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N Y C L A - C L E
H ow to H andle a
W age and H our
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Prepared in connection with a Continuing Legal Education course presented
at New York County Lawyers’ Association, 14 Vesey Street, New York, NY
presented on Tuesday, October 15, 2013.
P r o g r a m C h ai r :
Louis Pechman, Berke-Weiss & Pechman LLP and founder of waiterpay.com
P r o g r a m F ac u l t y :
Hon. Ramon Reyes, USMJ, EDNY; Joseph Fitapelli, Fitapelli & Schaffer, LLP; Carolyn
Richmond, Fox Rothschild
3 TRANSITIONAL & NON-TRANSITIONAL MCLE CREDITS:
This course has been approved in accordance with the requirements of the New York State Continuing Legal Education
Board for a maximum of 3 Transitional & Non-Transitional credit hours: 1 Ethics; 1 Skills; 1 PP
This program has been approved by the Board of Continuing Legal Education of the Supreme Court of New Jersey for 3
hours of total CLE credit. Of these, 1 qualify as hours of credit for Ethics/Professionalism, and 0 qualify as hours of credit
toward certification in civil trial law, criminal trial law, workers compensation law and/or matrimonial law.
Information Regarding CLE Credits and Certification
How to Handle a Wage and Hour Case
October 15, 2013; 6:00 PM to 9:00 PM
The New York State CLE Board Regulations require all accredited CLE
providers to provide documentation that CLE course attendees are, in fact,
present during the course. Please review the following NYCLA rules for
MCLE credit allocation and certificate distribution.
i.
You must sign-in and note the time of arrival to receive your
course materials and receive MCLE credit. The time will be
verified by the Program Assistant.
ii.
You will receive your MCLE certificate as you exit the room at
the end of the course. The certificates will bear your name and
will be arranged in alphabetical order on the tables directly outside
the auditorium.
iii.
If you arrive after the course has begun, you must sign-in and note
the time of your arrival. The time will be verified by the Program
Assistant. If it has been determined that you will still receive
educational value by attending a portion of the program, you will
receive a pro-rated CLE certificate.
iv.
Please note: We can only certify MCLE credit for the actual time
you are in attendance. If you leave before the end of the course,
you must sign-out and enter the time you are leaving. The time will
be verified by the Program Assistant. Again, if it has been
determined that you received educational value from attending a
portion of the program, your CLE credits will be pro-rated and the
certificate will be mailed to you within one week.
v.
If you leave early and do not sign out, we will assume that you left
at the midpoint of the course. If it has been determined that you
received educational value from the portion of the program you
attended, we will pro-rate the credits accordingly, unless you can
provide verification of course completion. Your certificate will
be mailed to you within one week.
Thank you for choosing NYCLA as your CLE provider!
New York County Lawyers’ Association
Continuing Legal Education Institute
14 Vesey Street, New York, N.Y. 10007 • (212) 267-6646
How to Handle a Wage and Hour Case
October 15, 2013
6:00PM – 9:00PM
AGENDA
Program Chair:
Louis Pechman, Berke-Weiss & Pechman LLP
Program Faculty:
Hon. Ramon Reyes, USMJ, EDNY
Joseph Fitapelli, Fitapelli & Schaffer, LLP
Carolyn Richmond, Fox Rothschild
5:30PM – 6:00PM
Registration
6:00PM - 6:10PM
Introductions and Announcements
6:10PM – 7:20PM
Presentations and Discussion
7:20PM – 7:30PM
BREAK
7:30 PM – 8:45 PM
Presentations and Discussion Cont.
8:45 PM – 9:00 PM
Questions and Answers
Fitapelli & Schaffer, LLP
Basic Primer on Wage and Hour Practice
October 15, 2013
Basic Primer on Wage and Hour Practice
Presented By Joseph A. Fitapelli of Fitapelli & Schaffer, LLP
These materials are meant to be a brief outline of the minimum wage and overtime
provisions of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL).
While the restaurant industry is one the most common violators of the federal and state labor
laws, wage and hour violations occur in a wide variety of businesses from banks 1 to the adult
entertainment industry. 2 While the FLSA and the NYLL at times overlap, certain claims and/or
requirements differ. This primer is certainly not indented to be exhaustive, but rather intended to
give an overview of common issues encountered in wage and hour litigation.
Limitations Periods
Under the NYLL, the statute of limitations is six years and under the FLSA the
limitations period is two years. See NYLL § 663(3); 29 U.S.C. § 255(a). However, if an
employer’s acts are found to be “willful,” the statute of limitations under the FLSA increases to
three years. 29 U.S.C. § 255(a). For an employer’s actions to be willful, the employer must have
“either [known] or showed reckless disregard for the matter of whether its conduct was
prohibited by the [FLSA]. Solis v. SCA Rest. Corp., No. 09 Civ. 2212 (JFB) (ETB), 2013 WL
1401396 (E.D.N.Y. Apr. 5, 2013)
Hybrid Actions
As FLSA and NYLL claims usually revolve around the same set of operative facts,
plaintiffs frequently bring both types of claims together in a single action using the procedural
mechanisms available under 29 U.S.C. § 216(b) to pursue the FLSA claims as a collective action
and under Rule 23 to pursue the NYLL claims as a class action under the district court’s
supplemental jurisdiction. In the Second Circuit, the FLSA is held not to preempt claims made
under the NYLL, and courts can certify hybrid actions that include both an opt-in FLSA
collective claim and an opt-out state labor law Fed.R.Civ.P. 23 class action. See Shahriar v.
Smith & Wollensky Rest. Group, Inc., 659 F.3d 234, 249, 252 (2d Cir. 2011).
When drafting pleadings for “hybrid actions” it is important to identify both the
collective and class mechanisms and the relevant claims that are brought under federal and state
law. To illustrate, attached are two examples of “hybrid action” complaints. The first is a typical
restaurant wage and hour complaint for hourly employees, 3 while the second complaint focuses
on overtime violations under the FLSA and NYLL due to a misclassification. 4
1
See Yuzary v. HSBC Bank USA, N.A., No. 12 Civ. 3693 (PGG), 2013 WL 5492998
(S.D.N.Y. Oct. 2, 2013)
2
See Flynn v. New York Dolls Gentlemen’s Club, Complaint
3
See Tiro v. Public House Investments, LLC, Complaint
4
See Walker v. Hunter Roberts Construction, Complaint
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Basic Primer on Wage and Hour Practice
October 15, 2013
Section 216(b) of the FLSA – Collective Actions
Section 216(b) of the FLSA authorizes an employee to maintain a collective action on
behalf of himself and all “similarly situated” employees. See 29 U.S.C. § 216(b). Unlike a class
action brought under Rule 23 of the Federal Rules of Civil Procedure, a collective action requires
“similarly situated” employees to affirmatively opt-in to the litigation by filing written consent 5
forms with the court. Id. “[D]istrict courts have discretion, in appropriate cases, to implement
[Section] 216(b) by facilitating notice to potential plaintiffs of the pendency of the action and of
their opportunity to opt-in as represented plaintiffs.” Myers v. Hertz Corp., 624 F.3d 537, 554
(2d Cir. 2010) (internal quotation marks and alterations omitted). In determining whether to
exercise such discretion, courts in this Circuit follow a two-step test. Id. at 554–55. An important
fact to remember is that, absent a tolling agreement, a plaintiff’s statute of limitations continues
to run until a written consent is filed.
The First Step (Notice/Conditional Certification)
The first step is known as the “notice” or “conditional certification” stage. This step is
triggered when the plaintiffs move for § 216(b) certification prior to, or very early, in discovery.
During this stage, “the court mak[es] an initial determination to send notice to potential opt-in
plaintiffs who may be ‘similarly situated’ to the named plaintiffs.” Myers, 624 F.3d at 555. A
plaintiff’s burden at this stage is minimal: he must only make a “modest factual showing” that he
and the potential opt-in plaintiffs were “victims of a common policy or plan that violated the
law.” Id. (internal quotation marks omitted). 6
To satisfy this burden, the plaintiff must offer substantial allegations demonstrating a
factual nexus between the plaintiff and potential opt-in plaintiffs.
If the court decides that plaintiffs have met their burden, then the court will authorize
issuing notice of the lawsuit to all potential opt-in plaintiffs in order for them to have an
opportunity to opt-in (join) the case. Also, the action will proceed as a collective action;
therefore, discovery will be for the putative class not just the named plaintiff(s).
The Second Stage
The second stage of a collective action usually occurs at the end of discovery. The
defendant normally triggers this stage by filing a motion for decertification. Here, the court will
use a stricter standard than the first stage. Courts normally consider the similarity of the factual
and employment settings of the individual plaintiffs, the various defenses available to the
5
See sample FLSA consent forms.
See Chhab v. Darden Restaurants, Inc., No. 11 Civ. 8345 (NRB), 2013 WL 5308004
(S.D.N.Y. Sept. 20, 2013).
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Basic Primer on Wage and Hour Practice
October 15, 2013
defendant and whether those may be asserted collectively or individually as to each plaintiff and
the fairness and procedural considerations. If the court determines that plaintiffs are similarly
situated, the lawsuit will be certified as a collective action and proceed to trial as such. Indergit v.
Rite Aid Corp., No. 08 Civ. 9361 (JPO), 2013 WL 5380253 (S.D.N.Y. Sept. 26, 2013).
Minimum Wage
The FLSA requires employers to pay their employees at least the statutory minimum wage.
29 U.S.C. § 206. Though employers of “tipped employees” are permitted to pay these workers a
reduced amount, by taking a tip credit pursuant to 29 U.S.C. § 203(m), there are clear and specific
requirements that must be satisfied. An employer may not avail itself of the tip credit unless it
notifies tipped employees of its intention to include tip income when calculating wages actually
paid for minimum wage purposes, and ensures that all tips received by tipped employees have been
retained by the employees. 29 U.S.C. § 203(m); see Nicholson v. Twelfth Street Corp., No. 09 Civ.
1984 (HB), 2010 WL 1780957, at *2 (S.D.N.Y. May 4, 2010) (citations omitted). “These
requirements are to be strictly construed.” Wicaksono v. XYZ 48 Corp., No. 10 Civ. 3635
(LAK)(JCF), 2011 WL 2022644, at *4 (S.D.N.Y. May 2, 2011) (citation and internal quotation
marks omitted).
Similarly, while the NYLL also allows employers to pay tipped workers in the food service
industry a lower minimum wage, an employer may receive the benefit of the tip credit only if it
notifies employees of its intent to take a tip credit, provides employees with regular wage
statements, and maintains and preserves weekly payroll records. 12 N.Y.C.R.R. §§ 137-2.1, 1372.2, 146-1.3, 146-2.2.
Notice of the Tip Credit
Employers bear the burden of showing that they have provided their employees with proper
notice of the minimum wage laws. Chan v. Sung Yue Tung Corp., No. 03 Civ. 6048 (GEL), 2007
WL 313483, at *18 (S.D.N.Y. Feb. 1, 2007). This can be accomplished, for example, by providing
employees with a copy of § 203(m) and informing them that their tips will be used as a credit
against the minimum wage as permitted by law. “Courts have noted that the notice requirement is
a firm one.” Copantitla v. Fiskardo Estiatorio, Inc., 788 F. Supp. 2d 253, 287-89 (S.D.N.Y.
2011) (finding that a restaurant failed to meet the notice requirement even though it displayed a
Department of Labor poster, as employees were not explicitly told they would be paid a reduced
minimum wage because the restaurant intended to use tips to satisfy its minimum wage
obligations). If the employer cannot show that it has informed employees that tips are being
credited against their wages, then no tip credit can be taken and the employer is liable for the full
minimum wage. Lanzetta v. Florio's Enterprises, Inc., 763 F. Supp. 2d 615 (S.D.N.Y. 2011);
Azkour v. Little Rest Twelve, Inc., No. 10 Civ. 4132 (RJS)(KNF), 2012 WL 402049, at *5
(S.D.N.Y. Feb. 7, 2012) (the tipped employee must be informed by the employer of the provisions
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Basic Primer on Wage and Hour Practice
October 15, 2013
of § 203(m)); Yu G. Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240, 254 (S.D.N.Y. 2008) (the
employer must “first notify the employees of the requirements of the law regarding minimum
wages and of the employer’s intention to take the tip credit”).
While the NYLL also allows employers to pay tipped workers in the food service industry
a lower minimum wage, an employer may receive the benefit of the tip credit only if it provides,
“to each employee a statement with every payment of wages listing … allowances … claimed as
part of the minimum wage,” and, “maintain[s] and preserve[s] for not less than six years weekly
payroll records which shall show for each employee … allowances … claimed as part of the
minimum wage.” Copantitla 788 F. Supp. 2d 253, 290 (citing 12 N.Y.C.R.R. §§ 137-2.1, 1372.2); Cao v. Wu Liang Ye Lexington Restaurant, No. 08 Civ. 3725(DC), 2010 WL 4159391
(S.D.N.Y. Sept. 30, 2010) (Court found that the defendants failed to satisfy the requirements for
receiving the benefit of the tip credit, thus, award the plaintiffs damaged based on ordinary
minimum wage rather than the tipped minimum wage). These requirements have been clarified by
the 2011 New York Department of Labor Hospitality Industry Wage Order, which states that
employers may benefit from the tip credit only if, “the food service worker receives enough tips
and if the employee has been notified of the tip credit as required in Section 146-2.2” [mandating
that employers provide, “each employee written notice of the employee’s regular hourly pay rate,
overtime hourly pay rate, the amount of tip credit, if any, to be taken from the basic minimum
hourly rate, and the regular payday”]. 12 N.Y.C.R.R. §§ 146-1.3, 146-2.2 (emphasis added).
Retention of Tips
An employer violates § 203(m), and is therefore not entitled to a tip credit, if it dilutes the
tip pool by including employees who do not, customarily receive tips, such as employees who
play a limited or no customer service role. See Azkour, 2012 WL 402049, at *5 (An employer
may not take advantage of the tip credit if it requires tipped employees to share tips with a
manager or with employees who do not typically provide direct customer service). Sharing tips
with an employer constitutes an employer’s retention of tips, thus violating the FLSA tip credit
conditions, 29 U.S.C. § 203(m). See Ayres v. 127 Rest. Corp., 12 F.Supp.2d 308
(S.D.N.Y.1998); Chan v. Triple 8 Palace, Inc., 03 Civ. 6048 (GEL), 2006 WL 851749 at *14
(S.D.N.Y. Mar. 30, 2006) (“[E]mployers are not merely barred from taking the tip credit if they
share in the tip pool, but they are barred from taking the tip credit if any person who does not
‘customarily and regularly receive tips’ shares in the tip pool”).
Furthermore, under the NYLL, an employer must refrain from withholding any portion of
the employees’ tips or requiring some employees to share the tips they receive with non-service
employees, such as managers or kitchen staff, who do not customarily and regularly receive tips.
Gunawan v. Sake Sushi Rest., No. 09 Civ. 5018 (JO), 2012 WL 4369754 (E.D.N.Y. Sept. 24,
2012). By requiring Tipped Employees to share tips with ineligible employees, Defendants
cannot avail themselves of the tip credit minimum wage rate. Hai Ming Lu v. Jing Fong Rest.,
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Inc., 503 F. Supp. 2d 706, 710 (S.D.N.Y. 2007) (noting that “this separate violation of § 196–d
would render Jing Fong ineligible to receive a tip credit under New York law”).
Dual Job Regulations
Section 203(m) of the FLSA permits an employer to take a tip credit against the
minimum wage. The United States Department of Labor (“USDOL”) regulation 29 C.F.R.
