicial — for employees who are not paid wages that are due and owing.

The following statutory definitions are central to the TPL analysis in this case:

"Wages" are defined under § 61.001(7) as "compensation owed by an employer to an employee for labor or services rendered, including salary, commissions, bonuses, and overtime pay owed under a federal statute." This definition is intentionally broad and encompasses any form of compensation that an employer is obligated to pay, whether that obligation arises from an employment agreement, an employer's policy or practice, or another applicable statute. Importantly, the definition expressly includes "overtime pay owed under a federal statute," which confirms that FLSA-mandated overtime, once established, falls within the TPL's scope.

"Employee" is defined under § 61.001(3) as "an individual who is employed by an employer." The statute explicitly excludes independent contractors from the definition of "employee." This exclusion is dispositive: if Delano and the putative collective members are properly classified as independent contractors under Texas law, the TPL does not apply to their compensation, and the TPL claims fail at the threshold.

"Employer" is defined under § 61.001(4) as "a person who . . . employs one or more employees" or "acts directly or indirectly in the interest of an employer in relation to an employee." This definition mirrors, in relevant respects, the FLSA's broad definition of employer, and could potentially encompass not only SLG but also any individual or entity that exercises control over the employment relationship. However, because the threshold question is whether Delano is an "employee" at all, the employer definition becomes relevant only if employee status is established.

A critical limitation of the TPL must be emphasized at the outset: the TPL does not create new substantive wage rights. It does not independently mandate overtime compensation, minimum wage, or any particular level of pay. Rather, the TPL functions as an enforcement mechanism that requires the timely and complete payment of wages that are already owed under some other authority — whether an employment agreement (oral or written), an employer's established policy or practice, or another applicable statute such as the FLSA. The Texas Legislature has not enacted a state-law overtime statute, and the TPL does not fill that gap. This stands in contrast to states such as California, New York, and Illinois, which have independent state-law overtime requirements that operate alongside the FLSA.

Remedies under the TPL include the following enforcement mechanisms: An employee may file a wage claim with the Texas Workforce Commission ("TWC") within 180 days of the date wages become due. Alternatively, an employee may bring a private court action to recover unpaid wages. In a private action, the employee may recover unpaid wages, attorney's fees, and court costs under Texas Labor Code § 61.062. The TWC may also order the payment of unpaid wages and impose administrative penalties against non-compliant employers.

B. Key Limitation: No Independent Overtime Mandate

As noted above, the State of Texas has not enacted a state-law overtime statute. There is no Texas statutory analog to FLSA § 207(a)(1), which requires covered employers to pay non-exempt employees one and one-half times their regular rate of pay for all hours worked in excess of 40 in a workweek. The absence of a state overtime mandate is a significant limiting factor for Delano's TPL claims.

The TPL obligates an employer to pay wages that are "owed" — that is, wages that are due and payable under an employment agreement, an employer's compensation policy, or another applicable statute. In this case, Delano's ICOA provides for per-delivery compensation only; it does not promise overtime pay, a minimum hourly rate, or any time-based compensation. Consequently, the only source of an overtime obligation that could underpin a TPL claim is the FLSA itself.

The analytical framework, therefore, operates as follows:

(a) If Delano's FLSA claim succeeds — that is, if the court determines that Delano is an "employee" under the FLSA and is entitled to overtime compensation under § 207(a)(1) — then the TPL would require payment of the overtime wages owed under the FLSA. The TPL claim would piggyback on the FLSA determination, providing a supplemental enforcement mechanism and an independent basis for attorney's fees.

(b) If Delano is properly classified as an independent contractor under Texas law, the TPL does not apply at all, because the statute's coverage is limited to "employees" as defined in § 61.001(3). In this scenario, the TPL claims fail regardless of the FLSA outcome.

(c) If the FLSA claim fails on grounds unrelated to classification — for example, if the court determines that Delano is an employee but that the particular work arrangement qualifies for an FLSA exemption — the TPL claim for overtime would also fail, because there would be no underlying overtime obligation for the TPL to enforce.

Plaintiff's theory of the TPL claim is, accordingly, derivative. Counsel for Delano has not identified, and the complaint does not allege, any independent contractual or statutory basis for overtime compensation apart from the FLSA. The TPL claim is best understood as a supplemental theory that provides an additional enforcement mechanism — and, importantly, an independent basis for attorney's fees — if the FLSA establishes that overtime wages are owed.

C. Damages and Remedies Under the TPL

The damages available under the TPL differ from those available under the FLSA in several important respects, and these differences bear on SLG's overall exposure assessment.

Unpaid Wages. The primary remedy under the TPL is recovery of the same unpaid wages that form the basis of the FLSA claim. If employee status is established and FLSA overtime is deemed owing, the quantum of unpaid overtime wages recoverable under the TPL would be identical to the amount recoverable under the FLSA — that is, the difference between the overtime compensation that should have been paid and the amount actually paid, calculated on a per-driver, per-week basis. There is no "double recovery" of the underlying wage amount; the TPL and FLSA claims address the same unpaid wages.

No Statutory Liquidated Damages. Unlike the FLSA, which provides for liquidated damages equal to the amount of unpaid wages (effectively doubling the recovery) unless the employer demonstrates that its violation was in good faith and based on reasonable grounds, the TPL does not contain a statutory liquidated damages provision. This is a meaningful distinction. Under the FLSA, the collective-wide exposure including liquidated damages is estimated at $73,958,409.00 (the $36,979,204.50 unpaid overtime amount plus an equal amount in liquidated damages). The TPL does not provide this doubling mechanism. The TPL claim, standing alone, would support recovery of only the underlying unpaid overtime amount without the additional liquidated damages layer.

Attorney's Fees and Costs. Texas Labor Code § 61.062 provides that an employee who prevails on a TPL claim may recover reasonable attorney's fees and court costs. This is the primary incremental exposure attributable to the TPL claim. While SLG would likely face attorney's fees exposure under the FLSA as well (FLSA § 216(b) also provides for attorney's fees to a prevailing plaintiff), the TPL provides an independent statutory basis for such fees that would survive even if FLSA-specific fee provisions were not available for any reason.

Practical Implications. The net incremental risk from the TPL claim is primarily threefold: (1) attorney's fees exposure under § 61.062; (2) a backstop theory for recovery of the underlying unpaid overtime wages in the event that FLSA liquidated damages are denied (e.g., if the court finds that SLG's violation was not willful, which would eliminate liquidated damages under the FLSA but would not affect the TPL's right to recover the underlying wages owed); and (3) the possibility that the TPL claim could survive even if the FLSA claim fails on procedural or jurisdictional grounds specific to the federal statute. In our assessment, the TPL does not materially increase SLG's total damages exposure beyond the FLSA exposure already identified in the initial case assessment, but it does provide plaintiff with additional leverage and an alternative path to recovery of the base unpaid wage amount.

One additional nuance deserves mention. The TPL claim could survive in a scenario where the FLSA claim fails on the willfulness element. Under the FLSA, liquidated damages are available only for willful violations, and the employer bears the burden of demonstrating good faith and reasonable grounds to avoid liquidated damages. The TPL, by contrast, does not require a willfulness finding for recovery of unpaid wages owed under an agreement or statute. Thus, if the court determines that SLG's FLSA violation was not willful (which would eliminate liquidated damages and could affect the applicable limitations period), the TPL would still allow Delano to recover the underlying unpaid overtime wages, provided that employee status is established and that the overtime wages are deemed "owed" under the FLSA.

IV. INDEPENDENT CONTRACTOR DEFENSE UNDER TEXAS LAW

A. Texas Common-Law "Right of Control" Test

Texas courts employ the common-law "right of control" test — not the FLSA's "economic reality" test — to determine whether a worker is an employee or an independent contractor for purposes of state-law claims, including claims under the Texas Payday Law. The distinction between the two tests is analytically significant, even though the factual inquiries overlap substantially.

Under the Texas common-law test, the central question is whether the purported employer has the right to control not merely the end result of the worker's performance, but the means, manner, and details by which the work is accomplished. This formulation focuses on the legal right to exercise control, regardless of whether the employer actually exercises that control in every instance. The right to control the details of the work is the single most important factor in the Texas analysis, and Texas courts have consistently held that it is entitled to the greatest weight.

The leading Texas authorities identify a multi-factor test that considers the following elements:

(1) The right to control the details of the work — whether the putative employer has the right to direct not only what work is to be done but how it is to be performed;

(2) Whether the worker is engaged in a distinct occupation or business — whether the worker holds himself or herself out as an independent business and operates as such;

(3) Whether the work is usually done under the employer's direction or by a specialist without supervision — whether the type of work at issue is typically performed under supervisory control or independently;

(4) The skill required for the particular occupation — whether the work requires specialized skill, training, or expertise, or whether it involves relatively unskilled labor;

(5) Who supplies the instruments, tools, and place of work — whether the putative employer provides the essential equipment and workspace or whether the worker supplies his or her own;

(6) The length of time the worker is employed — whether the engagement is for a specific project or task, or whether it is indefinite and ongoing;

(7) The method of payment — whether the worker is paid by time (hourly, weekly, monthly) or by the job (piece rate, per-project);

(8) Whether the work is part of the regular business of the employer — whether the services performed by the worker are integral to the employer's core business operations; and

(9) Whether the parties believe they are creating an employer-employee relationship — what the parties' subjective understanding of the relationship is, as reflected in their agreement and conduct.

Importantly, the contractual label assigned to the relationship in the ICOA — i.e., the designation of drivers as "independent contractors" — is relevant to the analysis but is not dispositive under Texas law. Texas courts have repeatedly held that the actual working relationship, as determined by the totality of the circumstances, controls over the contractual designation. A contract that labels a worker as an independent contractor will not be given effect if the operational realities demonstrate an employment relationship. Conversely, a contractual designation of independent contractor status is entitled to some weight, particularly where both parties had the capacity to negotiate the terms of the agreement.

The Texas common-law test differs from the FLSA economic reality test in several respects that may be material to this case. The FLSA test focuses on the "economic reality" of the relationship and asks whether the worker is "economically dependent" on the employer or is instead in business for himself or herself. The FLSA test considers factors such as the worker's opportunity for profit or loss, the worker's investment in equipment and materials, and the degree to which the work requires special skill, in addition to the degree of control exercised by the employer. The Texas test, by contrast, places the "right to control" at the apex of the analysis and treats the other factors as secondary considerations that inform the control inquiry. Additionally, the Texas test gives somewhat greater weight to the contractual designation and the worker's capital investment (e.g., the driver's personal vehicle) than the FLSA test does.

B. Factor-by-Factor Analysis Under Texas Law (Comparison to FLSA Economic Reality Test)

The companion memorandum dated May 20, 2025, applies the six-factor FLSA economic reality test to SLG's driver arrangements. This section does not repeat that analysis in full but instead highlights the points at which the Texas common-law analysis diverges from or supplements the FLSA analysis. Each factor is assessed under the Texas framework with cross-references to the companion FLSA memorandum where appropriate.

Factor 1: Right to Control the Details of Work. Under Texas law, this is the most critical factor in the classification analysis, and it is here that SLG's position faces the greatest challenge.

Plaintiff's position is strengthened by the following evidence of control: Delivery assignments are made through the RouteSync proprietary dispatch platform, which generates optimized routes and transmits specific delivery assignments to drivers' mobile devices. Drivers have limited ability to deviate from RouteSync-assigned routes without hub manager approval. SLG imposes a mandatory daily delivery window of 7:00 AM to 8:00 PM, Monday through Saturday, during which all deliveries must be completed. The GPS telematics device installed in each driver's vehicle transmits real-time location, speed, and route-compliance data to SLG's operations center, enabling continuous monitoring of driver activity. SLG requires drivers to maintain an 85% minimum acceptance rate for delivery assignments offered through RouteSync, measured on a rolling 30-day basis. Drivers whose acceptance rate falls below this threshold are subject to performance counseling and potential termination. SLG mandates 16 hours of initial safety and customer-service training and 4 hours of quarterly refresher training, conducted at SLG hub locations. Drivers must wear Stonefield-branded uniforms, display SLG identification badges, and affix branded vehicle placards. Drivers are subject to penalties for late deliveries or customer complaints, tracked through the RouteSync system. The ICOA prohibits subcontracting without prior written approval from SLG, and such approval is rarely granted in practice.

SLG's position is supported by the following evidence of autonomy: SLG does not assign fixed, minute-by-minute schedules; rather, it establishes broad delivery windows within which drivers have flexibility to sequence their stops. Drivers choose the order in which they complete their assigned deliveries. Drivers use their personal vehicles, not SLG-owned vehicles. No SLG supervisor rides along with drivers during deliveries or provides direct, moment-to-moment supervision of the delivery process. Drivers are free to take breaks and manage their time within the delivery window as they see fit.

Risk Assessment: This factor is moderately unfavorable for SLG. While SLG does not exercise traditional face-to-face supervision, the combination of RouteSync dispatch control, GPS tracking, mandatory acceptance rates, mandatory training, uniform requirements, and subcontracting restrictions constitutes a significant degree of control over the means and manner of work performance. Texas courts have increasingly recognized that technological tools such as routing software and GPS monitoring can be functionally equivalent to direct supervision, particularly in the last-mile delivery context. The breadth and granularity of SLG's monitoring capabilities — which extend to real-time location tracking, route deviation alerts, and acceptance rate algorithms — suggest a level of control that goes beyond merely specifying the end result (completed deliveries) and extends to the details of how drivers perform their work.

Factor 2: Distinct Occupation or Business. This factor examines whether the drivers operate their own independent delivery businesses, as distinct from being integrated into SLG's operations.

SLG's position: The ICOAs characterize drivers as independent businesses operating under their own authority. Drivers are not prohibited from working for other delivery platforms or companies. Drivers file their own taxes as self-employed individuals, obtain their own vehicle insurance, and bear their own vehicle expenses. Each driver is, in theory, a sole proprietor providing delivery services to SLG as one of potentially many clients.

Plaintiff's counter-arguments: The 12-month, 50-mile non-compete clause in all ICOA versions significantly constrains drivers' ability to perform competitive work. The 85% minimum acceptance rate, combined with the volume of deliveries offered through RouteSync, effectively requires near-full-time availability to SLG, leaving little practical capacity for drivers to engage with competing platforms. Discovery will likely reveal that few, if any, drivers maintained meaningful multi-platform delivery businesses during their engagement with SLG. The non-compete and minimum acceptance rate, taken together, undermine any characterization of drivers as independent businesses with diversified client bases.

Risk Assessment: This factor is mixed. The contractual structure nominally supports independent business status, but the non-compete clause and the practical demands of the minimum acceptance rate substantially undermine the independence of drivers' purported businesses. If discovery demonstrates that SLG drivers did not, in practice, perform delivery services for other companies during their engagement with SLG, this factor will tilt toward employee status. The strength of SLG's position on this factor depends heavily on the factual record that emerges in discovery regarding multi-platform engagement.

Factor 3: Supervision. This factor examines the degree of direct supervision exercised over the worker's performance.

Plaintiff's position: While SLG does not deploy in-person supervisors to ride along with drivers, the technological supervision exercised through RouteSync and the GPS telematics system is pervasive. The RouteSync platform effectively supervises route compliance and delivery timing in real time. GPS data enables SLG to monitor driver location, speed, and deviations from assigned routes. The 85% minimum acceptance rate functions as a performance metric enforced through algorithmic monitoring. Performance reviews and corrective actions are triggered when a driver's metrics fall below SLG's standards. These technological tools, plaintiff will argue, constitute functional supervision that is at least as effective as — and arguably more comprehensive than — traditional face-to-face supervision.

SLG's position: No SLG employee accompanies drivers during deliveries. Hub managers do not direct drivers' moment-to-moment activities. Drivers exercise independent judgment in sequencing stops, choosing routes (within the RouteSync framework), and interacting with customers. The technological tools are used for quality assurance and customer service purposes, not for directive supervision. GPS tracking is a standard safety and accountability measure in the transportation industry and does not, by itself, establish an employment relationship.

Risk Assessment: This factor is moderately unfavorable for SLG. The evolution of case law in this area reflects growing judicial recognition that technological monitoring can serve the same supervisory functions as traditional, in-person oversight. The combination of GPS tracking, algorithmic route assignment, and automated performance metrics creates a comprehensive supervisory architecture that may be difficult to distinguish from the kind of directive control that characterizes an employment relationship. While no single technological tool is dispositive, the aggregate effect of SLG's monitoring systems presents meaningful risk under this factor.

Factor 4: Skill Required. This factor examines whether the work requires specialized skill, training, or expertise, or whether it involves relatively unskilled labor that does not require independent judgment or specialized knowledge.

Last-mile delivery driving requires a valid driver's license, basic navigation ability, and the capacity to operate a cargo van or box truck safely. While these are not trivial competencies, they do not constitute specialized skills or expertise in the sense that would distinguish an independent professional from an employee. The work does not require a professional license, advanced training, or specialized knowledge that would typically be associated with independent contractor status (e.g., the expertise of an attorney, physician, architect, or skilled tradesperson).

Risk Assessment: This factor is unfavorable for SLG. The absence of specialized skill requirements in delivery driving generally weighs in favor of employee status under both the Texas common-law test and the FLSA economic reality test. SLG's own mandatory training program, while it provides drivers with operational knowledge specific to SLG's systems, does not establish that the work requires independent professional expertise. If anything, the mandatory training requirement may reinforce the argument that SLG controls the manner in which work is performed by specifying the methods and standards that drivers must follow.

Factor 5: Instruments, Tools, and Place of Work. This factor examines who supplies the essential instruments, tools, and place of work for the services being performed.

Evidence favoring independent contractor status: Drivers use their personal vehicles to perform deliveries. The ICOA requires drivers to provide a cargo van or box truck that meets SLG's specifications (model year 2015 or newer, passed SLG safety inspection), and drivers bear all vehicle-related expenses, including fuel, maintenance, insurance, and depreciation. The capital investment in a qualifying vehicle is significant — typically ranging from $15,000 to $45,000 for a used vehicle meeting SLG's specifications — and represents a meaningful entrepreneurial investment that weighs toward independent contractor status under both the Texas and FLSA tests.

Evidence favoring employee status: SLG provides several essential tools of the trade, including handheld barcode scanners, the RouteSync software application, and the GPS telematics hardware unit. Drivers cannot perform their delivery functions without these SLG-provided tools. The RouteSync platform, in particular, is not merely a convenience — it is the central operating system through which deliveries are assigned, routes are generated, delivery confirmations are recorded, and performance metrics are tracked. Without RouteSync access, a driver cannot receive delivery assignments or record completed deliveries.

Risk Assessment: This factor is mixed. The driver's capital investment in a personal vehicle is a genuine economic commitment that distinguishes the SLG driver arrangement from a pure employment relationship in which the employer provides all necessary equipment. Under Texas law, which tends to give somewhat greater weight to the worker's capital investment than the FLSA test, this factor provides meaningful support for SLG's independent contractor defense. However, SLG's provision of the scanner, telematics hardware, and — most critically — the RouteSync software platform partially offsets the weight of the driver's vehicle investment. On balance, this factor is neutral to slightly favorable for SLG, but it is not strong enough to overcome unfavorable findings on other factors.

Factor 6: Length of Time / Permanence of Relationship. This factor examines whether the engagement between the worker and the putative employer is for a specific project or task, or whether it is indefinite and ongoing.

Delano's engagement with SLG lasted approximately three and a half years, from March 2021 through September 2024. This is not a project-specific or short-term engagement; it is an extended, indefinite relationship characteristic of an ongoing employment arrangement. The ICOAs do not specify a termination date; they continue until terminated by either party. Many SLG drivers maintain long-term relationships with the company, often spanning multiple years.

Risk Assessment: This factor is unfavorable for SLG. Extended, indefinite engagements weigh toward employee status under both the Texas common-law test and the FLSA economic reality test. Independent contractor relationships are typically characterized by project-specific or fixed-term engagements, not by open-ended arrangements lasting multiple years. While the at-will nature of the ICOA (terminable by either party at any time) is consistent with independent contractor status in some respects, the practical reality of long-term, continuous engagement undermines the characterization of drivers as independent businesses performing discrete projects.