531.56(e) explains that in cases where an individual works for an employer in a tipped and a
non-tipped occupation, and therefore is employed in “dual jobs,” the employer can only take a
tip credit for the hours the employee has worked in the tipped occupation. BRIEF FOR THE
USDOL AS AMICUS CURIAE, 2010 WL 3761133, at *7, Fast v. Applebee’s Int’l, Inc., 638 F.3d
872 (8th Cir. 2011) cert. denied, 132 S. Ct. 1094 (U.S. 2012). In its 1988 Handbook, the
USDOL further interpreted this regulation concluding that “where the facts indicate that specific
employees are routinely assigned to maintenance, or that tipped employees spend a substantial
amount of time (in excess of 20 percent) performing general preparation work or maintenance,
no tip credit may be taken for the time spent in such duties.” Fast, 638 F.3d at 877-78 (citing
DOL Handbook § 30d00(e)). Courts have found the USDOL’s interpretation entitled to
deference and applied it to similar factual circumstances. See Id. at 880; Driver v. AppleIllinois,
LLC, No. 06 Civ. 6149, 2012 WL 3716482, *23 (N.D. Ill. Aug. 27, 2012) (denying defendants’
motion to dismiss where evidence established that employees regularly performed non-tipped
side work in excess of 20% of their shift); Holder v. MJDE Venture, LLC, No. 08 Civ. 2218
(TW), 2009 WL 4641757 (N.D. Ga. Dec. 1, 2009) (relying on USDOL Handbook § 30d00(e) as
persuasive).
Additionally, the NYLL requires that on any day that a service employee or food service
worker works at a non-tipped occupation for (a) two hours or more, or (b) more than twenty
percent (20%) of his or her shift, whichever is less, the wages of the employee shall be subject to
no tip credit for that day. 12 N.Y.C.R.R. §§ 146-2.9.
Overtime
The FLSA and NYLL unequivocally state that employees who work more than 40 hours in
a workweek are entitled to receive not less than one and one-half the regular rate of compensation
for all hours worked in excess of 40 per workweek. 29 U.S.C. § 207; NYLL Article 19, §§ 650 et
seq.; 12 N.Y.C.R.R. §§ 137-1.3, 146-1.4.
Employers may avoid paying overtime compensation to an employee if the employee falls
within an exemption. An employer seeking to rely upon an exemption as a defense to paying
overtime bears the burden of proving that such exemption applies. McLean v. Garage Mgmt.
Corp., 819 F.Supp.2d 332, 337 (S.D.N.Y.2011). “Because the FLSA is a remedial statute, its
exemptions are construed narrowly against the employer.” Kahn v. Superior Chicken & Ribs,
Inc., 331 F.Supp.2d 115, 117 (E.D.N.Y.2004). Below are a few examples of the most common
exemptions cited by defendants.
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Executive Exemption
To qualify for the executive employee exemption, all of the following tests must be met:
(1) the employee must be compensated on a salary basis at a rate not less than $455 per week; (2)
the employee’s primary duty must be managing the enterprise, or managing a customarily
recognized department or subdivision of the enterprise; (3) the employee must customarily and
regularly direct the work of at least two or more other full-time employees or their equivalent;
and; (4) the employee must have the authority to hire or fire other employees, or the employee’s
suggestions and recommendations as to the hiring, firing, advancement, promotion or any other
change of status of other employees must be given particular weight. see also, 29 U.S.C. §
213(a) and 29 C.F.R. Part 541.
Courts analyze these criteria in terms of a “salary basis” component and a “duties”
component. See, e.g., Rowe v. Olthof Funeral Home, Inc., No. 10 Civ. 6220T, 2011 WL
4899970, at *2 (W.D.N.Y. Oct. 13, 2011). An employee’s “primary duty” is the “principal, main,
major or most important duty that the employee performs.” 29 C.F.R. § 541.700(a). It must be
assessed based on all of the facts “with the major emphasis on the character of the employee’s
job as a whole .” Id. Relevant factors are: “the relative importance of the exempt duties as
compared with other types of duties; the amount of time spent performing exempt work; the
employee’s relative freedom from direct supervision; and the relationship between the
employee’s salary and the wages paid to other employees for the kind of nonexempt work
performed by the employee.” Id. Although the percentage of an employee’s time spent
performing exempt versus nonexempt work is an “important” factor, it is not dispositive. See,
e.g., Scott v. SSP America, Inc., No. 09 Civ. 4399 (RRM)(VVP), 2011 WL 1204406, at *8
(E.D.N.Y. Mar. 29, 2011)
Administrative Exemption
An exempt administrative employee under the FLSA is one: (1) who is paid a salary of at
least $455 per week; (2) whose “primary duty is the performance of office or non-manual work
directly related to the management or general business operations” of the employer or its
customers; and (3) whose primary duty also “includes the exercise of discretion and independent
judgment with respect to matters of significance.” 29 C.F.R. § 541.200.
With respect to (2), “work directly related to the management or general business
operations” must be “work directly related to assisting with the running or servicing of the
business.” Id. § 541.201(a). With respect to (3), whether an employee exercises “discretion and
independent judgment” requires a holistic assessment of the employee's situation, including the
consideration of such factors as: whether the employee has authority to formulate, affect,
interpret, or implement management policies or operating practices; whether the employee
carries out major assignments in conducting the operations of the business; whether the
employee performs work that affects business operations to a substantial degree ...; whether the
employee has authority to commit the employer in matters that have significant financial impact;
whether the employee has authority to waive or deviate from established policies and procedures
without prior approval; whether the employee has authority to negotiate and bind the company
on significant matters; whether the employee provides consultation or expert advice to
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October 15, 2013
management; whether the employee is involved in planning long- or short-term business
objectives; whether the employee investigates and resolves matters of significance on behalf of
management; and whether the employee represents the company in handling complaints,
arbitrating disputes or resolving grievances. Id. § 541.202(b).
Outside Sales Exemption
To qualify for the outside sales employee exemption, all of the following tests must be
met: (1) the employees primary duty must be making sales or obtaining orders or contracts for
services or for the use of facilities for which a consideration will be paid by the client or
customer; and (2) the employee must be customarily and regularly engaged away from the
employer’s place or places of business. See 29 U.S.C. 13(a)(1) and 29 CFR Part 541.
“Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for
sale, or other disposition. See Id. Recently, the Supreme Court determined that the term “other
disposition” can be interpreted to include arrangements that bring about the sale of a commodity.
See Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 2171-72 (2012) (“Consequently,
we think that the catchall phrase “other disposition” is most reasonably interpreted as including
those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a
commodity.”)
Off-the-Clock Work
Another common practice by employers to save money on labor costs is to require
employees to perform duties or require them to report to work early (e.g., 15 minutes before the
shift starts), before they are allowed to “clock in.” The time spent performing tasks while not
punched in is referred to as “off-the-clock” work.
“Off-the-clock” work deals with any work performed before or after a shift starts or ends
that is not recorded and not added to their total hours for the workweek. An example of an “offthe-clock” scenario might help clarify:
Claudia performs data entry for her company. Her company has a strict policy that
Claudia can only work 37.5 hours per week. Despite this policy, Claudia is required to adhere to
quotas that take longer than 37.5 hours to meet. As a result, Claudia will perform work before
and after her scheduled shift. Claudia’s manager is aware that she is performing work beyond
37.5 hours per week but will not let her record those hours. As a result, Claudia is working “offthe-clock” and entitled to be compensated for hours that she has worked.
The FLSA “guarantee[s] compensation for all work or employment engaged in by
employees covered by the Act.” Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321
U.S. 590, 602, 64 S.Ct. 698, 88 L.Ed. 949 (1944). “In determining the number of hours for which
overtime compensation is due, all hours worked (see § 778.223) by an employee for an employer
in a particular workweek must be counted.” 29 C.F.R. § 778.315.
To establish liability for hours worked by an employee off the clock, a plaintiff must
prove that he performed work for which he was not properly compensated, and that the employer
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had actual or constructive knowledge of that work. Kuebel v. Black & Decker Inc., 643 F.3d 352,
361 (2d Cir. 2011) (citing Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 686–87, 66 S.Ct.
1187, 90 L.Ed. 1515 (1946)); See also, Chao v. Gotham Registry, Inc., 514 F.3d 280, 287 (2d
Cir.2008); Grochowski v. Phoenix Constr., 318 F.3d 80, 87 (2d Cir.2003).
While an employee is entitled to recover unpaid overtime hours worked “off-the-clock”,
the Second Circuit recently ruled that, “An employee who has not worked overtime has no claim
under FLSA for hours worked below the 40–hour overtime threshold, unless the average hourly
wage falls below the federal minimum wage.” Lundy v. Catholic Health Sys. of Long Island Inc.,
711 F.3d 106, 115 (2d Cir. 2013). “So long as an employee is being paid the minimum wage or
more, FLSA does not provide recourse for unpaid hours below the 40–hour threshold, even if the
employee also works overtime hours the same week.” Id. at 116.
Tipped Employee Overtime Rate Under NYLL
A common violation by restaurants is miscalculating their tipped employees’ overtime
pay rate. Most restaurants will take the tipped minimum wage rate of $5.00 per hour and
multiply that by 1.5, giving them an overtime rate of $7.50. This is wrong and a violation of the
NYLL.
When an employer is taking the “tip credit” towards the basic minimum wage rate, the
overtime for that employee should be calculated as his or her regular rate of pay before the tip
credit, multiplied by one and one-half minus the tip credit. See, 12 NYCRR § 146-1.4.
Example: (based on the employer taking the full “tip credit” of $2.25)
• Regular minimum wage rate = $7.25
• Tipped minimum wage rate = $5.00 ($7.25 - $2.25)
• Regular overtime rate = $10.875 ($7.25 x 1.5)
• Tipped overtime rate = $8.625 ($10.875 - $2.25)
Miscalculating the overtime rate is a common violation within the restaurant industry.
Potential damages include the difference between the overtime rate paid and the required
overtime rate (this can also be the full overtime rate of $10.875 if the employer failed to satisfy
“tip credit” notification), liquidated damages, attorneys’ fees, costs and prejudgment and post
judgment interest.
Spread of Hours 12 NYCRR § 146-1.6
The NYLL provides that any restaurant employee whose workday is longer than ten
hours shall receive one hour’s pay at the basic minimum hourly wage rate. 12 N.Y.C.R.R. §§
137-1.7, 146-1.6. Spread-of-hours is defined as the number of hours from the time an employee
starts his/her workday until the time the employee finishes his/her workday, including both
working time and non-working time. Courts have routinely concluded that, under New York
law, plaintiffs can recover spread-of-hours wages in addition to their federal or state minimum
wage and overtime claims. See, e.g., Cao v. Wu Liang Ye Lexington Restaurant, Inc., No. 08
Civ. 3725 (DC), 2010 WL 4159391, at *3 (S.D.N.Y. Sept. 30, 2010). For tipped service
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workers, like Plaintiffs, this extra hour’s pay is at the full minimum wage rate. See 12
N.Y.C.R.R. § 146-1.6(d) (“This section shall apply to all employees in restaurants and all-year
hotels, regardless of a given employee’s regular rate of pay).
Examples of a spread of hours greater than 10 are:
•
•
7 am – 10am, 7pm – 10pm = 6 hours worked but a 15 hour spread;
11:30am – 3pm, 4pm – 10:00pm = 9½ hours worked but a 10½ hour spread.
Uniform Maintenance Pay 12 NYCRR § 146-1.7
“[I]n New York, where an employer does not maintain required uniforms for employees, it
is required to reimburse the employee for the maintenance of the uniforms, except in limited
circumstances such as where the uniforms consist of wash and wear materials or where the
uniforms may be routinely washed and dried with other personal garments and do not require
ironing or dry cleaning.” Benavidez v. Plaza Mexico Inc., Nos. 09 Civ. 5076 (THK), 09 Civ. 9574
(THK), 2012 WL 500428 (S.D.N.Y. Feb. 15, 2012) (The court held that the defendants violated
this statutory requirement by failing to maintain the plaintiffs’ uniforms which consisted of an
apron); see also 12 N.Y.C.R.R. §§ 137-1.8, 146-1.7. Prior to the 2011 Hospitality Industry Wage
Order, the regulations did not have a wash and wear exception, thus an employer was obligated “to
launder or maintain required uniforms for any employee.” 12 N.Y.C.R.R. 137-1.8. Under the wash
and wear exception, the employer must show the required uniforms: “(1) are made of ‘wash and
wear’ materials, (2) may be routinely washed and dried with other personal garments, (3) do not
require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment,
and (4) are furnished to the employee in sufficient number, or the employee is reimbursed by the
employer for eth purchase of a sufficient number of uniforms, consistent with the average number
of days per week worked by the employee.” 12 N.Y.C.R.R. § 146-1.7.
The amount of maintenance fees an employer must provide includes:
•
•
•
$9.00 per week for work weeks over 30 hours;
$7.10 per week for work weeks of more than 20 but not more than 30 hours; and
$4.30 per week for work weeks of 20 hours or less.
Individual Liability Under the FLSA and NYLL
To be held liable under the FLSA, a person must be an employer, which the FLSA
defines as “any person acting directly or indirectly in the interest of an employer in relation to an
employee....” 29 U.S.C. § 203(d). Courts have consistently viewed the FLSA definition of an
employer expansively. See Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61, 66 (2d Cir. 2003);
See also Benavidez, 2012 WL 500428, at *n9. (“New York's definition of an employer is nearly
identical to that of the FLSA”). In determining whether an individual is an “employer” under the
FLSA and NYLL, the overarching concern is whether the alleged employer possessed the power
to control the workers in question, with an eye to the “economic reality” presented by the facts of
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Basic Primer on Wage and Hour Practice
October 15, 2013
each case. Relevant factors include “whether the alleged employer (1) had the power to hire and
fire the employees, (2) supervise controlled employee work schedules or conditions of
employment; (3) determined the rate and method of payment and (4) maintained employment
records. See Irizarry v. Catsimatidis, 722 F.3d 99 (2d Cir. 2013).
Liquidated Damages Under the FLSA and NYLL
The FLSA and the NYLL provide for liquidated damages in addition to actual damages.
29 U.S.C. §§ 216(b), 260; NYLL §§ 198(1-a), 663(1). Liquidated damages under the FLSA are
the functional equivalent of prejudgment interest; they are “not a penalty exacted by the law, but
rather compensation to the employee occasioned by the delay in receiving wages due caused by
the employer’s violation of the FLSA.” Herman v. RSR Sec. Servs., 172 F.3d 132, 142 (2d Cir.
1999). By contrast, liquidated damages under the NYLL are punitive in nature; they “‘constitute
a penalty’ to deter an employer’s willful withholding of wages due.” Reilly v. Natwest Mkts.
Group, 181 F.3d 253, 265 (2d Cir. 1999). Consequently, the “majority view” in the Second
Circuit is that plaintiffs may be awarded liquidated damages under both the FLSA and NYLL for
the same time periods, as these damages, though sharing the same name, serve fundamentally
different purposes. See, e.g., Gurung v. Malhorta, 851 F. Supp. 2d 583, 594 (S.D.N.Y. 2012);
Benavidez, 2012 WL 500428, at *8 (collecting cases); Lanzetta v. Florio’s Enters., Inc., No. 08
Civ. 6181 (DC), 2011 WL 3209521, at *5 (S.D.N.Y. July 27, 2011).
The FLSA “guarantees” that an employee who is not compensated for his work will
also receive an additional equal amount [i.e., an additional 100% of the unpaid wages awarded]
as liquidated damages. See Wong v. Hunda Glass Corp., No. 09 Civ. 4402 (RLE), 2010 WL
2541698, at *4 (S.D.N.Y. June 23, 2010). As the Second Circuit has noted, the FLSA’s
liquidated damages are compensatory in nature. Reich v. S. New Eng. Telecomms. Corp., 121
F.3d 58, 70 n. 4 (2d Cir. 1997) (“Congress provided for liquidated damages as a means of
compensating employees for losses they might suffer by reason of not receiving their lawful
wage at the time it was due.”) (citation and internal quotation marks omitted). Thus, liquidated
damages “are mandatory under the FLSA, unless the employer demonstrates that it acted in
good faith.” Gurung, 851 F. Supp. 2d at 592 (citing 29 U.S.C. §§ 216(b), 260).