Factor 7: Method of Payment. This factor examines whether the worker is paid by time (hourly, weekly, monthly) or by the job (piece rate, per-project, per-delivery).

Drivers are paid on a per-delivery basis, with rates ranging from $14.50 to $38.00 depending on package weight, distance, and delivery type. Payment "by the job" or "by the piece" is traditionally associated with independent contractor status, because it ties compensation to output rather than time and suggests that the worker bears the risk of efficiency — a more productive worker earns more per hour, while a less efficient worker earns less.

However, the significance of this factor is tempered by the fact that drivers have no ability to negotiate their per-delivery rates. The rates are set unilaterally by SLG and published on a standard rate schedule. Drivers take the rates as given; there is no individual bargaining, competitive bidding, or market-based pricing that would characterize a true arm's-length commercial relationship between independent businesses. The inability to negotiate rates undermines the "independent business" narrative that typically accompanies per-job payment structures.

Risk Assessment: This factor is neutral to slightly favorable for SLG. The per-delivery payment structure is facially consistent with independent contractor status, and it does create some degree of economic risk and incentive for efficiency. However, the absence of rate negotiation diminishes the weight of this factor. A true independent contractor would typically have the ability to set or negotiate prices for his or her services.

Factor 8: Part of the Regular Business of the Employer. This factor examines whether the services performed by the worker are integral to the employer's core business operations.

Delivery driving is the core business of Stonefield Logistics Group Inc. SLG is a last-mile and regional freight delivery company; its entire business model depends on the work performed by its delivery drivers. Without drivers performing deliveries, SLG has no revenue-generating operations. The work performed by Delano and other drivers is not ancillary, incidental, or peripheral to SLG's business — it is the business itself.

Risk Assessment: This factor is unfavorable for SLG. When a worker performs services that are integral to the employer's regular business, rather than providing specialized or ancillary services, this factor strongly favors employee status under both the Texas common-law test and the FLSA economic reality test. This is one of the most challenging factors for SLG's independent contractor defense, and it is unlikely to be overcome by favorable findings on other factors. Courts in the delivery and logistics industry have consistently held that delivery drivers who perform the employer's core delivery function are performing work integral to the employer's business, weighing heavily toward employment status.

Factor 9: Parties' Belief / Contractual Designation. This factor examines the parties' subjective understanding of their relationship, as reflected in their agreement and conduct.

Evidence favoring SLG: The ICOA expressly classifies drivers as "independent contractors" and includes representations by both parties that the relationship is not an employment relationship. The ICOA requires drivers to acknowledge their independent contractor status, to maintain their own tax filings as self-employed individuals, and to carry their own vehicle insurance. These contractual provisions reflect a mutual understanding — at least at the time of contracting — that the relationship was intended to be an independent contractor arrangement.

Limitations: Under Texas law, as under the FLSA, a contractual designation of independent contractor status is one factor in the analysis but cannot overcome the reality of the working relationship. If the operational facts demonstrate that SLG exercised the right to control the details of drivers' work in a manner characteristic of an employment relationship, the contractual label will not be given dispositive weight. Texas courts have consistently emphasized that the substance of the relationship, not the form of the agreement, determines classification.

Risk Assessment: This factor is favorable for SLG, but of limited weight in isolation. The contractual designation provides SLG with a defense narrative and demonstrates that both parties entered the relationship with an understanding of independent contractor status. However, if the other factors — particularly the right-to-control factor — weigh toward employee status, the contractual designation will not save SLG's position. Under Texas law, contractual designations receive somewhat more weight than under the FLSA economic reality test, but they remain non-dispositive.

C. Overall Risk Assessment Under Texas Common-Law Test

Synthesizing the factor-by-factor analysis above, the overall picture under the Texas common-law "right of control" test is mixed but moderately unfavorable for SLG's independent contractor position. The factors that weigh most strongly against SLG — the degree of control exercised through RouteSync and GPS monitoring (Factor 1), the integral nature of delivery services to SLG's core business (Factor 8), the lack of specialized skill (Factor 4), and the permanence of the driver engagements (Factor 6) — are among the factors that Texas courts tend to weight most heavily. The factors that favor SLG — the per-delivery payment structure (Factor 7), the contractual designation (Factor 9), and the driver's capital investment in a personal vehicle (Factor 5) — are relevant but are unlikely to overcome the cumulative weight of the unfavorable factors.

The Texas common-law test may be somewhat more favorable to SLG than the FLSA economic reality test in certain limited respects. Specifically, the Texas test affords greater weight to the contractual designation of independent contractor status, and the driver's capital investment in a personal vehicle may receive greater recognition under the Texas "instruments, tools, and place of work" factor than under the FLSA's "opportunity for profit or loss" analysis. However, these advantages are incremental, not transformative.

The degree of technological control exercised through RouteSync and the GPS telematics system is the most significant risk factor under both the Texas and FLSA tests. The 85% minimum acceptance rate, the mandatory daily delivery windows, the subcontracting prohibition, the non-compete clause, the mandatory training requirements, and the uniform/branding requirements collectively create a control architecture that, viewed in its totality, presents meaningful risk of a finding that SLG has the right to control the means, manner, and details of drivers' work — the hallmark of an employment relationship under Texas law.

We assess the probability of an adverse classification finding under the Texas common-law test at approximately 50–60%, which is materially similar to our assessment of approximately 55–65% under the FLSA economic reality test as set forth in the companion memorandum dated May 20, 2025. The overlapping factual predicates make it unlikely that a court would reach different classification outcomes under the two tests, though divergent outcomes are theoretically possible.

V. INTERACTION BETWEEN FLSA AND TEXAS STATE-LAW THEORIES

A. Supplemental Jurisdiction

The federal court's jurisdiction over Delano's Texas state-law claims rests on 28 U.S.C. § 1367, which grants federal courts supplemental jurisdiction over state-law claims that are "so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy." The FLSA claims and the TPL claims arise from the identical factual nucleus — the classification and compensation of SLG's delivery drivers — and there is no serious question that § 1367 supplemental jurisdiction is properly invoked.

Under § 1367(c), the court has discretion to decline supplemental jurisdiction over the state-law claims if: (1) the state claims raise novel or complex issues of state law; (2) the state claims substantially predominate over the federal claims; (3) the federal claims have been dismissed; or (4) exceptional circumstances exist. None of these conditions is likely to be satisfied at the current stage of the litigation. The TPL claims are straightforward applications of established Texas law, they do not predominate over the FLSA claims, and the FLSA claims remain pending. Accordingly, we expect the federal court to retain supplemental jurisdiction over the state-law claims for the foreseeable future.

If, however, the court were to dismiss the FLSA claims at a later stage — for example, on summary judgment — the court could exercise its discretion under § 1367(c)(3) to decline supplemental jurisdiction and dismiss the state-law claims without prejudice, leaving Delano free to refile in Texas state court. This possibility is remote at the current posture but should be monitored.

If the FLSA collective action is conditionally certified, the state-law claims of opt-in plaintiffs may proceed alongside the federal claims within the same action. However, the procedural mechanisms for collective treatment differ, as discussed in the next subsection.

B. Procedural Differences: FLSA Collective vs. Rule 23 Class

The procedural vehicles for collective or class treatment of the FLSA claims and the Texas state-law claims are fundamentally different, and this distinction has significant strategic implications.

FLSA § 216(b) Collective Action. The FLSA provides for collective actions under an opt-in mechanism. A plaintiff who wishes to join a § 216(b) collective must file a written consent with the court affirmatively opting into the action. The conditional certification process is a two-stage inquiry: at the first stage, the court applies a lenient "similarly situated" standard to determine whether potential collective members should receive notice and an opportunity to opt in; at the second stage (the decertification stage), after discovery, the court applies a more rigorous standard to determine whether the collective should be maintained. The opt-in nature of the FLSA collective mechanism means that only drivers who affirmatively consent to join will be bound by or benefit from any judgment or settlement.

Rule 23 Class Action for State-Law Claims. If Delano seeks to pursue the Texas state-law claims on a class-wide basis, he must satisfy the requirements of Federal Rule of Civil Procedure 23. Rule 23 imposes a more stringent certification standard than FLSA conditional certification. To obtain Rule 23 certification, Delano must demonstrate: (a) numerosity — that the class is so numerous that joinder of all members is impracticable; (b) commonality — that there are questions of law or fact common to the class; (c) typicality — that the claims of the representative party are typical of the claims of the class; and (d) adequacy — that the representative party will fairly and adequately protect the interests of the class. In addition, for a damages class under Rule 23(b)(3), Delano must demonstrate that common questions predominate over individual issues and that a class action is superior to other methods of adjudication.

The predominance requirement under Rule 23(b)(3) is a significantly higher bar than the FLSA's "similarly situated" standard. In misclassification cases involving delivery drivers, courts have frequently found that individualized issues — including variations in hub-level operations, differences in ICOA versions, differences in the degree of control exercised by individual hub managers, and driver-specific evidence of autonomy or dependency — defeat the predominance requirement. SLG's defense will emphasize the operational differences across its 14 hubs, the three different ICOA versions, and the driver-specific factual variations that make class-wide adjudication of the classification question impracticable.

Current Posture. Plaintiff's complaint as filed asserts the Texas state-law claims on an individual and collective basis but has not yet moved for Rule 23 certification of the Texas claims. The complaint uses language suggesting a potential Rule 23 class action for the state claims, but no formal class certification motion has been filed. SLG should monitor whether plaintiff seeks to amend the complaint to add explicit Rule 23 class allegations or files a motion for Rule 23 certification in addition to the pending FLSA conditional certification motion.

Strategic Implications. If conditional certification is denied on the FLSA claims, plaintiff could still attempt to pursue Rule 23 certification for the Texas state-law claims. However, the more rigorous Rule 23 standard makes certification less likely than FLSA conditional certification. Conversely, if FLSA conditional certification is granted, plaintiff may attempt to ride the momentum of that ruling to seek Rule 23 certification of the state claims, arguing that the court's finding that the collective members are "similarly situated" under the FLSA supports a finding of commonality and predominance under Rule 23. SLG should be prepared to oppose this argument by emphasizing the different legal standards and the individualized issues that arise under the Texas common-law classification test.

C. Preemption and Overlap

The FLSA does not preempt state wage-payment laws. Both federal and state wage-and-hour statutes may coexist and be enforced concurrently, provided that the worker is not compensated twice for the same injury. The Supremacy Clause does not bar state laws that provide additional protections or enforcement mechanisms for workers beyond those provided by the FLSA. Accordingly, Delano's TPL claims may proceed alongside his FLSA claims without preemption concerns.

However, as discussed in Section III.B above, the TPL does not independently create an overtime entitlement. The TPL depends on overtime being owed under some other authority — either the FLSA or a contractual agreement between the parties. Because Delano's ICOA provides for per-delivery compensation only and does not promise overtime pay, the TPL claim for overtime is entirely derivative of the FLSA claim. The TPL adds enforcement teeth (attorney's fees) and procedural options (TWC administrative proceedings) but does not create substantive rights beyond those provided by the FLSA.

A potential separate TPL theory that Delano might advance — distinct from the overtime claim — would involve allegations that the per-delivery payments themselves were improperly calculated or withheld, such as through deductions, chargebacks, or other reductions in compensation. If SLG deducted amounts from drivers' per-delivery payments (e.g., for equipment, uniforms, or administrative fees) without proper authorization, this could give rise to an independent TPL claim that does not depend on the FLSA overtime determination. However, this theory has not been pled in the current complaint, and we are not aware of factual support for it at this stage. If plaintiff seeks to amend the complaint to add such a theory, we will need to reassess the TPL exposure.

Divergence Risk. Because the Texas common-law "right of control" test and the FLSA "economic reality" test are analytically distinct, it is theoretically possible for a court to reach different classification outcomes under the two frameworks — finding employee status under one test but independent contractor status under the other. For example, a court might find that the economic realities of the driver arrangement establish employment under the FLSA (where the "economic dependence" inquiry tilts toward employee status) but that the narrower "right to control the details" inquiry under Texas law supports independent contractor status (where the driver's vehicle investment and contractual designation receive greater weight). Alternatively, a court might find independent contractor status under the FLSA but employment under Texas law if the Texas analysis places greater emphasis on the control factors.

In practice, however, divergent outcomes are unlikely. The two tests share substantial factual overlap, and the same evidence that establishes (or negates) employee status under one framework will be highly probative under the other. The most likely outcome is a consistent classification finding under both tests. Nevertheless, SLG should be aware of the theoretical possibility of divergent outcomes and should develop its factual record to support independent contractor status under both frameworks simultaneously.

D. Damages Interaction

The damages exposure under the FLSA and TPL claims is summarized as follows:

The TPL does not provide an additional damages "layer" beyond what the FLSA already provides. The unpaid overtime wages recoverable under the TPL are the same wages recoverable under the FLSA; there is no double recovery. The primary incremental exposure from the TPL consists of: (a) attorney's fees under § 61.062; and (b) a backstop theory for recovery of the underlying unpaid overtime amount in the event that FLSA liquidated damages are denied.

If the court denies FLSA liquidated damages — for example, by finding that SLG acted in good faith and had reasonable grounds for believing its classification was proper (which SLG will argue based on its reliance on