The employer has the burden of demonstrating, by plain and substantial evidence, that,
“despite its failure to pay appropriate wages, it acted in subjective ‘good faith’ with objectively
‘reasonable grounds’ for believing that its acts or omissions did not violate the FLSA.” Barfield,
537 F.3d at 150. “To establish the requisite subjective ‘good faith,’ an employer must show that
it took ‘active steps to ascertain the dictates of the FLSA and then act to comply with them.
Copantitla, 788 F. Supp. 2d at 316 (quoting Barfield, 537 F.3d at 150). This burden “is a
difficult one to meet, however, and double damages are the norm, single damages the exception.”
Cao, 2010 WL 4159391, at *5 (citations omitted); Barfield, 537 F.3d at 150.
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The NYLL allows a worker to recover liquidated damages where: (a) prior to November
24, 2009 “an employer willfully violates the law when it either knew or showed reckless
disregard for the matter of whether its conduct was prohibited by the Act; or (b) from November
24 to present, the employer fails to prove “a good faith basis [for believing] that its
underpayment of wages was in compliance with the law.” NYLL §§ 198(1-a), 663(1); see
Kadden v. VisuaLex, LLC, No. 11 Civ. 4892 (SAS), 2012 WL 4354781, at *8 (S.D.N.Y. Sept.
24, 2012). In addition to the reasons stated above, Defendants have essentially failed to make
any spread-of-hours payments during the statutory period, nor have they discontinued their
practice of unlawfully retaining and/or misappropriating gratuities from tipped employees.
Therefore, they will be unable to satisfy either standard, entitling Plaintiffs to recover liquidated
damages equal to 25% (up to April 8, 2011) or 100% (April 9, 2011 to present) of the total
wages owed. See NYLL §§ 198(1-a), 663(1).
Attorneys’ Fees and Costs Under the FLSA and NYLL
Under both the FLSA and the NYLL, a prevailing plaintiff is entitled to reasonable
attorneys' fees and costs. Anthony v. Franklin First Fin., Ltd., 844 F. Supp. 2d 504, 506
(S.D.N.Y. 2012) (citing 29 U.S.C. § 216(b); N.Y. Labor Law § 663(1)). The traditional
approach to determining a fee award is the “lodestar” calculation, which is the number of hours
multiplied by a reasonable hourly rate. See Healey v. Leavitt, 485 F.3d 63, 71 (2d Cir.2007).
11
Yuzary v. HSBC Bank USA, N.A.
Exhibit 1
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
2013 WL 5492998
Only the Westlaw citation is currently available.
United States District Court,
S.D. New York.
Sharon YUZARY, Jon Racow, Henry Hu,
Mina Dimetry, Teron Haughton, Daniel
Hauer, Billy Tzewa Mui, Calvin Mazlumyan,
and Kim Lebleu, on behalf of themselves
and all others similarly situated, Plaintiffs,
v.
HSBC BANK USA, N.A.; HSBC USA, Inc.; and
HSBC North America Holdings, Inc., Defendants.
No. 12 Civ. 3693(PGG).
|
Oct. 2, 2013.
Opinion
ORDER GRANTING PLAINTIFFS' MOTION
FOR CERTIFICATION OF THE SETTLEMENT
CLASS, FINAL APPROVAL OF THE CLASS
ACTION SETTLEMENT, APPROVAL OF THE
FLSA SETTLEMENT, AND APPROVAL OF
ATTORNEYS' FEES, REIMBURSEMENT
OF EXPENSES, AND SERVICE AWARDS
PAUL G. GARDEPHE, District Judge.
*1 Plaintiffs Sharon Yuzary, Jon Racow, Henry Hu,
Mina Dimetry, Teron Haughton, Daniel Hauer, Billy Tzewa
Mui, Calvin Mazlumyan, and Kim LeBleu (“Plaintiffs”)
are former Personal Bankers, Branch Relationship Bankers,
Premier Relationship Managers, Small Business Specialists,
and Business Banking Specialists (collectively, the “Covered
Positions”) who worked for Defendants HSBC Bank USA,
N.A., HSBC USA, Inc., and HSBC North America Holdings,
Inc. (“HSBC” or “Defendants”). On February 7, 2012,
Plaintiff Mui filed a lawsuit in the United States District Court
for the Southern District of New York, Mui v. HSBC Bank
USA, N.A., et al., No. 12 Civ. 961(BSJ) (“Mui” ), bringing
FLSA collective action and Rule 23 class claims under the
NYLL. On May 9, 2012, Plaintiff Yuzary filed a class and
collective action overtime lawsuit in the United States District
Court for the Southern District of New York, Yuzary v. HSBC
Bank USA, N.A., et al., No. 12 Civ. 3693(PGG) (“Yuzary”
). On June 8, 2012, Plaintiff Hauer filed a collective action
overtime lawsuit in the United States District Court for the
Southern District of Florida, Hauer v. HSBC Bank USA,
N.A., et al., No. 12 Civ. 61155(KMW) (“Hauer” ). On
July 23, 2012, this Court consolidated the Mui, Yuzary, and
Hauer actions. ECF No. 25. In the consolidated amended
complaint, Plaintiffs alleged that HSBC violated the Fair
Labor Standards Act (“FLSA”) and the wage and hour laws
of New York, California, Connecticut, and New Jersey by
improperly classifying them as exempt from federal and state
overtime requirements and failing to pay them and other
employees in Covered Positions overtime wages. ECF No.
48. Plaintiffs sought unpaid overtime wages, attorneys' fees
and costs, interest, liquidated damages, and injunctive and
declaratory relief. Id.
After exchanging informal discovery to enable Plaintiffs to
calculate damages and undertaking extensive and vigorous
negotiations, the parties reached a settlement totaling
$15,625,000. Decl. of Justin M. Swartz in Supp. of Pls.'
Mot. for Certification of the Settlement Class, Final Approval
of the Class Action Settlement, and Approval of the FLSA
Settlement (“Swartz Decl.”) ¶¶ 12–13, 18–20, 27. The parties
reached this settlement after a formal mediation under the
supervision of an experienced employment law mediator,
Michael Young. Id. ¶¶ 18–20. At the mediation, the parties
reached agreement on the settlement amount and several other
key terms. Id. ¶ 20. During the next three months, the parties
negotiated the remaining terms of the settlement, which were
memorialized in a formal settlement agreement (“Settlement
Agreement”). Id.
On April 29, 2013, this Court entered an Order preliminarily
approving the settlement on behalf of the class set forth
therein (the “Class” or the “Class Members”), conditionally
certifying the settlement class, and appointing Outten &
Golden LLP; Fitapelli & Schaffer, LLP; Lee Litigation
Group, PLLC; and Shavitz Law Group, P.A. as Class
Counsel, and authorizing notice to all Class Members. ECF
No. 70.
*2 On May 31, 2013, a claims administrator sent Courtapproved notices to all Class Members informing them of
their rights under the settlement, including the right to opt
out or object to the settlement for Class Members in the
four states where Rule 23 claims were brought, and of Class
Counsel's intention to seek up to one-third of the settlement
fund for attorneys' fees, and reimbursement of their out-ofpocket expenses. Swartz Decl., Ex. D (Cudworth Decl.) ¶ 8.
After the initial Notices were mailed, Defendants discovered
that 62 Class Members had inadvertently been omitted from
the data initially provided to the claims administrator and that
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
1
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
the data also omitted a number of workweeks for 93 Class
Members who had received Notice. Id. ¶ 16. New Notices
were subsequently mailed to those 62 Class Members who
had received no Notice. No Class Members objected to the
settlement, seven filed timely opt-out requests, and one filed
a late opt-out request. Id . ¶¶ 14–15.
On July 16, 2013, Plaintiffs filed a Motion for Certification
of the Settlement Class, Final Approval of the Class Action
Settlement, and Approval of the FLSA Settlement (“Motion
for Final Approval”). That same day, Plaintiffs also filed
Motions for Approval of Attorneys' Fees and Reimbursement
of Expenses (“Motion for Attorneys' Fees”) and for Service
Awards (“Motion for Service Awards”). Defendants took no
position with respect to any of these motions and did not
object to the requests for attorneys' fees, costs, or service
payments.
The Court held a fairness hearing on July 25, 2013. No Class
Member objected to the settlement at the hearing.
Having considered the Motion for Final Approval, the Motion
for Attorneys' Fees and Reimbursement of Expenses, the
Motion for Service Awards, and the supporting declarations,
the oral argument presented at the July 25, 2013 fairness
hearing, and the complete record in this matter, for the reasons
set forth therein and stated on the record at the July 25, 2013
fairness hearing, and for good cause shown.
NOW, THEREFORE, IT IS HEREBY ORDERED,
ADJUDGED AND DECREED: CERTIFICATION OF
THE SETTLEMENT CLASS
1. The Court certifies the following sub-classes under Federal
Rule of Civil Procedure 23(e), for settlement purposes, which
consist of individuals who worked in Covered Positions for
at least fifteen (15) days in any state who fit within the
definitions set forth in subparagraphs (A) through (D) below
(the “State Sub–Classes”) (the “Rule 23 Class Members”);
*3 C. all individuals who were employed in Covered
Positions in the State of Connecticut from May 9, 2010
through November 15, 2012; and
D. all individuals who were employed in Covered Positions
in the State of New Jersey from May 9, 2010 through
November 15, 2012.
2. Plaintiffs meet all of the requirements for class certification
under Federal Rule of Civil Procedure 23(a) and (b) (3).
3. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)
(1) because there are approximately 2,203 Rule 23 Class
Members and, thus, joinder is impracticable. See Consol. Rail
Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir.1995)
(“[N]umerosity is presumed at a level of 40 members.”).
4. The proposed class also satisfies Federal Rule of Civil
Procedure 23(a)(2), the commonality requirement. Plaintiffs
and the Class Members share common issues of fact and
law, including whether Defendants misclassified them as
exempt employees, failed to pay them overtime wages in
violation of state wage and hour laws, and failed to keep
accurate records of time worked. See Beckman v.. KeyBank,
N.A., No. 12 Civ. 7836, 2013 WL 1803736, at *2 (S.D.N.Y.
Apr. 29, 2013) (common issues that help to satisfy Rule
23 commonality requirement include whether “Defendant
misclassified them as exempt employees, failed to pay them
overtime wages in violation of state wage and hour laws,
and failed to keep accurate records of time worked”); Morris
v. Affinity Health Plan, Inc., 859 F.Supp.2d 611, 615–16
(S.D.N.Y.2012) (commonality satisfied where, among other
allegations, plaintiffs claimed that defendant had a policy of
not paying all class members overtime pay).
A. all individuals who were employed in Covered Positions
in the State of New York from February 7, 2006 through
November 15, 2012, excluding individuals who signed
releases of state law wage and hour claims as evidenced
in releases provided by Defendants to Class Counsel on
or before the date of the Court's Final Approval Order;
5. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)
(3), typicality, because Plaintiffs' claims arose from the
same factual and legal circumstances that form the bases
of the class members' claims. See Hernandez v. Merrill
Lynch & Co., Inc., No. 11 Civ. 8472, 2013 WL 1209563,
at *3 (S.D.N.Y. Nov. 15, 2012) (typicality satisfied where
“[p]laintiffs' claims [for overtime pay] arose from the same
factual and legal circumstances that form[ed] the bases of the
[c]lass [m]embers' claims”); Morris, 859 F.Supp.2d at 616
(same).
B. all individuals who were employed in Covered Positions
in the State of California from May 9, 2008 through
November 15, 2012;
6. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)
(4) because there is no evidence that the Plaintiffs' and the
class members' interests are at odds. See Beckman, 2013 WL
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Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
1803736, at *3 (finding adequacy requirement met where
there was no evidence that plaintiffs' and class members'
interests were at odds); Morris, 859 F.Supp.2d at 616 (same).
7. In addition, Plaintiffs' Counsel are experienced and
adequate to serve as Class Counsel. See, e.g., Beckman,
2013 WL 1803736, at *3 (noting that Outten & Golden LLP
and Shavitz Law Group, P.A. “have substantial experience
prosecuting and settling employment class actions, including
wage and hour class actions[,] and are well-versed in wage
and hour law and class action law,” and finding both
firms adequate class counsel) (internal quotation and citation
omitted); Tiro v. Pub. House Invs., LLC, 288 F.R.D. 272,
275 (S.D.N.Y.2012) (Fitapelli & Schaffer approved as class
counsel); Han v. AB Gansevoort, No. 11 Civ. 2423, Docket
No. 40 (S.D.N.Y. April 4, 2012) (appointing Kraselnik & Lee,
PLLC as class counsel).
*4 8. Plaintiffs also satisfy Rule 23(b)(3). Plaintiffs'
common factual allegations and a common legal theory—that
Defendants violated federal and state wage and hour laws by
misclassifying Plaintiffs as exempt administrative employees
and failing to pay them for premium overtime hours—
predominate over any factual or legal variations among class
members. See Hernandez, 2013 WL 1209563, at *3 (common
factual allegations and legal theory predominated over
variations in wage and hour misclassification case); Torres v.
Gristede's Corp., No. 04 Civ. 3316, 2006 WL 2819730, at *16
(S.D.N.Y. Sept. 29, 2006) (plaintiffs “introduced sufficient
proof that Defendants engaged in a common practice to deny
employees overtime pay,” and “[t]his issue predominates
over any individual calculations of overtime wages”).
9. Class adjudication of this case is superior to individual
adjudication because it will conserve judicial resources and
is more efficient for class members, particularly those who
lack the resources to bring their claims individually. See
Beckman, 2013 WL 1803736, at *3; Morris, 859 F.Supp.2d
at 617. Concentrating the litigation in this Court is desirable
because the allegedly wrongful conduct occurred within its
jurisdiction.
APPROVAL OF THE SETTLEMENT AGREEMENT
10. The Court hereby grants the Motion for Final Approval
and finally approves the settlement as set forth in the
Settlement Agreement.
11. Rule 23(e) requires court approval for a class action
settlement to ensure that it is procedurally and substantively
fair, reasonable, and adequate. Fed.R.Civ.P. 23(e). To
determine procedural fairness, courts examine the negotiating
process leading to the settlement. See Wal–Mart Stores,
Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir.2005);
D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir.2001).
To determine substantive fairness, courts determine whether
the settlement's terms are fair, adequate, and reasonable
according to the factors set forth in City of Detroit v. Grinnell
Corp., 495 F.2d 448 (2d Cir.1974).
12. Courts examine procedural and substantive fairness in
light of the “strong judicial policy favoring settlements” of
class action suits. Wal–Mart Stores, 396 F.3d at 116 (internal
quotation and citation omitted); see also In re EVCI Career
Colls. Holding Corp. Sec. Litig., No. 05 Civ. 10240, 2007
WL 2230177, at *4 (S.D.N.Y. July 27, 2007); Spann v. AOL
Time Warner, Inc., No. 02 Civ. 8238, 2005 WL 1330937, at
*6 (S.D.N.Y. June 7, 2005).
13. A “presumption of fairness, adequacy and reasonableness
may attach to a class settlement reached in arm's-length
negotiations between experienced, capable counsel after
meaningful discovery.” Wal–Mart Stores, 396 F.3d at 116
(quoting Manual for Complex Litigation, Third, § 30.42
(1995)); see also D'Amato, 236 F.3d at 85. “Absent
fraud or collusion, [courts] should be hesitant to substitute
[their] judgment for that of the parties who negotiated the
settlement.” In re EVCI Career Colls. Holding Corp. Sec.
Litig., 2007 WL 2230177, at *4; see also In re Top Tankers,
Inc. Sec. Litig., No. 06 Civ. 13761, 2008 WL 2944620, at
*3 (S.D.N.Y. July 31, 2008); In re BankAmerica Corp. Sec.
Litig., 210 F.R.D. 694, 700 (E.D.Mo.2002).
Procedural Fairness
*5 14. The settlement is procedurally fair, reasonable,
adequate, and not a product of collusion. See Fed.R.Civ.P.