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: James Underwood, Lead Associate, and Devon Archer, Working Associate Calderwood & Harkness LLP 2200 Ross Avenue, Suite 3600 Dallas, TX 75201
TO: Bernard Crawford, Responsible Partner, Labor & Employment Renata Vasquez, Billing Partner, Labor & Employment Calderwood & Harkness LLP
DATE: May 22, 2025
RE: Delano v. Stonefield Logistics Group Inc., Case No. 3:25-cv-01847-RBC — Supplemental State-Law Analysis: Texas Payday Law and Texas Labor Code Claims
CLIENT: Stonefield Logistics Group Inc.
MATTER NO.: 04417.00329
I. EXECUTIVE SUMMARY
This memorandum supplements the initial case assessment memorandum dated May 9, 2025, by providing a detailed analysis of plaintiff Marcus Delano's parallel state-law claims under the Texas Payday Law ("TPL"), codified at Texas Labor Code Chapter 61, and related provisions of the Texas Labor Code. The initial memorandum addressed the FLSA collective action theories and the federal economic reality test for independent contractor classification. This supplemental memorandum focuses on the state-law dimensions of the case that were not fully addressed in the prior analysis, including the distinct classification test applied under Texas common law, the scope and limitations of the TPL as a remedial vehicle, and the procedural interplay between the FLSA collective action and any potential state-law class claims.
Our key conclusions are as follows:
First, the Texas Payday Law does not independently create an overtime obligation. The TPL is a wage-payment statute that requires the timely and complete payment of wages already owed to an employee under an employment agreement, oral or written, or under another applicable statute such as the FLSA. Texas has no state-law overtime mandate analogous to FLSA § 207(a)(1). Accordingly, Delano's TPL claim for unpaid overtime is entirely derivative of his FLSA claim — if the FLSA establishes that overtime wages are owed, the TPL provides a supplemental enforcement mechanism with distinct (though limited) remedies. If the FLSA claim fails, the TPL overtime claim fails with it.
Second, the TPL expressly excludes independent contractors from its coverage. If Delano is properly classified as an independent contractor under Texas law, the TPL claims fail at the threshold. However, the classification analysis under Texas law employs the common-law "right of control" test, which differs in certain respects from the FLSA's "economic reality" test. While the two tests share substantial factual overlap, the Texas test places greater emphasis on the right to control the means, manner, and details of work performance, and affords somewhat greater weight to contractual designations and the worker's capital investment. Notwithstanding these distinctions, the control factors present in SLG's driver arrangements — including the RouteSync dispatch platform, GPS telematics monitoring, mandatory acceptance rates, uniform requirements, subcontracting prohibitions, and the 12-month non-compete clause — create non-trivial risk under both the federal and state frameworks.
Third, the interaction between the FLSA and state theories presents important procedural considerations. The FLSA collective action and the Texas state-law claims may proceed on parallel tracks within the federal litigation under 28 U.S.C. § 1367 supplemental jurisdiction. However, the procedural vehicles differ: the FLSA claim proceeds under the § 216(b) opt-in collective mechanism, while any class-wide pursuit of the Texas state-law claims would require compliance with the more stringent requirements of Federal Rule of Civil Procedure 23. Plaintiff's complaint as filed asserts both FLSA § 216(b) collective claims and supplemental state-law claims, though plaintiff has not yet moved for Rule 23 certification of the Texas claims.
Fourth, the statute of limitations for the TPL claims is shorter than the FLSA limitations period plaintiff is asserting. The two-year limitations period for private TPL actions would limit state-law recovery to the period from April 30, 2023 forward, compared to the three-year period from April 30, 2022 that plaintiff claims under the FLSA willful-violation standard. This difference reduces the collective-wide state-law damages exposure from approximately $36.98 million to approximately $23.89 million.
We recommend that SLG's defensive strategy coordinate the state-law independent contractor defense with the FLSA defense, assert the shorter statute of limitations for TPL claims, prepare to oppose any Rule 23 certification motion on the state claims, and ensure that the motion to compel arbitration for the approximately 640 ICOA v3.0 signatories expressly encompasses the TPL claims alongside the FLSA claims.
II. BACKGROUND
A. Procedural Posture
Marcus Delano filed his complaint in this action on April 30, 2025, in the United States District Court for the Northern District of Texas, Dallas Division, asserting claims under the Fair Labor Standards Act, 29 U.S.C. § 216(b), and the Texas Payday Law, Texas Labor Code Chapter 61, as supplemental state-law claims under 28 U.S.C. § 1367. The case was assigned to the Honorable Rebecca Chen, United States District Judge, and designated Case No. 3:25-cv-01847-RBC. The Honorable Timothy Farrell, United States Magistrate Judge, has been assigned to handle pretrial matters, including discovery disputes and the anticipated motion for conditional certification.
Stonefield Logistics Group Inc. filed its Answer on June 2, 2025, asserting fourteen affirmative defenses, including: (1) independent contractor status under both federal and state law; (2) failure to state a claim upon which relief can be granted; (3) statute of limitations; (4) arbitration and collective/class action waiver (as to ICOA v3.0 signatories); (5) good-faith reliance on outside counsel's classification advice; (6) lack of standing for collective claims; (7) failure to exhaust administrative remedies (as to certain state-law claims); and (8) various other affirmative defenses as detailed in the filed Answer. The Answer preserves all defenses relevant to both the FLSA and TPL theories.
Plaintiff filed a Motion for Conditional Certification of the FLSA Collective Action on July 14, 2025, seeking to certify a collective of all delivery drivers engaged by SLG under ICOAs at any of its fourteen distribution hubs during the period from April 30, 2022 through the present. Defendant's response to the conditional certification motion is due August 13, 2025. We are currently preparing that response in coordination with the broader defense strategy.
Plaintiff's state-law claims are brought as supplemental claims under 28 U.S.C. § 1367, which grants federal courts supplemental jurisdiction over state-law claims that form part of the same case or controversy as the claims within the court's original jurisdiction. The federal court's jurisdiction over the FLSA claims is not in dispute, and the TPL claims arise from the identical factual nucleus — the classification and compensation of SLG's delivery drivers.
B. Parties. Defendant Stonefield Logistics Group Inc. SLG is a Delaware-incorporated, Texas-headquartered transportation and logistics company with its principal offices located at 4200 Commerce Gateway Blvd., Suite 800, Irving, Texas 75039. SLG specializes in last-mile and regional freight delivery services throughout the South-Central United States. The company operates fourteen distribution hubs across four states: Texas (Fort Worth, Dallas, Houston, San Antonio, Austin, El Paso, Lubbock, and Corpus Christi), Oklahoma (Oklahoma City and Tulsa), Louisiana (Baton Rouge, New Orleans, and Shreveport), and Arkansas (Little Rock). SLG engages approximately 1,450 drivers under Independent Contractor Operating Agreements ("ICOAs") to perform delivery services.
SLG is a portfolio company of Ridgepoint Capital Partners Fund III, LP, a private equity fund managed by Ridgepoint Capital Management LLC. Ridgepoint acquired a 72% equity stake in SLG in July 2019 for approximately $285 million. The remaining equity is held by SLG management and certain legacy investors. For fiscal year 2024, SLG reported revenue of $312.7 million and EBITDA of $28.4 million. SLG's key management contacts for this matter are Margaret Hollis, General Counsel, and Aaron Turcotte, Vice President of Human Resources and Compliance. Nathan Okonkwo, a Managing Director at Ridgepoint Capital Management LLC, serves as the Ridgepoint board observer and is authorized to receive privileged communications regarding this litigation.
Named Plaintiff Marcus Delano. Delano is a former delivery driver who was engaged at SLG's Fort Worth distribution hub, designated HUB-01, located at 1015 Railhead Parkway, Fort Worth, Texas 76106. Delano performed delivery services for SLG from approximately March 2021 through September 2024, a period of approximately three and a half years. Delano signed ICOA v1.0, the original 2018 version of the Independent Contractor Operating Agreement, which was drafted by Pennfield & Daye LLP of Fort Worth. Critically, ICOA v1.0 does not contain an arbitration clause or collective/class action waiver; the arbitration provision was not added until the January 2023 revision (ICOA v3.0). Delano alleges that he regularly worked between 55 and 65 hours per week, was paid on a per-delivery basis without overtime compensation, and was misclassified as an independent contractor when the operational realities of his engagement established an employment relationship.
Plaintiff's Counsel. Delano is represented by Claudia Hartwell and Jordan Brashear of Hartwell & Brashear PLLC, located at 500 N. Akard Street, Suite 1750, Dallas, Texas 75201. Hartwell & Brashear is a plaintiff-side employment litigation firm with a track record of pursuing worker misclassification claims in the logistics and delivery industries. The firm has previously litigated delivery driver misclassification cases against regional carriers in the Northern District of Texas, and counsel should be expected to be well-versed in both FLSA and Texas state-law theories.
C. Factual Overview Relevant to State-Law Claims
The factual background of Delano's engagement, which forms the evidentiary basis for both the federal and state-law claims, is summarized below with particular attention to the control factors relevant to the Texas common-law classification analysis.
Compensation Structure. Delano was classified as an independent contractor under his ICOA and was compensated on a per-delivery basis. Per-delivery rates ranged from $14.50 to $38.00, depending on package weight, distance from the hub, and delivery type (standard delivery versus "white-glove" or specialized delivery service). The rates were set by SLG and published on a rate schedule that was updated periodically; drivers had no ability to negotiate individual rates. Based on payroll records and Delano's allegations, his average weekly gross pay during calendar year 2023 was approximately $1,247, and his average weekly hours were approximately 58, yielding an effective hourly rate of approximately $21.50 per hour. No overtime premium was paid for hours exceeding 40 in any workweek.
Control Factors Alleged by Plaintiff. The complaint and plaintiff's supporting declarations identify the following indicia of control exercised by SLG over its drivers' work, each of which is relevant to the Texas common-law classification analysis:
• Mandatory Branding: Drivers were required to wear Stonefield-branded uniforms, display SLG identification badges, and affix SLG-branded vehicle placards to their personal vehicles during all delivery operations.
• GPS Tracking: SLG provided a telematics device that was installed in each driver's vehicle. The device transmitted real-time GPS location data, speed information, and route compliance data to SLG's operations center. Drivers were not permitted to disable or remove the telematics device during working hours.
• Dispatch Platform: Deliveries were assigned through RouteSync, SLG's proprietary dispatch and routing platform. RouteSync generated optimized delivery routes and transmitted delivery assignments to drivers' mobile devices. Drivers had limited ability to deviate from RouteSync-assigned routes without hub manager approval.
• Mandatory Delivery Windows: The ICOA and SLG's operating policies required drivers to perform deliveries within a daily delivery window of 7:00 AM to 8:00 PM, Monday through Saturday. While drivers were not required to work every day within the window, deliveries accepted through RouteSync were subject to the time constraints specified on the platform.
• Minimum Acceptance Rate: SLG imposed a mandatory 85% minimum acceptance rate for delivery assignments offered through RouteSync, measured on a rolling 30-day basis. Drivers whose acceptance rate fell below 85% were subject to performance counseling, reduced delivery priority in the routing algorithm, and potential termination of their ICOA.
• Mandatory Training: All drivers were required to complete 16 hours of initial safety and customer-service training before commencing deliveries, plus 4 hours of quarterly refresher training. Training was conducted at SLG hub locations and was not separately compensated.
• Subcontracting Prohibition: The ICOA prohibited drivers from subcontracting their delivery assignments to third parties without prior written approval from SLG. According to Delano's declaration, such approval was "rarely, if ever, granted" in practice.
• SLG-Provided Equipment: SLG provided handheld barcode scanners, access to the RouteSync software application, and the GPS telematics hardware unit. Drivers were required to use these SLG-provided tools for all delivery operations.
• Non-Negotiable Rates: Per-delivery rates were established by SLG on a take-it-or-leave-it basis. Drivers had no ability to negotiate individual rates or to set their own pricing for delivery services.
ICOA Versions. Three versions of the Independent Contractor Operating Agreement are relevant to this litigation:
• ICOA v1.0 (2018): The original agreement, drafted by Pennfield & Daye LLP, Fort Worth. This version established the independent contractor relationship, set forth the per-delivery compensation structure, and included a 12-month, 50-mile non-compete clause. It did not contain an arbitration provision or collective/class action waiver. Delano and an indeterminate but significant number of other drivers signed this version.
• ICOA v2.0 (August 2020): A revised version that updated certain operational provisions, including vehicle specifications and insurance requirements, but did not add an arbitration clause. The substantive classification provisions remained largely unchanged from v1.0.
• ICOA v3.0 (January 2023): The most recent revision, which added a mandatory individual arbitration clause and a collective/class action waiver covering "any and all disputes arising out of or relating to" the ICOA. Approximately 640 of the 1,187 drivers who performed services during the relevant litigation period signed ICOA v3.0.