23(e); McMahon v. Olivier Cheng Catering & Events, LLC,
No. 08 Civ. 8713, 2010 WL 2399328, at *4 (S.D.N.Y. Mar.
3, 2010). The settlement was reached after the parties had
conducted a thorough investigation and evaluated the claims
and defenses, and after arm's-length negotiations between the
parties. Swartz Decl. ¶¶ 6–13, 18–23.
15. Prior to mediation, Plaintiffs and Defendants both retained
economic experts to analyze the data and perform damages
calculations. Swartz Decl. ¶ 19. On August 22, 2012, the
parties attended a 17.5 hour mediation with an experienced
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3
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
employment law mediator. Id. ¶ 20. The parties made
progress toward a settlement and, during the next three
months, exchanged more information and ultimately reached
an agreement on all terms, which they memorialized in the
Settlement Agreement. Id. These arm's-length negotiations
involved counsel and a mediator well-versed in wage and
hour law, raising a presumption that the settlement achieved
meets the requirements of due process. See Wal–Mart Stores,
396 F.3d at 116; McMahon, 2010 WL 2399328, at *4.
16. In addition, courts encourage early settlement of class
actions, when warranted, because early settlement allows
class members to recover without unnecessary delay and
allows the judicial system to focus resources elsewhere.
See Hernandez v. Merrill Lynch & Co., Inc., No. 11 Civ.
8472, 2012 WL 5862749, at *2 (S.D.N .Y. Nov. 15,
2012) (endorsing early settlement of wage and hour class
action); Castagna v. Madison Square Garden, L.P., No. 09
Civ. 10211, 2011 WL 2208614, at *10 (S.D.N.Y. June 7,
2011) (commending Plaintiffs' attorneys for negotiating early
settlement); In re Interpublic Sec. Litig., No. 02 Civ, 6527,
2004 WL 2397190, at * 12 (S.D.N.Y. Oct. 26, 2004) (early
settlements should be encouraged when warranted by the
circumstances of the case). The parties here acted responsibly
in reaching an early settlement. See Hernandez, 2012 WL
5862749, at *2; In re Interpublic Sec. Litig., 2004 WL
2397190, at *12.
Substantive Fairness
17. The settlement is substantively fair. All of the factors set
forth in Grinnell, which provides the analytical framework
for evaluating the substantive fairness of a class action
settlement, weigh in favor of final approval.
18. The Grinnell factors are: (1) the complexity, expense and
likely duration of the litigation; (2) the reaction of the class;
(3) the stage of the proceedings and the amount of discovery
completed; (4) the risks of establishing liability; (5) the risks
of establishing damages; (6) the risks of maintaining the class
action through the trial; (7) the ability of the defendants to
withstand a greater judgment; (8) the range of reasonableness
of the settlement fund in light of the best possible recovery;
and (9) the range of reasonableness of the settlement fund
to a possible recovery in light of all the attendant risks of
litigation. 495 F.2d at 463.
*6 19. Litigation through trial would be complex, expensive
and long. Therefore, the first Grinnell factor weighs in favor
of final approval.
20. The class's reaction to the settlement was positive. The
Notices included an explanation of the allocation formula
and an estimate of each Class Member's award. The Rule
23 Notice also informed Rule 23 Class Members of their
right to object to or exclude themselves from the Settlement
and explained how to do so. No Class Member objected to
the settlement, and only eight of the 2,203 Rule 23 Class
Members opted out. This favorable response demonstrates
that the class approves of the settlement and supports final
approval. “The fact that the vast majority of class members
neither objected nor opted out is a strong indication of
fairness.” See Willix v. Healthfirst, Inc., No. 07 Civ. 1143,
2011 WL 754862, at *4 (E.D.N.Y. Feb. 18, 2011) (approving
settlement where seven of 2,025 class member submitted
timely objections and two requested exclusion); Khait v.
Whirlpool Corp., No. 06 Civ. 6381, 2010 WL 2025106, at
*5 (E.D.N.Y. Jan. 20, 2010) (the fact that no class members
objected and two opted out demonstrated favorable response
weighing in favor of final approval); Wright v. Stern, 553
F.Supp.2d 337, 344–45 (S.D.N.Y.2008) (“[t]he fact that the
vast majority of class members neither objected nor opted out
is a strong indication” of fairness).
21. The parties have completed enough discovery to
recommend settlement. The pertinent question is “whether
counsel had an adequate appreciation of the merits of the case
before negotiating.” In re Warfarin Sodium Antitrust Litig.,
391 F.3d 516, 537 (3d Cir.2004) (internal quotation marks
omitted). Here, through an efficient, informal exchange of
information, Plaintiffs obtained sufficient discovery to weigh
the strengths and weaknesses of their claims and to accurately
estimate the damages at issue. The parties' participation in
a 17.5 hour mediation allowed them to further explore the
claims and defenses. The third Grinnell factor weighs in favor
of final approval.
22. The risk of establishing liability and damages further
weighs in favor of final approval. “Litigation inherently
involves risks.” In re PaineWebber Ltd. P'ships Litig., 171
F.R.D. 104, 126 (S.D.N.Y.1997). Indeed, the primary purpose
of settlement is to avoid the uncertainty of a trial on the
merits. See In re Ira Haupt & Co., 304 F.Supp. 917, 934
(S.D.N.Y.1969); see also Velez v. Majik Cleaning Serv., Inc.,
No. 03 Civ. 8698, 2007 WL 7232783, at *6 (S.D.N.Y. June
25, 2007). Here, Plaintiffs faced numerous risks as to both
liability and damages, including overcoming Defendants'
exemption defenses, proving willfulness in order to obtain
a third year of liability and damages, and overcoming
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Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
Defendants' likely fluctuating workweek argument, among
others. The proposed settlement eliminates this uncertainty.
This factor therefore weighs in favor of final approval.
*7 23. The risk of obtaining collective and class certification
and maintaining both through trial is also present. Contested
collective and class certification motion would likely require
extensive discovery and briefing. If the Court did authorize
notice to the FLSA collective, Defendants would likely
challenge that determination by seeking decertification at a
later date, after the close of discovery. If the Court were
to grant class certification, Defendants might seek to file
an appeal under Federal Rule of Civil Procedure 23(f), the
resolution of which would require an additional round of
briefing. Settlement eliminates the risk, expense, and delay
inherent in the litigation process. The fifth Grinnell factor
weighs in favor of final approval.
24. Even if Defendants could have withstood a greater
judgment, a “defendant's ability to withstand a greater
judgment, standing alone, does not suggest that the settlement
is unfair.” Frank v. Eastman Kodak Co., 228 F.R.D. 174,
186 (W.D.N.Y.2005) (quoting In re Austrian & German Bank
Holocaust Litig., 80 F.Supp.2d 164, 178 n. 9 (S.D.N.Y.2000)
(alterations and citation omitted)). Accordingly, this factor is
neutral and does not preclude the Court from approving the
settlement.
25. The substantial amount of the settlement, in light of the
best possible recovery and the attendant risks of litigation,
weighs in favor of final approval. The determination of
whether a settlement amount is reasonable “does not involve
the use of a ‘mathematical equation yielding a particularized
sum.’ “ Frank, 228 F.R.D. at 186 (quoting In re Austrian
& German Bank Holocaust Litig., 80 F.Supp.2d at 178).
“Instead, ‘there is a range of reasonableness with respect
to a settlement-a range which recognizes the uncertainties
of law and fact in any particular case and the concomitant
risks and costs necessarily inherent in taking any litigation to
completion.’ “ Id. (quoting Newman v. Stein, 464 F.2d 689,
693 (2d Cir.1972)). These factors also weigh in favor of final
approval.
Corp., 747 F.2d 1211, 1213 (8th Cir.1984); FLSA collective
actions do not implicate the same due process concerns
as Rule 23 actions, McMahon, 2010 WL 2399328, at *6.
Accordingly, the standard for approval of an FLSA settlement
is lower than for a class action under Rule 23.
28. Courts approve FLSA settlements when they are reached
as a result of contested litigation to resolve bona fide disputes.
See Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350,
1353 n. 8 (11th Cir.1982); McMahon, 2010 WL 2399328,
at *6. Typically, courts regard the adversarial nature of a
litigated FLSA case to be an adequate indicator of the fairness
of the settlement. Lynn's Food Stores, 679 F.2d at 1353–
54. If the proposed FLSA settlement reflects a reasonable
compromise over contested issues, it should be approved. Id.
at 1354; McMahon, 2010 WL 2399328, at *6.
*8 29. In this case, the settlement was the result of
arm's-length negotiation involving vigorous back and forth.
Swartz Decl. ¶ 23. During the entire process, Plaintiffs
and Defendants were represented by counsel experienced in
wage and hour law. Accordingly, the Settlement Agreement
resolves a bona fide dispute under circumstances supporting
a finding that is fair and reasonable.
DISSEMINATION OF NOTICE
30. Pursuant to the Preliminary Approval Order, the Rule
23 and FLSA Notices were sent by first-class mail to each
respective Class Member at his or her last known address
(with re-mailing of returned Notices for which new addresses
could be located). The Court finds that the Rule 23 and FLSA
Notices fairly and adequately advised Class Members of the
terms of the settlement, as well as the right of Rule 23 Class
Member to opt out of or to object to the settlement, and to
appear at the fairness hearing conducted on July 25, 2013.
Class Members were provided with the best notice practicable
under the circumstances.
31. On August 1, 2013, additional Notices were sent to the
62 Class Members who were inadvertently excluded from the
data sent to the Claims Administrator.
APPROVAL OF THE FLSA SETTLEMENT
26. The Court hereby approves the FLSA settlement.
32. The second notice period ended on September 3, 2013.
No Class Members included in this second mailing opted out
or objected.
27. Because, under the FLSA, “parties may elect to opt in
but a failure to do so does not prevent them from bringing
their own suits at a later date,” McKenna v. Champion Intern.
33. The addition of the 62 Class Members who had
inadvertently been omitted from the original mailing and the
corrected workweeks for the 93 Class Members who were
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
5
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
entitled to higher settlement amounts caused a shortfall in
the Settlement Fund because the original Notices advised
Class Members that they would receive no less than the
amount that had been printed on their Notice. To absorb some
of the shortfall, Class Counsel voluntarily reduced their fee
request from one-third to 31.7% of the Settlement Fund. An
additional $45,000 will be used from the errors and omissions
fund, and HSBC agreed to pay the remaining balance.
38. The work that Class Counsel has performed in litigating
and settling this case demonstrates their commitment to the
class and to representing the class's interests. Class Counsel
have committed substantial resources to prosecuting this case.
34. The Court further finds that the Notices and their
distribution comported with all constitutional requirements,
including those of due process.
35. The Court confirms Kurtzman Carson Consultants, LLC
as the claims administrator.
40. The trend in this Circuit is to use the percentage of the fund
method to compensate attorneys in common fund cases like
this one. McDaniel v. County of Schenectady, 595 F.3d 411,
417 (2d Cir.2010); Wal–Mart Stores, Inc. v. Visa U.S.A., Inc.,
396 F.3d 96, 121 (2d Cir.2005); Sewell, 2012 WL 1320124,
at *10; Beckman, 2013 WL 1803736, at *8.
AWARD OF FEES AND COSTS TO CLASS COUNSEL
AND AWARD OF SERVICE AWARDS TO PLAINTIFFS
36. On April 29, 2013, the Court appointed Outten & Golden
LLP; Fitapelli & Schaffer, LLP; Lee Litigation Group, PLLC;
and Shavitz Law Group, P.A. as Class Counsel because they
met all of the requirements of Federal Rule of Civil Procedure
23(g). See Damassia v. Duane Reade, Inc., 250 F.R.D. 152,
165 (S.D.N.Y.2008) (Rule 23(g) requires the court to consider
“the work counsel has done in identifying or investigating
potential claims in the action, ... counsel's experience in
handling class actions, other complex litigation, and claims of
the type asserted in the action, ... counsel's knowledge of the
applicable law, and ... the resources counsel will commit to
representing the class.”) (internal quotation marks omitted).
41. Although the Court has discretion to award attorneys'
fees based on the lodestar method or the percentage-ofrecovery method, McDaniel, 595 F.3d at 417, in wage and
hour class action lawsuits, public policy favors a common
fund attorneys' fee award, Beckman, 2013 WL 1803736, at
*8; McMahon, 2010 WL 2399328, at *7. Fee awards in wage
and hour cases are meant to “encourage members of the bar
to provide legal services to those whose wage claims might
otherwise be too small to justify the retention of able, legal
counsel.” Sand v. Greenberg, No. 08 Civ. 7840, 2010 WL
69359, at *3 (S.D.N.Y. Jan. 7, 2010). The FLSA and state
wage and hour statutes are remedial statutes, the purposes of
which are served by adequately compensating attorneys who
protect wage and hour rights. McMahon, 2010 WL 2399328,
at *7; Sand, 2010 WL 69359, at *3.
*9 37. Class Counsel are experienced employment lawyers
with good reputations among the employment law bar. See
Sewell v. Bovis Lend Lease, Inc., No. 09 Civ. 6548, 2012
WL 1320124, at *12 (S.D.N .Y. Apr. 16, 2012) (noting
Outten & Golden LLP's reputation as a “respected labor
and employment firm” and that attorneys had “prosecuted
and favorably settled many employment law class actions,
including wage and hour class actions”); Palacio v.
E*TRADE Fin. Corp., No. 10 Civ. 4030, 2012 WL 1058409,
at *2 (S.D.N.Y. Mar. 12, 2012) (appointing Outten & Golden
LLP and Shavitz Law Group, P.A. as Class Counsel based
on their experience in “numerous wage and hour class and
collective actions”); Tiro v. Pub. House Investments, LLC,
288 F.R.D. 272, 280 (S.D.N.Y.2012) (appointing Fitapelli &
Schaffer, LLP as class counsel because “counsel is qualified
to represent the classes”).
39. The Court hereby grants Plaintiffs' Motion for Attorneys'
Fees and awards Class Counsel $4,953,125, which is 31.7%
of the settlement fund.
42. Where relatively small claims can only be prosecuted
through aggregate litigation, and the law relies on prosecution
by “private attorneys general,” attorneys who fill the private
attorney general role must be adequately compensated for
their efforts. McMahon, 2010 WL 2399328, at *7; Sand, 2010
WL 69359, at *3. If not, wage and hour abuses would go
without remedy because attorneys would be unwilling to take
on the risk. Willix v. Healthfirst Inc., No. 07 Civ. 1143, 2011
WL 754862, at *6 (E.D.N.Y. Feb. 18, 2011); Sand, 2010
WL 69359, at *3 (“But for the separate provision of legal
fees, many violations of the Fair Labor Standards Act would
continue unabated and uncorrected.”).
*10 41. Class Counsel's request for 31.7% of the Fund is
reasonable and “consistent with the norms of class litigation
in this circuit.” McMahon, 2010 WL 2399328, at *7.
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
6
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
42. Although Arbor Hill Concerned Citizens Neighborhood
Association v. County of Albany does not address a common
fund fee petition, it supports class counsel's request for onethird of the fund because “ ‘reasonable, paying client[s]’ ...
typically pay one-third of their recoveries under private
retainer agreements.” McMahon, 2010 WL 2399328, at *8
(internal citation and quotations omitted).
43. In addition, in Plaintiffs' retainer agreements with Class
Counsel, Plaintiffs agreed that Class Counsel could apply to
the Court for up to 33% of a class-wide recovery and that they
would pay Class Counsel 33% of any individual recovery.
Decl. of Justin M. Swartz in Supp. of Pls.' Mot. for Approval
of Attys' Fees and Reimbursement of Expenses and Pls.' Mot.
for Approval of Service Awards (“Swartz Fees & Service
Awards Decl.”) ¶ 11. This also provides support for Class
Counsel's request for 31.7% of the fund.
44. No Class Member objected to Class Counsel's request for
one-third of the fund, which also provides support for Class
Counsel's fee request of 31.7%.
45. All of the factors in Goldberger v. Integrated Resources,
Inc., 209 F.3d 43, 48–49 (2d Cir.2000) weigh in favor of the
requested fee award.
46. Applying the lodestar method as a “cross check,” see id.
at 50, the Court finds that the fee that Class Counsel seeks
is reasonable. “Courts regularly award lodestar multipliers
of up to eight times the lodestar, and in some cases, even
higher multipliers.” Beckman, 2013 WL 1803736, at *13;
see also Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1052–
54 (9th Cir.2002) (listing nationwide class action settlements
where multiplier ranged up to 8.5 times); Sewell, 2012
WL 1320124, at *13 (“Courts commonly award lodestar
multipliers between two and six.”); In re Lloyd's Am. Trust
Fund Litig., No. 96 Civ. 1262, 2002 WL 31663577, at *27
(S.D.N.Y. Nov. 26, 2002) (a “multiplier of 2.09 is at the lower
end of the range of multipliers awarded by courts within the
Second Circuit”); see, e.g., Steiner v. Am. B'casting Co., Inc.,
248 Fed. Appx. 780, 783 (9th Cir.2007) (multiplier of 6.85
“falls well within the range of multipliers that courts have
allowed); Ramirez v. Lovin' Oven Catering Suffolk, Inc., No.
11 Civ. 520, 2012 WL 651640, at *4 (S.D.N.Y. Feb. 24,
2012) (granting attorneys' fees equal to 6.8 times lodestar);
Davis v. J.P. Morgan Chase & Co., 827 F.Supp.2d 172, 184–
86 (W.D.N.Y.2011) (awarding multiplier of 5.3 in wage and
hour class action); Buccellato v. AT & T Operations, Inc.,
No. 10 Civ. 463, 2011 WL 3348055, at *2 (N.D.Cal. Jun.
30, 2011) (awarding multiplier of 4.3 in wage and hour class
action); New England Carpenters Health Benefits Fund v.
First Databank, Inc., No. 05 Civ. 11148, 2009 WL 2408560,
at *2 (D.Mass. Aug, 3, 2009) (awarding multiplier of 8.3);
In re Enron Corp. Sec., Derivative & ERISA Litig., 586
F.Supp.2d 732, 803 (S.D.Tex.2008) (awarding multipler of
5.2); In re Cardinal Health Inc. Sec. Litig., 528 F.Supp.2d
752, 768 (S.D.Ohio 2007) (awarding multiplier of six times);
In re Rite Aid Sec. Litig., 362 F.Supp.2d 587 (E.D.Pa.2005)
(awarding multiplier of seven times); Maley v. Del Global
Techs. Corp., 186 F.Supp.2d 358, 371 (S.D.N.Y.2002)
(“modest multiplier” of 4.65 in wage and hour class action
was “fair and reasonable”); In re RJR Nabisco, Inc. Sec. Litig.,
No. 88 Civ. 7905, 1992 WL 210138, at *5 (S.D.N.Y. Aug. 24,
1992) (awarding multiplier of 6); Cosgrove v. Sullivan, 759
F.Supp. 166, 167 n. 1 (S.D.N.Y.1991) (awarding multiplier
of 8.74).
*11 47. Here, the lodestar sought by Class Counsel,
approximately 7.6 times, falls within the range granted
by courts and equals the 31.7% being sought. While this
multiplier is near the higher end of the range of multipliers
that courts have allowed, this should not result in penalizing
plaintiffs' counsel for achieving an early settlement, particular
where, as here, the settlement amount is substantial. See
Wal–Mart Stores, 396 F.3d at 121 (“[T]he lodestar create[s]
an unanticipated disincentive to early settlements, tempt[s]
lawyers to run up their hours, and compel[s] district courts
to engage in a gimlet-eyed review of line-item fee audits.”);
Vizcaino, 290 F.3d at 1050 n. 5 (noting that “the lodestar
method does not reward early settlement” and that “class
counsel should [not] necessarily receive a lesser fee for
settling a case quickly”); Savoie v. Merchants Bank, 166
F.3d 456, 461 (2d Cir.1999) (“[T]he percentage-of-the-fund
method also removes disincentives to prompt settlement,
because plaintiffs' counsel, whose fee does not increase with
delay, have no reason to drag their feet.”).
48. The lodestar multiplier Class Counsel seeks is also
reasonable because it will diminish over time. Parker v.
Jekyll & Hyde Entm't Holdings, LLC, No. 08 Civ. 7670,
2010 WL 532960, at *2 (S.D.N.Y. Feb. 9, 2010) (“[A]s
class counsel is likely to expend significant effort in the
future implementing the complex procedure agreed upon
for collecting and distributing the settlement funds, the
multiplier will diminish over time”). “[W]here ‘class counsel
will be required to spend significant additional time on this
litigation in connection with implementing and monitoring
the settlement, the multiplier will actually be significantly
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
7
Yuzary v. HSBC Bank USA, N.A., Slip Copy (2013)
lower’ because the award includes not only time spent prior
to the award, but after in enforcing the settlement.” Sewell,
2012 WL 1320124, at *13 (quoting Bellifemine v. Sanofi–
Aventis U.S. LLC, No. 07 Civ. 2207, 2010 WL 3119374,
at *6 (S.D.N.Y. Aug. 6, 2010)). In wage and hour cases,
Class Counsel is often called upon to perform work after
the final approval hearing, including answering class member
questions, answering questions from the claims administrator,
and negotiating and sometimes litigating disagreements
with defendants about administering the settlement and
distributing the fund. See Swartz Fees & Service Awards
Decl. ¶ 12. “The fact that Class Counsel's fee award will not
only compensate them for time and effort already expended,
but for time that they will be required to spend administering
the settlement going forward, also supports their fee request.”
See McMahon, 2010 WL 2399328, at *8.
49. The Court also awards Class Counsel reimbursement of
their litigation expenses in the amount of $33,155.56. Courts
typically allow counsel to recover their reasonable out-ofpocket expenses. See In re Indep. Energy Holdings PLC Sec.
Litig., 302 F.Supp.2d 180, 183 n. 3 (S.D.N.Y.2003). Here,
Class Counsel's unreimbursed expenses, including court and
process server fees, postage and courier fees, transportation,
working meals, photocopies, electronic research, expert fees,
and Plaintiffs' share of the mediator's fees, are reasonable and
were incidental and necessary to the representation of the
class.
*12 50. The attorneys' fees and the amount in
reimbursement of litigation costs and expenses shall be paid
from the settlement fund.
51. The Court finds reasonable service awards of $10,000
each to named Plaintiffs Sharon Yuzary, Jon Racow, Henry
Hu, Mina Dimetry, Teron Haughton, Daniel Hauer, Billy
Tzewa Mui, Calvin Mazlumyan, and Kim LeBleu. These
amounts shall be paid from the settlement fund.
52. Service awards are common in class action cases and
serve to “compensate plaintiffs for the time and effort
expended in assisting the prosecution of the litigation, the
risks incurred by becoming and continuing as a litigant, and
any other burdens sustained by the plaintiff[s].” McMahon,
2011 4599822, at *9. Service awards fulfill the important
End of Document
purpose of compensating plaintiffs for the time they spend
and the risks they take. Massiah v. MetroPlus Health Plan,
Inc., No. 11 Civ. 5669, 2012 WL 5874655, at *8 (E.D.N.Y.
Nov. 20, 2012).
53. The “Effective Date” of the settlement shall be 5 days after
the date of this Order if no party appeals this Order. If a party
appeals this Order, the “Effective Date” of the settlement shall
be the day after all appeals are finally resolved. This Order
shall constitute a judgment for purposes of Rule 58 of the
Federal Rules of Civil Procedure.
54. Within 3 days of time to appeal this Order has expired,
the claims administrator shall distribute the funds in the
settlement account by making the following payments in the
order below:
A. Paying Class Counsel 31.7% of the fund ($4,953,125);
B. Reimbursing Class Counsel for $33,155.56 in litigation
costs and expenses;
C. Paying service awards of S 10,000 each to named
Plaintiffs Sharon Yuzary, Jon Racow, Henry Hu, Mina
Dimetry, Teron Haughton, Daniel Hauer, Billy Tzewa
Mui, Calvin Mazlumyan, and Kim LeBleu;
D. Paying the remainder of the fund to class members
in accordance with the allocation plan described in the
Settlement Agreement.
55. The Court retains jurisdiction over this action for
the purpose of enforcing the Settlement Agreement and
overseeing the distribution of settlement funds. The parties
shall abide by all terms of the Settlement Agreement, which
are incorporated herein, and this Order.
56. Upon the Effective Date, this litigation shall be dismissed
with prejudice, and all Rule 23 Class Members who have
not excluded themselves from the settlement and all FLSA
Class Members who have opted in to the lawsuit shall be
permanently enjoined from pursuing and/or seeking to reopen
claims that have been released pursuant to the settlement.
It is so ORDERED.
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
8
COMPLAINT: Flynn v. New York Dolls Gentlemen's Club
Exhibit 2
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 1 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 2 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 3 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 4 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 5 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 6 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 7 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 8 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 10016
Case
1:13-cv-06530-PKC
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 9 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 10 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 11 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 12 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 13 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 14 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 15 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 16 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 17 of 40
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 18 of 40
Fitapelli & Schaffer, LLP
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York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 19 of 40
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10016
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Telephone: 212-300-0375
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10016
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10016
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Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 22 of 40
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10016
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Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 23 of 40
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10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 24 of 40
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York 1:13-cv-06530-PKC
10016
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Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 25 of 40
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10016
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Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 26 of 40
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10016
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Telephone: 212-300-0375
Document 1
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Document 1
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Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 40 of 40
COMPLAINT: Tiro v. Public House Investments, LLC
Exhibit 3
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
COMPLAINT: Walker v. Hunter Roberts Construction Group
Exhibit 4
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New York 10016
Telephone: 212-300-0375
FLSA Consent
Exhibit 5
Fitapelli & Schaffer, LLP
475 Park Avenue South, 12th FL
New York, New
York 1:13-cv-06530-PKC
10016
Case
Telephone: 212-300-0375
Document 1
Filed 09/17/13 Page 39 of 40
Chhab v. Darden Restaurants, Inc.
Exhibit 6
Chhab v. Darden Restaurants, Inc., Slip Copy (2013)
2013 WL 5308004
Only the Westlaw citation is currently available.
United States District Court,
S.D. New York.
Ahmed CHHAB, Kathryn Shrader, Lance Feldhun,
Michael Rella, Vinent Anthony Boreland, and
Adrianne Benzion, on behalf of themselves
and all others similarly situated, Plaintiffs,
v.
DARDEN RESTAURANTS, INC., GMRI,
Inc., Capital Grille Holdings, Inc.
d/b/a the Capital Grille, and Rare
Hospitality International, Inc., Defendants.
No. 11 Civ. 8345(NRB).
|
Sept. 20, 2013.
Attorneys and Law Firms
Joseph A. Fitapelli, Esq., Brian S. Schaffer, Esq., Eric J.
Gittig, Esq., Fitapelli & Schaffer, LLP, Louis Pechman, Esq.,
N. Marely Mercado, Esq., Berke–Weiss & Pechman LLP, D.
Maimon Kirschenbaum, Esq., Matthew D. Kadushin, Esq.,
Joseph, Herzfeld, Hester & Kirschenbaum, LLP, New York,
NY, for Plaintiffs.
Craig R. Benson, Esq., George Pauta, Esq., Sarah E. Moss,
Esq., Lauren Schwartzreich, Esq., Littler Mendelsohn, P.C.,
New York, NY, Gerald L. Maatman, Jr., Esq., Seyfarth Shaw
LLP, Chicago, IL, for Defendants.
forth below, plaintiffs' motion is granted in part and denied
in part.
BACKGROUND 1
I. Factual Background
Plaintiffs work or have worked as servers and bartenders
(“tipped employees” 2 ) at The Capital Grille (“TCG”), a
well-known chain of restaurants with forty-seven locations
across the United States. Defendant Darden Restaurants, Inc.
(“Darden”) is a publicly traded company that owns and
operates all TCG locations, as well as over 1,900 other
restaurant chains including Red Lobster, The Olive Garden,
Bahama Breeze, and Longhorn Steakhouse. 3
According to plaintiffs, Darden maintains significant control
“down to the smallest detail” over each of its TCG
restaurants to ensure their adherence with its uniform policies.
(Deposition of Brian Foye, Fitapelli Decl. Ex. B (“Foye
Tr.”), at 134:23–24, 182:24–183:13.) It selects managing
partners (“MP”) to manage its individual TCG locations,
each of whom report to one of seven regional Directors of
Operations (“DO”), who in turn report to a single Senior
Vice President of Operations. (Foye Tr. at 13:25–14:16.) By
utilizing this network of managing employees, Darden is able
to communicate directly with individual TCG locations to
implement nationwide policies, manage menu and service
specifications, and deliver training, finance and payroll
information. (See July 2012 Form 10–K, Fitapelli Decl. Ex.
C, at 7; see also Foye Tr. at 16:17–17:14, 225:13–19.)
Opinion
MEMORANDUM AND ORDER
NAOMI REICE BUCHWALD, District Judge.
*1 Ahmed Chhab, Kathryn Shrader, Lance Feldhun,
Michael Rella, Vincent Anthony Boreland, and Adrianna
Benzion (collectively, “plaintiffs”) bring this action under the
Fair Labor Standards Act (the “FLSA”). In the instant motion,
plaintiffs request that this Court: (1) authorize the distribution
of a collective action notice to a class of potential opt-in
plaintiffs; (2) approve plaintiffs' proposed notice of lawsuit,
opt-in consent form, and deadline reminder letter; and (3)
direct the defendants to disclose the names, work locations,
dates of employment, addresses, phone numbers, and email
addresses of potential opt-in plaintiffs. For the reasons set
Plaintiffs rely on Darden's acknowledgment that it provides
extensive training to its TCG employees, evidencing its
commitment to consistency and uniformity across TCG
locations. (July 2012 Form 10–K, Fitapelli Decl. Ex. C,
at 7 (“Restaurants are visited regularly by all levels of
supervision to help ensure strict adherence to all aspects
of our standards. Our Learning Center of Excellence in
partnership with each brand's head of training, together with
senior operations executives, are responsible for developing
and maintaining our operations training programs.”) Each
MP attends the manager-in-training program at “Darden
University,” as well as a week of standardized training at
Darden's corporate support center in Orlando. (See Foye Tr. at
54:6–9; Deposition of Thomas Gathers, Fitapelli Decl. Ex. E
(“Gathers Tr.”), at 109:21–112:21.) TCG employees confirm
that such training is standardized, designed to ensure that all
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
1
Chhab v. Darden Restaurants, Inc., Slip Copy (2013)
locations adhere to the same policies and procedures. (See
Gathers Tr. at 90:12–22.) MPs “cannot change policy” at
TCG. (Foye Tr. at 165:16–18.)
§ 206(a)(1). However, under the statute's “tip credit,”
employers may pay tipped employees at an hourly wage rate
below the minimum wage, provided that the hourly wage and
the employees' tips, taken together, are at least equivalent to
*2 TCG's tipped employees are trained at their respective
restaurants by “certified trainers,” hourly employees from
other locations who have been selected by Darden based on
their MPs' recommendations and who are themselves taught
to provide such training. (Id. at 36:2–9; Gathers Tr. at 56:8–
11, 58:19–59:5; Deposition of Jill Dickstein, Fitapelli Decl.
Ex. F (“Dickstein Tr.”), at 252:23–253:16.) The certified
trainers provide tipped employees with standardized training
materials, including a server and bartender manual, a member
handbook, and a payroll guide. (See Foye Tr. at 43:6–19;
Gathers Tr. at 52:11–22.) Notably, once they have been
trained by certified trainers, tipped employees are permitted
to transfer from one TCG location to another without
undergoing further training, since the policies in which they
have been trained are “essentially identical” at each location.