All three ICOA versions contain a 12-month, 50-mile non-compete clause restricting drivers from performing delivery or logistics services for any competing company within a 50-mile radius of any SLG hub for twelve months following termination of the ICOA.
III. OVERVIEW OF THE TEXAS PAYDAY LAW (TEXAS LABOR CODE CHAPTER 61)
A. Statutory Framework
The Texas Payday Law is codified at Texas Labor Code §§ 61.001 through 61.095. The TPL is the primary Texas statute governing the timing, manner, and payment of wages by employers to employees. It establishes the obligation of employers to pay wages in a timely manner, prescribes the frequency and method of wage payments, and provides enforcement mechanisms — both administrative and judicial — for employees who are not paid wages that are due and owing.
The following statutory definitions are central to the TPL analysis in this case:
"Wages" are defined under § 61.001(7) as "compensation owed by an employer to an employee for labor or services rendered, including salary, commissions, bonuses, and overtime pay owed under a federal statute." This definition is intentionally broad and encompasses any form of compensation that an employer is obligated to pay, whether that obligation arises from an employment agreement, an employer's policy or practice, or another applicable statute. Importantly, the definition expressly includes "overtime pay owed under a federal statute," which confirms that FLSA-mandated overtime, once established, falls within the TPL's scope.
"Employee" is defined under § 61.001(3) as "an individual who is employed by an employer." The statute explicitly excludes independent contractors from the definition of "employee." This exclusion is dispositive: if Delano and the putative collective members are properly classified as independent contractors under Texas law, the TPL does not apply to their compensation, and the TPL claims fail at the threshold.
"Employer" is defined under § 61.001(4) as "a person who . . . employs one or more employees" or "acts directly or indirectly in the interest of an employer in relation to an employee." This definition mirrors, in relevant respects, the FLSA's broad definition of employer, and could potentially encompass not only SLG but also any individual or entity that exercises control over the employment relationship. However, because the threshold question is whether Delano is an "employee" at all, the employer definition becomes relevant only if employee status is established.
A critical limitation of the TPL must be emphasized at the outset: the TPL does not create new substantive wage rights. It does not independently mandate overtime compensation, minimum wage, or any particular level of pay. Rather, the TPL functions as an enforcement mechanism that requires the timely and complete payment of wages that are already owed under some other authority — whether an employment agreement (oral or written), an employer's established policy or practice, or another applicable statute such as the FLSA. The Texas Legislature has not enacted a state-law overtime statute, and the TPL does not fill that gap. This stands in contrast to states such as California, New York, and Illinois, which have independent state-law overtime requirements that operate alongside the FLSA.
Remedies under the TPL include the following enforcement mechanisms: An employee may file a wage claim with the Texas Workforce Commission ("TWC") within 180 days of the date wages become due. Alternatively, an employee may bring a private court action to recover unpaid wages. In a private action, the employee may recover unpaid wages, attorney's fees, and court costs under Texas Labor Code § 61.062. The TWC may also order the payment of unpaid wages and impose administrative penalties against non-compliant employers.
B. Key Limitation: No Independent Overtime Mandate
As noted above, the State of Texas has not enacted a state-law overtime statute. There is no Texas statutory analog to FLSA § 207(a)(1), which requires covered employers to pay non-exempt employees one and one-half times their regular rate of pay for all hours worked in excess of 40 in a workweek. The absence of a state overtime mandate is a significant limiting factor for Delano's TPL claims.
The TPL obligates an employer to pay wages that are "owed" — that is, wages that are due and payable under an employment agreement, an employer's compensation policy, or another applicable statute. In this case, Delano's ICOA provides for per-delivery compensation only; it does not promise overtime pay, a minimum hourly rate, or any time-based compensation. Consequently, the only source of an overtime obligation that could underpin a TPL claim is the FLSA itself.
The analytical framework, therefore, operates as follows:
(a) If Delano's FLSA claim succeeds — that is, if the court determines that Delano is an "employee" under the FLSA and is entitled to overtime compensation under § 207(a)(1) — then the TPL would require payment of the overtime wages owed under the FLSA. The TPL claim would piggyback on the FLSA determination, providing a supplemental enforcement mechanism and an independent basis for attorney's fees.
(b) If Delano is properly classified as an independent contractor under Texas law, the TPL does not apply at all, because the statute's coverage is limited to "employees" as defined in § 61.001(3). In this scenario, the TPL claims fail regardless of the FLSA outcome.
(c) If the FLSA claim fails on grounds unrelated to classification — for example, if the court determines that Delano is an employee but that the particular work arrangement qualifies for an FLSA exemption — the TPL claim for overtime would also fail, because there would be no underlying overtime obligation for the TPL to enforce.
Plaintiff's theory of the TPL claim is, accordingly, derivative. Counsel for Delano has not identified, and the complaint does not allege, any independent contractual or statutory basis for overtime compensation apart from the FLSA. The TPL claim is best understood as a supplemental theory that provides an additional enforcement mechanism — and, importantly, an independent basis for attorney's fees — if the FLSA establishes that overtime wages are owed.
C. Damages and Remedies Under the TPL
The damages available under the TPL differ from those available under the FLSA in several important respects, and these differences bear on SLG's overall exposure assessment.
Unpaid Wages. The primary remedy under the TPL is recovery of the same unpaid wages that form the basis of the FLSA claim. If employee status is established and FLSA overtime is deemed owing, the quantum of unpaid overtime wages recoverable under the TPL would be identical to the amount recoverable under the FLSA — that is, the difference between the overtime compensation that should have been paid and the amount actually paid, calculated on a per-driver, per-week basis. There is no "double recovery" of the underlying wage amount; the TPL and FLSA claims address the same unpaid wages.
No Statutory Liquidated Damages. Unlike the FLSA, which provides for liquidated damages equal to the amount of unpaid wages (effectively doubling the recovery) unless the employer demonstrates that its violation was in good faith and based on reasonable grounds, the TPL does not contain a statutory liquidated damages provision. This is a meaningful distinction. Under the FLSA, the collective-wide exposure including liquidated damages is estimated at $73,958,409.00 (the $36,979,204.50 unpaid overtime amount plus an equal amount in liquidated damages). The TPL does not provide this doubling mechanism. The TPL claim, standing alone, would support recovery of only the underlying unpaid overtime amount without the additional liquidated damages layer.
Attorney's Fees and Costs. Texas Labor Code § 61.062 provides that an employee who prevails on a TPL claim may recover reasonable attorney's fees and court costs. This is the primary incremental exposure attributable to the TPL claim. While SLG would likely face attorney's fees exposure under the FLSA as well (FLSA § 216(b) also provides for attorney's fees to a prevailing plaintiff), the TPL provides an independent statutory basis for such fees that would survive even if FLSA-specific fee provisions were not available for any reason.
Practical Implications. The net incremental risk from the TPL claim is primarily threefold: (1) attorney's fees exposure under § 61.062; (2) a backstop theory for recovery of the underlying unpaid overtime wages in the event that FLSA liquidated damages are denied (e.g., if the court finds that SLG's violation was not willful, which would eliminate liquidated damages under the FLSA but would not affect the TPL's right to recover the underlying wages owed); and (3) the possibility that the TPL claim could survive even if the FLSA claim fails on procedural or jurisdictional grounds specific to the federal statute. In our assessment, the TPL does not materially increase SLG's total damages exposure beyond the FLSA exposure already identified in the initial case assessment, but it does provide plaintiff with additional leverage and an alternative path to recovery of the base unpaid wage amount.
One additional nuance deserves mention. The TPL claim could survive in a scenario where the FLSA claim fails on the willfulness element. Under the FLSA, liquidated damages are available only for willful violations, and the employer bears the burden of demonstrating good faith and reasonable grounds to avoid liquidated damages. The TPL, by contrast, does not require a willfulness finding for recovery of unpaid wages owed under an agreement or statute. Thus, if the court determines that SLG's FLSA violation was not willful (which would eliminate liquidated damages and could affect the applicable limitations period), the TPL would still allow Delano to recover the underlying unpaid overtime wages, provided that employee status is established and that the overtime wages are deemed "owed" under the FLSA.
IV. INDEPENDENT CONTRACTOR DEFENSE UNDER TEXAS LAW
A. Texas Common-Law "Right of Control" Test
Texas courts employ the common-law "right of control" test — not the FLSA's "economic reality" test — to determine whether a worker is an employee or an independent contractor for purposes of state-law claims, including claims under the Texas Payday Law. The distinction between the two tests is analytically significant, even though the factual inquiries overlap substantially.
Under the Texas common-law test, the central question is whether the purported employer has the right to control not merely the end result of the worker's performance, but the means, manner, and details by which the work is accomplished. This formulation focuses on the legal right to exercise control, regardless of whether the employer actually exercises that control in every instance. The right to control the details of the work is the single most important factor in the Texas analysis, and Texas courts have consistently held that it is entitled to the greatest weight.
The leading Texas authorities identify a multi-factor test that considers the following elements:
(1) The right to control the details of the work — whether the putative employer has the right to direct not only what work is to be done but how it is to be performed;
(2) Whether the worker is engaged in a distinct occupation or business — whether the worker holds himself or herself out as an independent business and operates as such;
(3) Whether the work is usually done under the employer's direction or by a specialist without supervision — whether the type of work at issue is typically performed under supervisory control or independently;
(4) The skill required for the particular occupation — whether the work requires specialized skill, training, or expertise, or whether it involves relatively unskilled labor;
(5) Who supplies the instruments, tools, and place of work — whether the putative employer provides the essential equipment and workspace or whether the worker supplies his or her own;
(6) The length of time the worker is employed — whether the engagement is for a specific project or task, or whether it is indefinite and ongoing;
(7) The method of payment — whether the worker is paid by time (hourly, weekly, monthly) or by the job (piece rate, per-project);
(8) Whether the work is part of the regular business of the employer — whether the services performed by the worker are integral to the employer's core business operations; and
(9) Whether the parties believe they are creating an employer-employee relationship — what the parties' subjective understanding of the relationship is, as reflected in their agreement and conduct.
Importantly, the contractual label assigned to the relationship in the ICOA — i.e., the designation of drivers as "independent contractors" — is relevant to the analysis but is not dispositive under Texas law. Texas courts have repeatedly held that the actual working relationship, as determined by the totality of the circumstances, controls over the contractual designation. A contract that labels a worker as an independent contractor will not be given effect if the operational realities demonstrate an employment relationship. Conversely, a contractual designation of independent contractor status is entitled to some weight, particularly where both parties had the capacity to negotiate the terms of the agreement.
The Texas common-law test differs from the FLSA economic reality test in several respects that may be material to this case. The FLSA test focuses on the "economic reality" of the relationship and asks whether the worker is "economically dependent" on the employer or is instead in business for himself or herself. The FLSA test considers factors such as the worker's opportunity for profit or loss, the worker's investment in equipment and materials, and the degree to which the work requires special skill, in addition to the degree of control exercised by the employer. The Texas test, by contrast, places the "right to control" at the apex of the analysis and treats the other factors as secondary considerations that inform the control inquiry. Additionally, the Texas test gives somewhat greater weight to the contractual designation and the worker's capital investment (e.g., the driver's personal vehicle) than the FLSA test does.
B. Factor-by-Factor Analysis Under Texas Law (Comparison to FLSA Economic Reality Test)
The companion memorandum dated May 20, 2025, applies the six-factor FLSA economic reality test to SLG's driver arrangements. This section does not repeat that analysis in full but instead highlights the points at which the Texas common-law analysis diverges from or supplements the FLSA analysis. Each factor is assessed under the Texas framework with cross-references to the companion FLSA memorandum where appropriate.
Factor 1: Right to Control the Details of Work. Under Texas law, this is the most critical factor in the classification analysis, and it is here that SLG's position faces the greatest challenge.
Plaintiff's position is strengthened by the following evidence of control: Delivery assignments are made through the RouteSync proprietary dispatch platform, which generates optimized routes and transmits specific delivery assignments to drivers' mobile devices. Drivers have limited ability to deviate from RouteSync-assigned routes without hub manager approval. SLG imposes a mandatory daily delivery window of 7:00 AM to 8:00 PM, Monday through Saturday, during which all deliveries must be completed. The GPS telematics device installed in each driver's vehicle transmits real-time location, speed, and route-compliance data to SLG's operations center, enabling continuous monitoring of driver activity. SLG requires drivers to maintain an 85% minimum acceptance rate for delivery assignments offered through RouteSync, measured on a rolling 30-day basis. Drivers whose acceptance rate falls below this threshold are subject to performance counseling and potential termination. SLG mandates 16 hours of initial safety and customer-service training and 4 hours of quarterly refresher training, conducted at SLG hub locations. Drivers must wear Stonefield-branded uniforms, display SLG identification badges, and affix branded vehicle placards. Drivers are subject to penalties for late deliveries or customer complaints, tracked through the RouteSync system. The ICOA prohibits subcontracting without prior written approval from SLG, and such approval is rarely granted in practice.
SLG's position is supported by the following evidence of autonomy: SLG does not assign fixed, minute-by-minute schedules; rather, it establishes broad delivery windows within which drivers have flexibility to sequence their stops. Drivers choose the order in which they complete their assigned deliveries. Drivers use their personal vehicles, not SLG-owned vehicles. No SLG supervisor rides along with drivers during deliveries or provides direct, moment-to-moment supervision of the delivery process. Drivers are free to take breaks and manage their time within the delivery window as they see fit.
Risk Assessment: This factor is moderately unfavorable for SLG. While SLG does not exercise traditional face-to-face supervision, the combination of RouteSync dispatch control, GPS tracking, mandatory acceptance rates, mandatory training, uniform requirements, and subcontracting restrictions constitutes a significant degree of control over the means and manner of work performance. Texas courts have increasingly recognized that technological tools such as routing software and GPS monitoring can be functionally equivalent to direct supervision, particularly in the last-mile delivery context. The breadth and granularity of SLG's monitoring capabilities — which extend to real-time location tracking, route deviation alerts, and acceptance rate algorithms — suggest a level of control that goes beyond merely specifying the end result (completed deliveries) and extends to the details of how drivers perform their work.
Factor 2: Distinct Occupation or Business. This factor examines whether the drivers operate their own independent delivery businesses, as distinct from being integrated into SLG's operations.
SLG's position: The ICOAs characterize drivers as independent businesses operating under their own authority. Drivers are not prohibited from working for other delivery platforms or companies. Drivers file their own taxes as self-employed individuals, obtain their own vehicle insurance, and bear their own vehicle expenses. Each driver is, in theory, a sole proprietor providing delivery services to SLG as one of potentially many clients.
Plaintiff's counter-arguments: The 12-month, 50-mile non-compete clause in all ICOA versions significantly constrains drivers' ability to perform competitive work. The 85% minimum acceptance rate, combined with the volume of deliveries offered through RouteSync, effectively requires near-full-time availability to SLG, leaving little practical capacity for drivers to engage with competing platforms. Discovery will likely reveal that few, if any, drivers maintained meaningful multi-platform delivery businesses during their engagement with SLG. The non-compete and minimum acceptance rate, taken together, undermine any characterization of drivers as independent businesses with diversified client bases.
Risk Assessment: This factor is mixed. The contractual structure nominally supports independent business status, but the non-compete clause and the practical demands of the minimum acceptance rate substantially undermine the independence of drivers' purported businesses. If discovery demonstrates that SLG drivers did not, in practice, perform delivery services for other companies during their engagement with SLG, this factor will tilt toward employee status. The strength of SLG's position on this factor depends heavily on the factual record that emerges in discovery regarding multi-platform engagement.
Factor 3: Supervision. This factor examines the degree of direct supervision exercised over the worker's performance.
Plaintiff's position: While SLG does not deploy in-person supervisors to ride along with drivers, the technological supervision exercised through RouteSync and the GPS telematics system is pervasive. The RouteSync platform effectively supervises route compliance and delivery timing in real time. GPS data enables SLG to monitor driver location, speed, and deviations from assigned routes. The 85% minimum acceptance rate functions as a performance metric enforced through algorithmic monitoring. Performance reviews and corrective actions are triggered when a driver's metrics fall below SLG's standards. These technological tools, plaintiff will argue, constitute functional supervision that is at least as effective as — and arguably more comprehensive than — traditional face-to-face supervision.
SLG's position: No SLG employee accompanies drivers during deliveries. Hub managers do not direct drivers' moment-to-moment activities. Drivers exercise independent judgment in sequencing stops, choosing routes (within the RouteSync framework), and interacting with customers. The technological tools are used for quality assurance and customer service purposes, not for directive supervision. GPS tracking is a standard safety and accountability measure in the transportation industry and does not, by itself, establish an employment relationship.
Risk Assessment: This factor is moderately unfavorable for SLG. The evolution of case law in this area reflects growing judicial recognition that technological monitoring can serve the same supervisory functions as traditional, in-person oversight. The combination of GPS tracking, algorithmic route assignment, and automated performance metrics creates a comprehensive supervisory architecture that may be difficult to distinguish from the kind of directive control that characterizes an employment relationship. While no single technological tool is dispositive, the aggregate effect of SLG's monitoring systems presents meaningful risk under this factor.
Factor 4: Skill Required. This factor examines whether the work requires specialized skill, training, or expertise, or whether it involves relatively unskilled labor that does not require independent judgment or specialized knowledge.
Last-mile delivery driving requires a valid driver's license, basic navigation ability, and the capacity to operate a cargo van or box truck safely. While these are not trivial competencies, they do not constitute specialized skills or expertise in the sense that would distinguish an independent professional from an employee. The work does not require a professional license, advanced training, or specialized knowledge that would typically be associated with independent contractor status (e.g., the expertise of an attorney, physician, architect, or skilled tradesperson).
Risk Assessment: This factor is unfavorable for SLG. The absence of specialized skill requirements in delivery driving generally weighs in favor of employee status under both the Texas common-law test and the FLSA economic reality test. SLG's own mandatory training program, while it provides drivers with operational knowledge specific to SLG's systems, does not establish that the work requires independent professional expertise. If anything, the mandatory training requirement may reinforce the argument that SLG controls the manner in which work is performed by specifying the methods and standards that drivers must follow.
Factor 5: Instruments, Tools, and Place of Work. This factor examines who supplies the essential instruments, tools, and place of work for the services being performed.
Evidence favoring independent contractor status: Drivers use their personal vehicles to perform deliveries. The ICOA requires drivers to provide a cargo van or box truck that meets SLG's specifications (model year 2015 or newer, passed SLG safety inspection), and drivers bear all vehicle-related expenses, including fuel, maintenance, insurance, and depreciation. The capital investment in a qualifying vehicle is significant — typically ranging from $15,000 to $45,000 for a used vehicle meeting SLG's specifications — and represents a meaningful entrepreneurial investment that weighs toward independent contractor status under both the Texas and FLSA tests.
Evidence favoring employee status: SLG provides several essential tools of the trade, including handheld barcode scanners, the RouteSync software application, and the GPS telematics hardware unit. Drivers cannot perform their delivery functions without these SLG-provided tools. The RouteSync platform, in particular, is not merely a convenience — it is the central operating system through which deliveries are assigned, routes are generated, delivery confirmations are recorded, and performance metrics are tracked. Without RouteSync access, a driver cannot receive delivery assignments or record completed deliveries.
Risk Assessment: This factor is mixed. The driver's capital investment in a personal vehicle is a genuine economic commitment that distinguishes the SLG driver arrangement from a pure employment relationship in which the employer provides all necessary equipment. Under Texas law, which tends to give somewhat greater weight to the worker's capital investment than the FLSA test, this factor provides meaningful support for SLG's independent contractor defense. However, SLG's provision of the scanner, telematics hardware, and — most critically — the RouteSync software platform partially offsets the weight of the driver's vehicle investment. On balance, this factor is neutral to slightly favorable for SLG, but it is not strong enough to overcome unfavorable findings on other factors.
Factor 6: Length of Time / Permanence of Relationship. This factor examines whether the engagement between the worker and the putative employer is for a specific project or task, or whether it is indefinite and ongoing.
Delano's engagement with SLG lasted approximately three and a half years, from March 2021 through September 2024. This is not a project-specific or short-term engagement; it is an extended, indefinite relationship characteristic of an ongoing employment arrangement. The ICOAs do not specify a termination date; they continue until terminated by either party. Many SLG drivers maintain long-term relationships with the company, often spanning multiple years.
Risk Assessment: This factor is unfavorable for SLG. Extended, indefinite engagements weigh toward employee status under both the Texas common-law test and the FLSA economic reality test. Independent contractor relationships are typically characterized by project-specific or fixed-term engagements, not by open-ended arrangements lasting multiple years. While the at-will nature of the ICOA (terminable by either party at any time) is consistent with independent contractor status in some respects, the practical reality of long-term, continuous engagement undermines the characterization of drivers as independent businesses performing discrete projects.
Factor 7: Method of Payment. This factor examines whether the worker is paid by time (hourly, weekly, monthly) or by the job (piece rate, per-project, per-delivery).
Drivers are paid on a per-delivery basis, with rates ranging from $14.50 to $38.00 depending on package weight, distance, and delivery type. Payment "by the job" or "by the piece" is traditionally associated with independent contractor status, because it ties compensation to output rather than time and suggests that the worker bears the risk of efficiency — a more productive worker earns more per hour, while a less efficient worker earns less.
However, the significance of this factor is tempered by the fact that drivers have no ability to negotiate their per-delivery rates. The rates are set unilaterally by SLG and published on a standard rate schedule. Drivers take the rates as given; there is no individual bargaining, competitive bidding, or market-based pricing that would characterize a true arm's-length commercial relationship between independent businesses. The inability to negotiate rates undermines the "independent business" narrative that typically accompanies per-job payment structures.
Risk Assessment: This factor is neutral to slightly favorable for SLG. The per-delivery payment structure is facially consistent with independent contractor status, and it does create some degree of economic risk and incentive for efficiency. However, the absence of rate negotiation diminishes the weight of this factor. A true independent contractor would typically have the ability to set or negotiate prices for his or her services.
Factor 8: Part of the Regular Business of the Employer. This factor examines whether the services performed by the worker are integral to the employer's core business operations.
Delivery driving is the core business of Stonefield Logistics Group Inc. SLG is a last-mile and regional freight delivery company; its entire business model depends on the work performed by its delivery drivers. Without drivers performing deliveries, SLG has no revenue-generating operations. The work performed by Delano and other drivers is not ancillary, incidental, or peripheral to SLG's business — it is the business itself.
Risk Assessment: This factor is unfavorable for SLG. When a worker performs services that are integral to the employer's regular business, rather than providing specialized or ancillary services, this factor strongly favors employee status under both the Texas common-law test and the FLSA economic reality test. This is one of the most challenging factors for SLG's independent contractor defense, and it is unlikely to be overcome by favorable findings on other factors. Courts in the delivery and logistics industry have consistently held that delivery drivers who perform the employer's core delivery function are performing work integral to the employer's business, weighing heavily toward employment status.