(Deposition of Ahmed Chhab, Fitapelli Decl. Ex. K (“Chhab
Tr.”), at 128:9–20; Deposition of DuJuan White, Fitapelli
Decl. Ex. L (“White Tr.”), at 21:19–22; Deposition of Crystal
Beng, Fitapelli Decl. Ex. M (“Beng Tr.”), at 34:10–18;
Deposition of Tasiya Oliver, Fitapelli Decl. Ex. N (“Oliver
Tr.”), at 10:21–25, 18:1–9.)
the minimum wage. See 29 U .S.C. § 203(m). 4
Plaintiffs further claim that Darden mandates the
implementation of certain standardized programs in all
TCG locations nationwide. (July 2012 Form 10–K, Fitapelli
Decl. Ex. C, at 9.) For example, each TCG location must
use the Darden Application for Service and Hospitality
(“DASH”), TCG's proprietary timekeeping system; the
Darden Information Super Highway (“DiSH”), which
provides access to payroll information and various Darden
publications; the Labor Management System (“LMS”),
TCG's shift scheduling system; and the Par Pull System,
which measures food preparation requirements. (Pl. Mem. at
3–4.)
In reliance on the foregoing, plaintiffs move for conditional
class certification, claiming that defendants have violated the
FLSA in connection with four common policies affecting
TCG's tipped employees nationwide: side work, tip pooling,
uncompensated off-the-clock hours, and denial of overtime
pay. We summarize each of those claims below.
A. Federal Tip Credit and Side Work
The FLSA generally requires employers to pay employees
a federal minimum wage of $7.25 per hour. See 29 U.S.C.
When an employee is employed by a single employer in both
a tipped and a non-tipped position, DOL regulations permit
the employer to utilize the tip credit only for hours spent
by the employee in the tipped occupation. See 29 C.F.R.
§§ 531.51. Thus, if a tipped employee works two jobs, one
in which his work customarily and regularly produces tips
and one in which it does not, the employee is considered
employed in dual occupations, and the tip credit may not
be taken for any hours worked in the non-tip-producing
occupation. See id. § 531.56(e). However, the regulation
distinguishes that situation from “a waitress who spends
part of her time cleaning and setting tables, toasting bread,
making coffee and occasionally washing dishes or glasses,”
concluding that “[s]uch related duties in an occupation that
is a tipped occupation need not by themselves be directed
toward producing tips.” Id.
*3 In the case of servers and bartenders, the threshold
between tip-producing and non-tip-producing work is
particularly important. Waitstaff commonly perform “side
work,” such as setting and clearing tables, that is related to
their tipped occupation but does not itself generate tips. In
such circumstances, the DOL has stated that an employer
can “take the tip credit for time spent in duties related to
the tipped occupation, even though such duties are not by
themselves directed toward producing tips (i.e. maintenance
and preparatory or closing activities),” but that such duties
must be “incidental to the regular duties of the server.” DOL
Field Operations Handbook § 30d00(e) (rev. June 30, 2000),
available at http://www.dol.gov/whd/FOH/FOH_ Ch30.pdf
(last visited Sept. 13, 2013). The DOL further clarified this
issue in a March 2011 opinion in which it concluded that
tipped employees who spend a substantial amount of time,
or more than twenty percent of their workweeks, engaged
in related but non-tip-producing work must be paid the
full minimum wage for the time spent performing the nontipped work. See U.S. Department of Labor, Wage and Hour
Division Fact Sheet # 15: Tipped Employees Under the
Fair Labor Standards Act (FLSA) (rev. Mar. 2011) (“DOL
Fact Sheet # 15”), available at http://www.dol.gov/whd/regs/
compliance/whdfsl5.pdf (last visited September 3, 2013).
While not expressly mandated in the DOL regulations, certain
courts have concluded that the twenty percent limit on side
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
2
Chhab v. Darden Restaurants, Inc., Slip Copy (2013)
work under the federal tip credit is entitled to deference.
See, e.g., Fast v. Applebee's International, Inc., 638 F.3d
872, 879–81 (8th Cir.2011); Driver v. AppleIllinois, LLC, 890
F.Supp.2d 1008, 1032–33 (N.D.Ill.2012).
Plaintiffs allege that, during the relevant period, defendants
uniformly required tipped employees to perform a substantial
amount of side work, or non-tip-producing duties, in excess
of twenty percent of their shift. Nevertheless, plaintiffs assert
that defendants unlawfully utilized the FLSA tip credit wage
rate for the excessive hours spent on side work. (See Pl. Mem.
at 6–7.) As explained below, plaintiffs' side work allegations
differ slightly for the periods before and after November
2011, when Darden implemented a uniform side work policy
in all of its TCG locations.
1. Pre–November 2011 TCG Side Work
Prior to November 2011, each TCG location circulated
general side work guidelines containing lists of the side work
tasks to be completed by tipped employees at those locations.
(See, e.g., New York—42nd Street Side Work Guidelines,
Fitapelli Decl. Ex. T; New York—51st Street Side Work
Guidelines, Fitapelli Decl. Ex. U; New York—Wall Street
Side Work Guidelines, Fitapelli Decl. Ex. V; Indianapolis,
Indiana Side Work Guidelines, Fitapelli Decl. Ex. Y;
Charlotte, North Carolina Side Work Guidelines, Fitapelli
Decl. Ex. Z; Phoenix, Arizona Side Work Guidelines,
Fitapelli Decl. Ex. AA.)
*4 Those guidelines divided the requisite side work into
opening, closing, and running side work tasks. Opening
side work, such as folding napkins, polishing glasses and
silverware, cutting and wrapping lemon wedges, and filling
butter ramekins, was required to be completed before the
start of lunch and dinner services. (See Chhab Tr. at 155:2–
7; White Tr. at 151:2–19, 152:9–18; Beng. Tr. at 122:5–
21; Deposition of Amy Mitchell, Fitapelli Decl. Ex. DD
(“Mitchell Tr.”), at 133:17–23, 135:2–11; Deposition of
Michael Rella, Fitapelli Decl. Ex. EE (“Rella Tr.”), at
159:4–22.) Closing side work, such as running used glasses
and steak knives through the dishwasher, creating “setups”
of washed and polished silverware, cleaning the coffee
machines, and restocking coffee beans and tea bags, was
required to be completed at the end of service, before the
restaurants closed each night. (See Chhab Tr. at 172:4–
173:21; White Tr. at 174:8–17, 183:5–18; Oliver Tr. at 69:9–
16; Rella Tr. at 155:23–157:8, 160:11–161:18; Deposition of
Vincent Anthony Boreland, Fitapelli Decl. Ex. FF (“Boreland
Tr.”), at 132:12–22; Deposition of Kathryn Shrader, Fitapelli
Decl. Ex. HH (“Shrader Tr.”), at 93:7–19, 95:2–9, 97:12–
98:24, 101:4–21.) Opening and closing side work tasks were
divided among the tipped employees by station. (See Chhab
Tr. at 184:16–23; White Tr. at 134:11–135:3; Rella Tr. at
130:15–131:15; Mitchell Tr. at 132:18–133:1.) Running side
work, which tipped employees were required to complete
throughout their shifts, included brewing coffee and tea,
polishing and replacing clean silverware, restocking clean
dishes, cleaning counters, and refilling ice bins. (See, e.g.,
New York—42nd Street Side Work Guidelines, Fitapelli
Decl. Ex. T; New York—51st Street Side Work Guidelines,
Fitapelli Decl. Ex. U; Charlotte, North Carolina Side Work
Guidelines, Fitapelli Decl. Ex. Z; Phoenix, Arizona Side
Work Guidelines, Fitapelli Decl. Ex. AA.)
Plaintiffs claim that although they spent a substantial amount
of time, in excess of twenty percent of their shifts, performing
opening and closing side work duties, defendants failed to
pay them for that time at the full minimum wage rate. (See
Foye Tr. at 87:11–13.) Several plaintiffs have testified that
opening side work duties alone often took between thirty
and ninety minutes, as compared to an average meal shift
of six hours. (See, e.g., Chhab Tr. at 155:2–7; White Tr. at
152:9–18; Beng Tr. at 50:24–51:1, 55:15–23; Oliver Tr. at
56:16–18); see also Tr. at 11:12–12:4. They claim that tipped
employees were required to finish their assigned opening side
work tasks before the start of service, and if a tipped employee
was assigned to an “easier” task, he or she would be required
to assist with the more time consuming duties. (See Chhab
Tr. at 131:9–17; White Tr. at 154:8–21; Beng Tr. at 50:24–
51:1; Oliver Tr. at 56:16–18.) Similarly, plaintiffs were not
allowed to leave following their shift until all closing tasks
were completed and the next meal service had been set up.
(See Beng Tr. at 55:15–23.)
*5 Plaintiffs further claim that defendants failed to monitor
the amount of time tipped employees spent performing side
work at the opening and close of each service, thereby
perpetrating a common policy of permitting side work to
exceed twenty percent of their shifts. (See Chhab Tr. at 131:9–
17, 155:2–23; Beng Tr. at 55:15–23; see also Wirnowski Tr.
at 20:8–24 (alleging that defendants had the ability to record
time spent by tipped employees performing side work).)
2. Post–November 2011 TCG Side Work
In November 2011, Darden introduced its Universal Side
Work program, which standardized and memorialized the
required opening, running, and closing side work tasks to be
completed at all TCG locations across the U.S. (Universal
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
3
Chhab v. Darden Restaurants, Inc., Slip Copy (2013)
Side Work Edge Training Guide, Fitapelli Decl. Ex. KK.)
Plaintiffs claim that the introduction of the program reflects
defendants' concession that previous side work policies had
resulted in tipped employees spending more than twenty
percent of their shifts performing side work. (Pl. Mem. at 12.)
Although Universal Side Work redistributed certain tasks,
such as lemon wedges and butter, to non-tipped employees,
it required tipped employees to perform new tasks, such as
“backwashing” espresso machines and running trays through
the dishwasher. (Universal Side Work Edge Training Guide,
Fitapelli Decl. Ex. KK, at D000918.) Plaintiffs have testified
that the program neither reduced the amount of time tipped
employees spent performing side work (see Mitchell Tr.
at 132:1–8; Deposition of Rebecca Ledwell, Fitapelli Decl.
Ex. JJ (“Ledwell Tr.”), at 451:4–17), nor required MPs or
any other Darden or TCG employee to monitor the time
spent performing such work (see Foye Tr. at 115:13–116:20;
Dickstein Tr. at 190:14–191:5; Zemlock Tr. at 214:2–19;
Hamilton Tr. at 117:19–119:4.). As a result, plaintiffs allege
that defendants' policy of utilizing tipped employees to
perform a substantial amount of non-tip producing side work,
while being paid less than full minimum wage, continued
even after the November 2011 introduction of Universal Side
Work. (See Pl. Reply Mem. at 1.)
B. Tip Pooling
The FLSA permits the pooling of tips so long as the tip
pool includes only “employees who customarily and regularly
receive tips .” 29 U.S.C. §§ 203(m), (t); see 29 C.F.R. §
531.54; see also Gillian v. Starjem Restaurant Corp., No.
10 Civ. 6056(JSR), 2011 WL 4639842, at *4 (S.D.N.Y.
Oct. 4, 2011) (“When all tips are received and retained
by the employee, the pool only includes employees who
‘customarily and regularly receive tips,’ and employees
are notified that the employer is taking the tip credit, the
requirements of the FLSA are satisfied and the employer is
permitted to take a tip credit against minimum wage that
would permit it to pay tipped employees an hourly rate lower
than the standard minimum wage.”). The inclusion of an
employee who does not customarily and regularly receive
tips will invalidate the tip credit applied to participating
employees' wages. See Delaney v. Geisha NYC, LLC, 261
F.R.D. 55, 58 (S.D.N.Y. Sept. 22, 2009) (“If the tip pool
includes employees who do not customarily and regularly
receive tips, the employer must pay them the full minimum
wage.”); Chung v. New Silver Palace Rest., Inc., 246
F.Supp.2d 220, 230–31 (S.D.N.Y.2002).
*6 When deciding whether an employee customarily and
regularly receives tips, courts must determine whether the
employee's job is historically a tipped occupation and whether
he has more than “de minimis” interaction with customers
as a part of his employment. See, e.g., Hai Ming Lu v. Jing
Fong Rest. Inc., 503 F.Supp.2d 706, 712 (S.D.N.Y.2007);
Garcia v. La Revise Assocs. LLC, No.08 Civ. 9356(LTS),
2011 WL 135009, at *5 (S.D.N.Y. Jan. 13, 2011); Chan v.
Triple 8 Palace, Inc., No. 03 Civ. 6048(GEL), 2006 WL
851749, at *14 n. 22 (S.D.N.Y. Mar. 30, 2006). Courts in
this District have concluded that certain back-of-the-house
restaurant staff, including cooks and dishwashers, cannot
participate in valid tip pools under the FLSA because they
do not interact with customers. See, e.g., Shahriar v. Smith &
Wollensky Rest. Grp., Inc., 659 F.3d 234, 240 (2d Cir.2011)
(observing that a “salad maker” was not a tipped employee
because he had no “direct intercourse with diners, worked
entirely outside the view of restaurant patrons, and solely
performed duties traditionally classified as food preparation
or kitchen support work”) (citing Myers v. Cooper Cellar
Corp., 192 F.3d 546, 550–51 (6th Cir.1999); Hai Ming Lu,
503 F.Supp.2d at 711 (denying summary judgment due to
remaining issue of fact regarding “whether pantry workers
and dim sum servers ... are ... entitled to share in the tip
pool, or, in the alternative, whether they are ‘like dishwashers,
cooks, or off-hour employees like an overnight janitor [who]
do not directly relate with customers at all’ and who may not
share in the pool”) (citing Kilgore v. Outback Steakhouse,
160 F.3d 294, 301 (6th Cir.1998)). However, employees who
provide direct services to customers, such as servers, hosts,
and busboys, are valid tip pool participants. See 29 C.F.R. §
531.54; see also Kilgore, 160 F.3d at 301–02; Garcia, 2011
WL 135009, at *7.
Plaintiffs assert that because employees who did not
customarily and regularly receive tips shared in the tip pool
at TCG locations, defendants improperly took advantage
of the tip credit and paid them less than minimum wage.
(See Pl. Mem. at 14.) Plaintiffs only assert their tip pooling
allegations for the period before November 2011, when
Darden implemented a uniform tip sharing policy in all TCG
locations nationwide.
1. Pre–November 2011 Tip Pooling
Under a typical tip-pooling arrangement, a restaurant collects
its employees' tips and then redistributes them in shares
among tipped employees to equalize their incomes. Here,
plaintiffs allege that while certified trainers informed tipped
employees that tip pooling was mandatory, they did not
© 2013 Thomson Reuters. No claim to original U.S. Government Works.
4
Chhab v. Darden Restaurants, Inc., Slip Copy (2013)
themselves redistribute the tips among non-tipped employees.
Rather, plaintiffs assert that the trainers instructed the tipped
employees to themselves “tip out,” or give a portion of
their individual tips, to certain non-tipped TCG employees,
including dishwashers and silverware polishers. (See Foye
Tr. at 66:5–13; Rella Tr. at 43:6–444:16; Oliver Tr. at
18:7–19:16, 109:18–19; Duke Tr. at 182:4–16; White Tr.
at 75:9–12; Ledwell Tr. at 393:12–24; Beng Tr. at 81:22–
82:3; Smith Decl. ¶ 10). They allege that non-tip-eligible
employees thus participated in the tip pools at the following
locations: New York–42nd Street, New York–Wall Street,
Fort Lauderdale, Florida, Orlando, Florida, Tampa, Florida,
Indianapolis, Indiana, Charlotte, North Carolina, Phoenix,
Ariznoa, and Pittsburgh, Pennsylvania. (See Pl. Mem. at 13
& nn. 69–76.)
*7 Plaintiffs further point to a series of emails sent by a
Darden DO to several MPs in late 2010 instructing them to
remove silverware polishers from the tip pools and ensure that
such employees were not receiving tips which, they contend,
indicates defendants' awareness of the violation. (See Email
from Paula Thomas, Fitapelli Decl. LL, at 1.) Nevertheless,
plaintiffs have testified that no follow up was conducted. (See,
e.g., Foye Tr. at 112:1–21.)
2. Post–November 2011 Tip Pooling
Simultaneous with the introduction of Universal Side Work,
Darden rolled out a Standardized “One Best Way” Tip
Share program, to be implemented at all TCG locations
across the U.S. (See Standardized “One Best Way” Tip
Share Program Rollout Guide, The Capital Grille, Fitapelli
Decl. Ex. R.) That program provided, inter alia, that only
servers, bartenders, bar servers, runners, bar backs, and
service assistants could participate in valid tip pools. (See id.
at 5.) Thus, according to plaintiffs, defendants only violated
the FLSA as a result of their tip-sharing policies prior to
November 2011. See Tr. at 29 (“After the rollout of the new
tip share, what we have determined is that the ineligible
employees were effectively removed from the tip pool.”).
C. Off–the–Clock Hours
Plaintiffs allege, and defendants do not dispute, that all TCG
locations nationwide use the same standardized timekeeping
system, DASH, which keeps track of the employees
scheduled to work during any given shift and the number of
hours worked by each employee. (See Pl. Mem. at 15.) Nor do
defendants dispute that all TCG locations adhere to Darden's
“Safe and Secure” program, which requires “[a]t least one
Manager and two other employees ... [to] be in the restaurant
at all times ... at opening and closing.” (The Capital Grille
Recommitment 2011–2012, Fitapelli Ex. MM, at 11.)
As a result of the above policies, plaintiffs allege that
defendants regularly denied tipped employees compensation
by preventing them from being “on the clock” for the full
amount of time spent working. (See Pl. Mem. at 14–15.)
For example, tipped employees have testified that the DASH
system prohibits them from clocking in more than five
minutes before the official start of their shifts, or remaining
clocked in between the lunch and dinner shifts, no matter how
long the employees have been working before or in between
shifts. (See, e.g., Wirnowski Tr. at 26:22–27:9; Boreland Tr.
at 112:13–113:15; Deposition of John Mirabal, Fitapelli Decl.
Ex. PP (“Mirabal Tr.”), at 204:1–12.) Plaintiffs also allege
that DASH prohibits them from clocking in if they are not
listed on the schedule, either because they are substituting
for the scheduled employee or because they picked up the
shift after the schedule was entered. Since only MPs—
who plaintiffs submit are disincentivized from permitting
employees to work in excess of forty hours per week 5 —
are authorized to make adjustments to the DASH schedule,
plaintiffs claim that they were regularly denied compensation
for these unrecorded shifts. (See, e.g., Foye Tr. at 151:8–16;
Wirnowski Tr. at 25:12–19, 26:22–27:9; White Tr. at 238:7–
239:1; Rella Tr. at 76:6–24; Oliver Tr. at 39:19–40:21.)
*8 Next, plaintiffs allege that the “Safe and Secure” program
regularly requires tipped employees to be at TCG for an
uncompensated period of time while closing the restaurant
each night. Specifically, they claim that in order for the MPs
to run the end of night report, the tipped employees who
have remained at TCG pursuant to the “Safe and Secure”
policy must clock out. As such, the program requires tipped
employees to wait off the clock while MPs complete their
closing responsibilities. (See, e.g., Chhab Tr. at 97:14–24,
100:17–22; Oliver Tr. at 101:4–20; Mitchell Tr. at 81:2–16;
Ledwell Tr. at 128:5–129:20.) Plaintiffs further argue that the
off the clock time was “significant” due to the length of time
it takes to run the end of night report and complete various
forms of closing paperwork. Tr. at 38:2–5; (see Pl. Mem. at
14; Foye Tr. at 158:3–8; Email from Joe Rossi, Fitapelli Decl.
Ex. NN, at 1 (recalling clocking out before having to complete
weekly sales accountings and compile credit card receipts and
server check out reports after closing shift); October 24, 2011
Email from Ron Adelman to MPs, Fitapelli Decl. Ex. OO, at 1
(“There should not be more than a 5 minute variance from the
time the last team member clocks until the closing manager
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runs end of day. Team members can not being [sic] waiting
for managers to close the restaurant off the clock!”).)
D. Denial of Overtime Pay
Finally, plaintiffs allege that defendants regularly denied
tipped employees overtime wages when they worked more
than forty hours per week. (Pl. Mem. at 15–16); see 29 U.S.C.
§ 207(a)(1). Largely, plaintiffs claim that this was perpetrated
through defendants' “de facto policy” against overtime, as
enforced by MPs who prohibited tipped employees from
working on the clock in excess of forty hours per week (see
White Tr. at 227:2–20; Oliver Tr. at 33:4–13) and permitted
them to work off the clock hours and shifts (see Chhab Tr. at
205:21–206:1; Benzion Tr. at 125:5–17; Rella Tr. at 85:15–
86:14).
In addition, due to defendants' alleged failure to satisfy the
requirements by which they can avail themselves of the FLSA
tip credit, plaintiffs claim that the overtime rates paid to tipped
employees are inaccurate because they are not calculated at
time and one half the full statutory minimum wage. (See Pl.
Mem. at 16.)
II. Procedural History
Plaintiffs filed their complaint on November 17, 2011, and
an amended complaint on March 1, 2012, alleging that
defendants had perpetrated the above willful FLSA violations
through a common policy or plan with respect to all tipped
employees at the forty-seven TCG restaurants nationwide.
(Amended Compl., Fitapelli Decl. Ex. A.) Defendants joined
issue on April 30, 2012. The parties have since engaged in
limited discovery regarding common policies. To date, fortyfive tipped employees representing eleven TCG locations 6
have opted into the instant action.
*9 On October 25, 2012, plaintiffs moved for conditional
class certification pursuant to 29 U.S.C. § 216(b). Defendants
filed their opposition on December 17, 2012, and plaintiffs
replied on January 16, 2013. We held oral argument on the
motion on August 21, 2013. 7
DISCUSSION
I. Motion for Conditional Certification
A. Legal Standards
Section 216(b) of the FLSA authorizes an employee to
maintain a collective action on behalf of himself and all
“similarly situated” employees. 29 U.S.C. § 216(b). Unlike
a class action brought under Rule 23 of the Federal Rules
of Civil Procedure, a collective action requires “similarly
situated” employees to affirmatively opt-in to the litigation
by filing written consent forms with the court. Id. “[D]istrict
courts have discretion, in appropriate cases, to implement
[Section] 216(b) by facilitating notice to potential plaintiffs of
the pendency of the action and of their opportunity to opt-in as
represented plaintiffs.” Myers v. Hertz Corp., 624 F.3d 537,
554 (2d Cir.2010) (internal quotation marks and alterations
omitted). In determining whether to exercise such discretion,
courts in this Circuit follow a two-step test. Id. at 554–55.
The first step, at issue in this motion, is commonly referred
to as conditional certification. See Guillen v. Marshalls of
MA, Inc ., 750 F.Supp.2d 469, 475 (S.D.N.Y.2010). During
this stage, “the court mak[es] an initial determination to send
notice to potential opt-in plaintiffs who may be ‘similarly
situated’ to the named plaintiffs.” Myers, 624 F.3d at 555.
A plaintiff's burden at this stage is minimal: he must only
make a “modest factual showing” that he and the potential
opt-in plaintiffs were “victims of a common policy or plan
that violated the law.” Id. (internal quotation marks omitted).
To satisfy this burden, the plaintiff must offer “substantial
allegations” demonstrating a “factual nexus” between the
plaintiff and the potential opt-in plaintiffs. Diaz v. S & H
Bondi's Dep't Store, No. 10 Civ. 7676(PGG), 2012 WL
137460, at *3 (S.D.N.Y. Jan. 18, 2012) (internal quotation
marks omitted); see also Myers, 624 F.3d at 555 (stating that
the plaintiff must offer more than “unsupported assertions” to
satisfy its burden at the first stage) (internal quotation marks
omitted). The plaintiff may adduce evidence through its own
pleadings, affidavits, and declarations, Raniere v. Citigroup
Inc., 827 F.Supp.2d 294, 319 (S.D.N.Y.2011), including any
hearsay statements contained therein. Hernandez v. Merrill
Lynch & Co., No. 11 Civ. 8472(KBF), 2012 WL 1193836,
at *3 (S.D.N.Y. Apr. 6, 2012); see also Cunningham v. Elec.
Data Sys. Corp., 754 F.Supp.2d 638, 644 (S.D.N.Y.2010)
(noting that courts use a “relatively lenient evidentiary
standard” during the first stage of the analysis) (internal
quotation marks omitted).
The plaintiff's burden at the first stage is “very low.” Raniere,
827 F.Supp.2d at 319; see also Myers, 624 F.3d at 555;
Lynch v. United Servs. Auto. Ass'n, 491 F.Supp.2d 357, 368
(S.D.N.Y.2007). Importantly, the court does “not weigh the
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merits” of the plaintiff's underlying claims. Cunningham, 754
F.Supp.2d at 644. Nor does the court resolve factual disputes
or evaluate credibility. Id.; see also Raniere, 827 F.Supp.2d
at 324. Although “unsupported assertions” are insufficient,
the Second Circuit has emphasized that the standard of proof
should remain “low” because “the purpose of this first stage
is merely to determine whether ‘similarly situated’ plaintiffs
do in fact exist.” Myers, 624 F.3d at 555 (internal quotation
marks omitted); see also Amador v. Morgan Stanley, No.
11 Civ. 4326(RJS), 2013 WL 494020, at *3 (S.D.N.Y. Feb.
7, 2013). Because the standard at the first stage is “fairly
lenient,” courts applying it “typically grant [ ] conditional
certification.” Malloy v. Richard Fleischman & Assocs. Inc.,
No. 09 Civ. 332(CM), 2009 WL 1585979, at *2 (S.D.N.Y.
June 3, 2009) (internal quotation marks omitted).
*10 As the term conditional certification suggests, the
court's determination at the first stage is only preliminary.
During the second stage, which often occurs after the
close of discovery, the court applies increased scrutiny to
determine whether the opt-in plaintiffs are in fact “similarly
situated” to the named plaintiff, such that a collective
action should proceed. Myers, 624 F.3d at 555; see also
Morano v. Intercontinental Capital Grp., Inc., No. 10 Civ.
2192(KBF), 2012 WL 2952893, at *5 (S.D.N.Y. July 17,
2012) (describing the second-stage standard as “stringent”)
(internal quotation marks omitted). If the court is not
satisfied that the opt-in plaintiffs are similarly situated to
the named plaintiffs, the court will decertify the collective
action and dismiss the claims of the opt-in plaintiffs without
prejudice. See, e.g., Co hen v. Gerson Lehrman Grp., Inc.,
686 F.Supp.2d 317, 327 (S.D.N.Y.2010); Morano, 2012 WL
2952893, at *6.
B. Analysis
Based on the above allegations, plaintiffs seek conditional
certification of a collective action on behalf of all tipped
employees who are or were employed at TCG locations
nationwide between November 17, 2008 and the entry of
judgment in this case. In response, defendants argue that
plaintiffs' proposed certification should be denied because
they have not established that they are similarly situated to
putative collective members with respect to their side work,
tip sharing, and off the clock claims. In addition, defendants
object to various aspects of plaintiffs' proposed notice and
related requests. We address each of defendants' arguments
in turn.
1. Side Work
According to defendants, plaintiffs have not established that
they are similarly situated to putative collective members with
respect to their side work allegations for two reasons: first,
plaintiffs fail to show TCG's use of a facially unlawful side
work policy (see Def. Opp. at 19), and second, plaintiffs have
not shown that there were common side work practices in
existence prior to November 2011, since each TCG location
had “its own unique side work policy” during that time
(see id. at 18). 8 Defendants also submit that individualized
differences among tipped employees' performance of side
work make it impossible for plaintiffs to show common proof.
(See id. at 20–21.) For the following reasons, the Court
disagrees with each of defendants' arguments.
As an initial matter, it is undisputed that TCG locations did
not adhere to any formal, written side work policy prior to the
implementation of Universal Side Work in November 2011.
However, plaintiffs need not show the existence of a facially
unlawful formal policy in order to meet the burden required of
them at the conditional certification stage. See, e.g., Winfield,
843 F.Supp.2d at 405 (“[T]he existence of a formal policy of
requiring overtime pay should not immunize the defendant
where the plaintiffs have presented evidence that this policy
was commonly violated in practice.”). They need only show
evidence of a “de facto” policy which, in practice, resulted
in a pattern of FLSA violations. See id. (listing cases); Myers,
624 F.3d at 555; Amador, 2013 WL 494020, at *6–7.
*11 Defendants concede that TCG locations adhered
to certain side work practices nationwide. For example,
defendants argue that “each MP understood that ... side
work assignments should not take more than 30 minutes per
shift.” (See Def. Opp. at 18). At oral argument, they further
argued that while MPs did not record the specific amount of
time spent by tipped employees on side work, they uniformly
ensured that a “cushion” existed between a tipped employee's
total shift hours and the likely time spent performing opening
side work. See Tr. at 10:12–18. Plaintiffs do not contend that
these policies themselves constitute the “common policy or
plan that violated the law” that they must show for conditional
certification. Myers, 624 F.3d at 555. Rather, they submit
that defendants' side work policies resulted, in practice, in
a pattern of FLSA violations across TCG locations. For the
reasons that follow, we agree.
First, plaintiffs have adduced substantial evidence showing
that Darden centrally controlled the side work performed
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across TCG locations even before the implementation
of Universal Side Work. Its Par Pull System mandated
adherence to detailed specifications for commonly performed
side work tasks, including the preparation of lemon wedges
and butter ramekins. (See Foye Tr. at 99:24–100:1.) Darden
personally selected certified trainers to oversee the training
of tipped employees in its side work practices, the format
of which does not vary across TCG locations. It also made
occasional brand-wide changes to its side work specifications
during the relevant period, which became effective in every
TCG location nationwide. (See, e.g., Email from James
Nuetzi to DL–CG Regional Managers, Fitapelli Decl. Ex.
CC, at 1 (requiring all TCG locations to transition to a new,
standardized butter service no later than October 2010).)
Plaintiffs further testified that these violations occurred as a
result of defendants' uniform failure to record or monitor the
time spent on non-tip-producing side work, both before and
after the implementation of Universal Side Work. (See Foye
Tr. at 88:13–25; Dickstein Tr. at 190:14–191:5; Deposition
of James Zemlock, Fitapelli Decl. Ex. J (“Zemlock Tr.”), at
214:2–19; Deposition of James Hamilton, Fitapelli Decl. Ex.
P (“Hamilton Tr.”), at 117:19–119:4.)
Plaintiffs' evidence further indicates that there was substantial
overlap in the type of side work performed by tipped
employees at each location prior to November 2011. (See,
e.g., Foye Tr. at 87:4–8; Chhab Tr. at 128:9–23; White Tr. at
135:24–138:7; Beng Tr. at 42:10–15; Oliver Tr. at 86:16–19;
Declaration of Amy Smith, Fitapelli Decl. Ex. BB (“Smith
Decl.”), ¶ 13.) Nearly every TCG location divided those tasks
into opening, running, and closing side work, and assigned
them to tipped employees by station. (See New York—42nd
Street Side Work Guidelines, Fitapelli Decl. Ex. T, at 6.; New
York—51st Street Side Work Guidelines, Fitapelli Decl. Ex.
U, at 7–8; New York—Wall Street Side Work Guidelines,
Fitapelli Decl. Ex. V, at 3–4, 6–8; Indianapolis, Indiana Side
Work Guidelines, Fitapelli Decl. Ex. Y, at 2–3; Charlotte,
North Carolina Side Work Guidelines, Fitapelli Decl. Ex. Z,
at 7, 14; Phoeniz, Arizona Side Work Guidelines, Fitapelli
Decl. Ex. AA, at 6–7.)