Factor 9: Parties' Belief / Contractual Designation. This factor examines the parties' subjective understanding of their relationship, as reflected in their agreement and conduct.
Evidence favoring SLG: The ICOA expressly classifies drivers as "independent contractors" and includes representations by both parties that the relationship is not an employment relationship. The ICOA requires drivers to acknowledge their independent contractor status, to maintain their own tax filings as self-employed individuals, and to carry their own vehicle insurance. These contractual provisions reflect a mutual understanding — at least at the time of contracting — that the relationship was intended to be an independent contractor arrangement.
Limitations: Under Texas law, as under the FLSA, a contractual designation of independent contractor status is one factor in the analysis but cannot overcome the reality of the working relationship. If the operational facts demonstrate that SLG exercised the right to control the details of drivers' work in a manner characteristic of an employment relationship, the contractual label will not be given dispositive weight. Texas courts have consistently emphasized that the substance of the relationship, not the form of the agreement, determines classification.
Risk Assessment: This factor is favorable for SLG, but of limited weight in isolation. The contractual designation provides SLG with a defense narrative and demonstrates that both parties entered the relationship with an understanding of independent contractor status. However, if the other factors — particularly the right-to-control factor — weigh toward employee status, the contractual designation will not save SLG's position. Under Texas law, contractual designations receive somewhat more weight than under the FLSA economic reality test, but they remain non-dispositive.
C. Overall Risk Assessment Under Texas Common-Law Test
Synthesizing the factor-by-factor analysis above, the overall picture under the Texas common-law "right of control" test is mixed but moderately unfavorable for SLG's independent contractor position. The factors that weigh most strongly against SLG — the degree of control exercised through RouteSync and GPS monitoring (Factor 1), the integral nature of delivery services to SLG's core business (Factor 8), the lack of specialized skill (Factor 4), and the permanence of the driver engagements (Factor 6) — are among the factors that Texas courts tend to weight most heavily. The factors that favor SLG — the per-delivery payment structure (Factor 7), the contractual designation (Factor 9), and the driver's capital investment in a personal vehicle (Factor 5) — are relevant but are unlikely to overcome the cumulative weight of the unfavorable factors.
The Texas common-law test may be somewhat more favorable to SLG than the FLSA economic reality test in certain limited respects. Specifically, the Texas test affords greater weight to the contractual designation of independent contractor status, and the driver's capital investment in a personal vehicle may receive greater recognition under the Texas "instruments, tools, and place of work" factor than under the FLSA's "opportunity for profit or loss" analysis. However, these advantages are incremental, not transformative.
The degree of technological control exercised through RouteSync and the GPS telematics system is the most significant risk factor under both the Texas and FLSA tests. The 85% minimum acceptance rate, the mandatory daily delivery windows, the subcontracting prohibition, the non-compete clause, the mandatory training requirements, and the uniform/branding requirements collectively create a control architecture that, viewed in its totality, presents meaningful risk of a finding that SLG has the right to control the means, manner, and details of drivers' work — the hallmark of an employment relationship under Texas law.
We assess the probability of an adverse classification finding under the Texas common-law test at approximately 50–60%, which is materially similar to our assessment of approximately 55–65% under the FLSA economic reality test as set forth in the companion memorandum dated May 20, 2025. The overlapping factual predicates make it unlikely that a court would reach different classification outcomes under the two tests, though divergent outcomes are theoretically possible.
V. INTERACTION BETWEEN FLSA AND TEXAS STATE-LAW THEORIES
A. Supplemental Jurisdiction
The federal court's jurisdiction over Delano's Texas state-law claims rests on 28 U.S.C. § 1367, which grants federal courts supplemental jurisdiction over state-law claims that are "so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy." The FLSA claims and the TPL claims arise from the identical factual nucleus — the classification and compensation of SLG's delivery drivers — and there is no serious question that § 1367 supplemental jurisdiction is properly invoked.
Under § 1367(c), the court has discretion to decline supplemental jurisdiction over the state-law claims if: (1) the state claims raise novel or complex issues of state law; (2) the state claims substantially predominate over the federal claims; (3) the federal claims have been dismissed; or (4) exceptional circumstances exist. None of these conditions is likely to be satisfied at the current stage of the litigation. The TPL claims are straightforward applications of established Texas law, they do not predominate over the FLSA claims, and the FLSA claims remain pending. Accordingly, we expect the federal court to retain supplemental jurisdiction over the state-law claims for the foreseeable future.
If, however, the court were to dismiss the FLSA claims at a later stage — for example, on summary judgment — the court could exercise its discretion under § 1367(c)(3) to decline supplemental jurisdiction and dismiss the state-law claims without prejudice, leaving Delano free to refile in Texas state court. This possibility is remote at the current posture but should be monitored.
If the FLSA collective action is conditionally certified, the state-law claims of opt-in plaintiffs may proceed alongside the federal claims within the same action. However, the procedural mechanisms for collective treatment differ, as discussed in the next subsection.
B. Procedural Differences: FLSA Collective vs. Rule 23 Class
The procedural vehicles for collective or class treatment of the FLSA claims and the Texas state-law claims are fundamentally different, and this distinction has significant strategic implications.
FLSA § 216(b) Collective Action. The FLSA provides for collective actions under an opt-in mechanism. A plaintiff who wishes to join a § 216(b) collective must file a written consent with the court affirmatively opting into the action. The conditional certification process is a two-stage inquiry: at the first stage, the court applies a lenient "similarly situated" standard to determine whether potential collective members should receive notice and an opportunity to opt in; at the second stage (the decertification stage), after discovery, the court applies a more rigorous standard to determine whether the collective should be maintained. The opt-in nature of the FLSA collective mechanism means that only drivers who affirmatively consent to join will be bound by or benefit from any judgment or settlement.
Rule 23 Class Action for State-Law Claims. If Delano seeks to pursue the Texas state-law claims on a class-wide basis, he must satisfy the requirements of Federal Rule of Civil Procedure 23. Rule 23 imposes a more stringent certification standard than FLSA conditional certification. To obtain Rule 23 certification, Delano must demonstrate: (a) numerosity — that the class is so numerous that joinder of all members is impracticable; (b) commonality — that there are questions of law or fact common to the class; (c) typicality — that the claims of the representative party are typical of the claims of the class; and (d) adequacy — that the representative party will fairly and adequately protect the interests of the class. In addition, for a damages class under Rule 23(b)(3), Delano must demonstrate that common questions predominate over individual issues and that a class action is superior to other methods of adjudication.
The predominance requirement under Rule 23(b)(3) is a significantly higher bar than the FLSA's "similarly situated" standard. In misclassification cases involving delivery drivers, courts have frequently found that individualized issues — including variations in hub-level operations, differences in ICOA versions, differences in the degree of control exercised by individual hub managers, and driver-specific evidence of autonomy or dependency — defeat the predominance requirement. SLG's defense will emphasize the operational differences across its 14 hubs, the three different ICOA versions, and the driver-specific factual variations that make class-wide adjudication of the classification question impracticable.
Current Posture. Plaintiff's complaint as filed asserts the Texas state-law claims on an individual and collective basis but has not yet moved for Rule 23 certification of the Texas claims. The complaint uses language suggesting a potential Rule 23 class action for the state claims, but no formal class certification motion has been filed. SLG should monitor whether plaintiff seeks to amend the complaint to add explicit Rule 23 class allegations or files a motion for Rule 23 certification in addition to the pending FLSA conditional certification motion.
Strategic Implications. If conditional certification is denied on the FLSA claims, plaintiff could still attempt to pursue Rule 23 certification for the Texas state-law claims. However, the more rigorous Rule 23 standard makes certification less likely than FLSA conditional certification. Conversely, if FLSA conditional certification is granted, plaintiff may attempt to ride the momentum of that ruling to seek Rule 23 certification of the state claims, arguing that the court's finding that the collective members are "similarly situated" under the FLSA supports a finding of commonality and predominance under Rule 23. SLG should be prepared to oppose this argument by emphasizing the different legal standards and the individualized issues that arise under the Texas common-law classification test.
C. Preemption and Overlap
The FLSA does not preempt state wage-payment laws. Both federal and state wage-and-hour statutes may coexist and be enforced concurrently, provided that the worker is not compensated twice for the same injury. The Supremacy Clause does not bar state laws that provide additional protections or enforcement mechanisms for workers beyond those provided by the FLSA. Accordingly, Delano's TPL claims may proceed alongside his FLSA claims without preemption concerns.
However, as discussed in Section III.B above, the TPL does not independently create an overtime entitlement. The TPL depends on overtime being owed under some other authority — either the FLSA or a contractual agreement between the parties. Because Delano's ICOA provides for per-delivery compensation only and does not promise overtime pay, the TPL claim for overtime is entirely derivative of the FLSA claim. The TPL adds enforcement teeth (attorney's fees) and procedural options (TWC administrative proceedings) but does not create substantive rights beyond those provided by the FLSA.
A potential separate TPL theory that Delano might advance — distinct from the overtime claim — would involve allegations that the per-delivery payments themselves were improperly calculated or withheld, such as through deductions, chargebacks, or other reductions in compensation. If SLG deducted amounts from drivers' per-delivery payments (e.g., for equipment, uniforms, or administrative fees) without proper authorization, this could give rise to an independent TPL claim that does not depend on the FLSA overtime determination. However, this theory has not been pled in the current complaint, and we are not aware of factual support for it at this stage. If plaintiff seeks to amend the complaint to add such a theory, we will need to reassess the TPL exposure.
Divergence Risk. Because the Texas common-law "right of control" test and the FLSA "economic reality" test are analytically distinct, it is theoretically possible for a court to reach different classification outcomes under the two frameworks — finding employee status under one test but independent contractor status under the other. For example, a court might find that the economic realities of the driver arrangement establish employment under the FLSA (where the "economic dependence" inquiry tilts toward employee status) but that the narrower "right to control the details" inquiry under Texas law supports independent contractor status (where the driver's vehicle investment and contractual designation receive greater weight). Alternatively, a court might find independent contractor status under the FLSA but employment under Texas law if the Texas analysis places greater emphasis on the control factors.
In practice, however, divergent outcomes are unlikely. The two tests share substantial factual overlap, and the same evidence that establishes (or negates) employee status under one framework will be highly probative under the other. The most likely outcome is a consistent classification finding under both tests. Nevertheless, SLG should be aware of the theoretical possibility of divergent outcomes and should develop its factual record to support independent contractor status under both frameworks simultaneously.
D. Damages Interaction
The damages exposure under the FLSA and TPL claims is summarized as follows:
The TPL does not provide an additional damages "layer" beyond what the FLSA already provides. The unpaid overtime wages recoverable under the TPL are the same wages recoverable under the FLSA; there is no double recovery. The primary incremental exposure from the TPL consists of: (a) attorney's fees under § 61.062; and (b) a backstop theory for recovery of the underlying unpaid overtime amount in the event that FLSA liquidated damages are denied.
If the court denies FLSA liquidated damages — for example, by finding that SLG acted in good faith and had reasonable grounds for believing its classification was proper (which SLG will argue based on its reliance on

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 04417.00329

I. EXECUTIVE SUMMARY

II. BACKGROUND

III. OVERVIEW OF THE TEXAS PAYDAY LAW (TEXAS LABOR CODE CHAPTER 61)

IV. INDEPENDENT CONTRACTOR DEFENSE UNDER TEXAS LAW

V. INTERACTION BETWEEN FLSA AND TEXAS STATE-LAW THEORIES

Record

Parties

Dates

Amounts