*12 To rebut plaintiffs' showing, defendants urge the
Court to consider a number of competing declarations which
they assert undermine the contention that tipped employees
uniformly performed side work in excess of twenty percent
of their workweeks. (See Def. Opp. at 19 & n. 79.) Doing
so, however, would require the Court to evaluate credibility
and determine the facts. Such rulings are inappropriate at
this stage. Raniere, 827 F.Supp.2d at 324; see also Co hen,
686 F.Supp.2d at 330 (declining to “wade into a thicket of
competing factual asserts at this preliminary stage”). The
accuracy of the parties' competing views will be tested
through discovery and may be raised before the Court on
a motion to decertify the class after the close of discovery.
At this stage, however, defendants' untested declarations
do not undermine plaintiffs' showing. See Winfield, 843
F.Supp.2d at 407 n. 6 (“[C]ourts in this Circuit regularly
conclude that [competing] declarations do not undermine
the plaintiffs' showing in the first stage of the conditional
certification process.”); Iglesias–Mendoza v. La Belle Farm,
Inc., 239 F.R.D. 363, 368 (S.D.N.Y.2007) (stating that, at the
notice stage, “the factual variations defendants rely on do not
undercut plaintiffs' allegations of common wage and overtime
practices that violate the FLSA”).
Based on the above, plaintiffs have submitted ample
deposition testimony in support of their argument that
defendants' side work practices resulted in a pattern of
similar FLSA violations. For example, tipped employees
from multiple TCG locations testified that they performed
“significant” amounts of side work at the opening and closing
of each meal service. (See Chhab Tr. at 172:4–173:21;
White Tr. at 174:8–17, 183:5–18; Oliver Tr. at 69:9–16;
Rella Tr. at 155:23–157:8, 160:11–161:18; Boreland Tr. at
132:12–22; Shrader Tr. at 93:7–19, 95:2–9, 97:12–98:24,
101:4–21.) Notably, several tipped employees testified that
their opening side work often exceeded an hour and a half,
compared to an average shift of six hours, and continued
throughout their shifts. (See, e.g., Chhab Tr. at 155:2–7;
White Tr. at 152:9–18; Beng Tr. at 50:24–51:1, 55:15–
23; Oliver Tr. at 56:16–18; Dickstein Tr. at 190:22–191:5).
Finally, defendants submit that conditional certification
of plaintiffs' side work allegations would require an
“individualized inquiry” into the number of hours each
tipped employee worked per shift as compared to the
number of hours those employees spent on non-tip-producing
side work. (See Def. Opp. at 20–21.) To support that
argument, defendants rely solely on the reasoning espoused
in Strait v. Belcan Engineering Grp., Inc., 911 F.Supp.2d
709 (N.D.Ill.2012), in which the U.S. District Court for the
Northern District of Illinois concluded that conditional class
certification was not warranted where liability is potentially
dependent on a number of individualized factual assessments
regarding potential plaintiffs' employment duties. See id. at
723. Beyond the non-binding nature of that precedent on the
resolution of this motion, we note that courts in this District
have rejected such arguments. See Co hen v. Gerson Lehrman
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Grp., Inc., 686 F.Supp.2d 317, 329 (S.D.N.Y.2010); Francis
v. A & E Stores, Inc., 2008 WL 4619858, at *3 & n. 3
(S.D.N.Y. Oct. 16, 2008) (concluding that it “seem[s] to be
against the weight of authority in undertaking that analysis
at the first stage of the certification process, rather than
evaluating at the decertification stage whether the need for
individual analysis makes a collective action inappropriate”).
We find defendants' argument more appropriately addressed
at a damages phase should the case reach that point.
Accordingly, we believe it is premature for the Court to
conclude at this stage that plaintiffs' experiences were so
individualized as to defeat their motion for conditional
certification.
*13 In sum, none of defendants' arguments refute plaintiffs'
showing that they are similarly situated to putative collective
members with respect to their side work allegations.
2. Tip Pooling
Defendants next argue that plaintiffs are not similarly situated
to putative collective members with respect to their tip
pooling claims because they establish neither the existence
of a common policy or practice regarding tip sharing prior to
November 2011, nor that ineligible employees received tips
“at all locations, and at the direction of management.” (See
Def. Opp. at 16.)
Once again, plaintiffs do not assert the existence of a
formal, chain-wide tip pooling policy prior to November
2011. However, they have adduced considerable evidence
indicating that common tip sharing practices across TCG
locations resulted in a pattern of FLSA violations. Testimony
from putative collective members confirms that MPs
instructed tipped employees to “tip out,” or give a portion of
their individual tips, to tip-ineligible employees. (See Foye
Tr. at 66:5–13; Rella Tr. at 43:6–444:16; Oliver Tr. at 18:7–
19:16, 109:18–19; Duke Tr. at 182:4–16; White Tr. at 75:9–
12; Ledwell Tr. at 393:12–24; Beng Tr. at 81:22–82:3; Smith
Decl. ¶ 10.) Moreover, Brian Foye, the former Senior Vice
President of Operations at TCG, has testified that such tip
pooling practices were implemented by Darden's certified
trainers, although they were perpetuated by generations of
MPs without further training. (See Foye Tr. at 66:5–13.)
Plaintiffs have established that silverware polishers and
dishwashers were tip-ineligible employees because they
do not interact with customers at TCG, as their primary
responsibility was to clean flatware and glasses in the kitchen
area, away from table service. (See, e.g., Chhab Tr. at 243:23–
25; White Tr. at 183:3–13; Oliver Tr. at 109:10–17; Ledwell
Tr. at 438:6–10.) They have further submitted evidence
indicating that tip pools included silverware polishers and
dishwashers in at least nine TCG locations: New York—42nd
Street, New York—Wall Street, Fort Lauderdale, Florida,
Orlando, Florida, Tampa, Florida, Indianapolis, Indiana,
Charlotte, North Carolina, Phoenix, Arizona, and Pittsburgh,
Pennsylvania. (See Rella Tr. at 43:6–44:16; Oliver Tr. at
109:18–19; Duke Tr. at 182:4–16; White Tr. at 75:9–12;
Ledwell Tr. at 393:12–24; Beng Tr. at 81:22–82:3; see
also Foye Tr. at 106:25–108:7 (confirming that silverware
polishers were included in the tip pool at the Boca Raton,
Florida location.) Thus, plaintiffs have made the minimal
factual showing required of them that there was a common
practice of requiring tipped employees to share tips with noneligible employees in multiple TCG locations.
In response, defendants submit that any common practice of
“tipping out” tip-ineligible employees was voluntary on the
part of the tipped employees. (See Def. Opp. at 17 & n. 71.)
We note that defendants have failed to support their argument
with documentary evidence or deposition testimony, and
find that the emails sent by Darden management, instructing
MPs to root out and eradicate any such practices, further
undermine that contention. (See Fitapelli Decl. LL, at 1.) To
the contrary, plaintiffs have adduced substantial testimonial
evidence showing that the practice of “tipping out” to
non-tipped employees was not voluntary, but rather was
represented to them as reflecting mandatory TCG policy. 9
(See Foye Tr. at 66:5–13; Rella Tr. at 43:6–444:16; Oliver
Tr. at 18:7–19:16, 109:18–19; Duke Tr. at 182:4–16; White
Tr. at 75:9–12; Ledwell Tr. at 393:12–24; Beng Tr. at 81:22–
82:3; Smith Decl. ¶ 10.) Thus, defendants' competing factual
assertion neither overcomes plaintiffs' showing of being
similarly situated with respect to tip pooling, nor deserves this
Court's consideration at the conditional certification stage. 10
3. Off–the–Clock Hours and Denial of Overtime Pay
*14 Defendants next argue that plaintiffs have not made the
requisite factual showing that they were victims of a common
policy requiring them and other putative collective members
to work off the clock because TCG's time-recording and Safe
and Secure policies were facially lawful, and plaintiffs have
not shown that those policies led to common deviations which
resulted in FLSA violations. (See Def. Opp. at 12–14.) Again,
we disagree with defendants' assertions.
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As stated above, plaintiffs' off the clock allegations need not
allege the existence of a facially unlawful common policy.
Plaintiffs' declarations sufficiently establish Darden's control
over the timekeeping policies and procedures implemented at
TCG locations nationwide, as it is undisputed that all tipped
employees were required to log into Darden's centralized
DASH network to clock in or out, request time off, or access
payroll information. (See Darden Team Member Handbook,
Benson Decl. Ex. 10, at 31.) It is also undisputed that only
MPs possessed the requisite authorization to make changes to
the shift schedule and authorize overtime hours in the DASH
system. (Id.) Darden further mandated the implementation of
the Safe and Secure policy in all TCG locations nationwide.
(See The Capital Grille Recommitment 2011–2012, Fitapelli
Ex. MM, at 11.)
Although they concede that the above policies were facially
lawful, plaintiffs have presented significant evidence that
they resulted, in practice, in a pattern of FLSA violations
across TCG locations. With respect to their off the clock
claims, they establish that MPs refused to adjust tipped
employees' scheduled shifts or record overtime hours in the
DASH system, which requires MPs' authorization to effect
such changes, in order to keep labor hours low. (See Foye
Tr. at 151:8–16; Wirnowski Tr. at 25:12–19, 26:22–27:9;
White Tr. at 238:7–239:1; Rella Tr. at 76:6–24; Oliver Tr. at
39:19–40:21; Boreland Tr. at 112:13–113:15; Mirabal Tr. at
204:1–12.) With respect to the Safe and Secure policy, at least
four putative collective members have testified that they were
required to wait off the clock while their MPs ran the end of
night report. (See Chhab Tr. at 97:14–24; Oliver Tr. at 101:4–
20; Mitchell Tr. at 81:2–16; Ledwell Tr. at 128:5–129:20.)
Foye, the former Senior Vice President of Operations at TCG,
further testified that he was aware of incidents of off the
clock waiting resulting from adherence to Safe and Secure,
that he spoke to the DOs who reported to him to ask them to
follow up, and that in one instance he terminated an MP who
continued to take a significant amount of time to close up after
employees clocked out. (See Foye Tr. at 158:3–25.) Thus,
we find that plaintiffs' declarations and supporting testimony
support their contention that the operation of TCG's lawful
policies could have resulted in common violations.
To rebut the above allegations, defendants rely primarily
on alternative declarations from other putative collective
members who attest that they were not uniformly required
to wait off the clock due to Safe and Secure, but as we
stated supra, at this stage such competing declarations are
insufficient to undermine plaintiffs' showing. See Winfield,
843 F.Supp.2d at 407 n. 6; Cohen, 686 F.Supp.2d at 329;
In re Penthouse Exec. Club Compensation Litig., 2010 WL
4340255, at *4. As a result, we conclude that plaintiffs have
met their minimal burden with respect to their off the clock
and overtime allegations.
C. Conclusion
*15 For the foregoing reasons, the Court authorizes the
distribution of notice to all tipped employees who work or
have worked at any of the forty-seven U.S. locations of TCG.
II. Notice to Potential Opt–In Plaintiffs
A. Legal Standards
Upon authorizing the distribution of notice to potential opt-in
plaintiffs, the district court maintains “broad discretion” over
the form and content of the notice. Gjurovich v. Emmanuels
Marketplace, Inc., 282 F.Supp.2d 101, 106 (S.D.N.Y 2003)
(citing Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165,
170 (1989)). In exercising this discretion, the court should be
“guided by the goals of the notice: to make as many potential
plaintiffs as possible aware of this action and their right to opt
in without devolving into a fishing expedition or imposing
undue burdens on the defendants.” Guzelgurgenli, 2012 WL
3264314, at *13 (internal quotation marks omitted).
B. Analysis
Plaintiffs request that the Court approve their proposed notice
of lawsuit, opt-in consent form, and deadline reminder letter.
(Fitapelli Decl., Exs. R, S, T.) Defendants contend that
plaintiffs' proposed materials are deficient in a number of
respects. We consider defendants' objections seriatim.
1. Recipients
With respect to defendants' first objection, we note that,
because the three-year statute of limitations period for willful
FLSA violations runs for each individual plaintiff until that
plaintiff consents to join the action, notice should generally
be directed to those employed within three years of the date of
the Order granting conditional certification or to the mailing
of the notice. See 29 U.S.C. § 255; Whitehorn v. Wolfgang's
Steakhouse, Inc., 767 F.Supp.2d 445, 451 (S.D.N.Y.2011);
In re Penthouse Exec. Club Compensation Litig., No. 10
Civ. 1145(NRB), 2010 WL 4340255, at *5 n. 4 (S.D.N.Y.
Oct. 27, 2010). However, plaintiffs seek to toll the statute
of limitations in order to provide court-authorized notice to
all tipped employees who work or have worked at TCG
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10
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since November 17, 2008, three years before the filing of the
complaint in this action.
When faced with a request for equitable tolling of the
notice period, some courts in this district have permitted
plaintiffs to send notice to similarly situated persons
employed within three years of the filing of the complaint,
“with the understanding that challenges to the timeliness
of individual plaintiffs' actions will be entertained at a
later date.” Winfield v. Citibank, N.A., 843 F.Supp.2d 397,
410 (S.D.N.Y.2012) (quoting Whitehorn, 767 F.Supp.2d at
451); see also Thompson v. World Alliance Fin. Corp .,
No. 08 Civ. 4951, 2010 WL 3394188, at *7 (E.D.N.Y.
Aug. 20, 2010). Generally, we are not comfortable with the
reasoning offered in support of granting defendants leave
to challenge the timeliness of individual plaintiffs' claims at
some later date. It would severely undermine the provision
of a three-year maximum statute of limitations if courts
were prepared to readily widen that period to span four
or five years simply because some litigation ensued in the
interim. Nevertheless, we agree with plaintiffs' argument that,
absent tolling, defendants would be perversely incentivized
to drag out preliminary discovery so as to shorten the prefiling notice period. Moreover, given the unique timing of
events in this case, particularly defendants' implementation of
certain uniform policies to address potential FLSA violations
just days before the filing of plaintiffs' complaint, denying
plaintiffs the tolling they seek would exclude a large chunk of
time during which defendants were potentially violating the
FLSA, and include instead the period during which they were
making attempts to comply.
*16 Thus, we conclude that notice should be sent to all
tipped employees who work or have worked at TCG since
November 17, 2008. Defendants are free to challenge the
timeliness of individual plaintiffs' claims in the future.
2. Notice Period
Plaintiffs' proposed notice and consent form provide a 90–day
notice period. Defendants contend that a 60–day notice period
is sufficient. The Court agrees. See, e.g., Diaz, 2012 WL
137460, at *8 (noting that “[m]any courts in this district have
set a 60–day period,” and that longer periods are warranted
“on consent or where special circumstances indicate that an
extended opt-in period is appropriate”).
Accordingly, the notice and consent form shall require optin plaintiffs to consent to join the collective action within 60
days of the notice mailing date.
3. Form of Notice
Defendants object to various aspects of plaintiffs' proposed
form of notice. Specifically, they contend such notice is
improper because it uses larger font, bold typeface, and
underlining to highlight the language that promotes joining
the lawsuit. (See Def. Opp. at 24.) We agree with defendants
that such emphasis is promotional and improper. All language
in the notice is important and should be equally emphasized.
Defendants further object to the portion of plaintiffs'
proposed notice which directs potential collective members
to contact only plaintiffs' counsel with questions. Instead,
defendants contend that both plaintiffs' and defendants'
counsel's information should be made available to permit both
parties to act as a source of information. (See Def. Opp. at
24–25.) We disagree. Only plaintiffs' counsel can potentially
represent the individuals to whom the notice is mailed, and
only they should be privy to certain sensitive information
that may otherwise fall within the attorney-client privilege.
Thus, it is appropriate that defendants' counsel not be listed
as contacts on the form of notice.
4. Reminder Notice
Plaintiffs propose the distribution of a “reminder” notice
prior to the expiration of the opt-in period to alert potential
plaintiffs that the deadline is coming due. Plaintiffs contend
that a reminder notice promotes the broad remedial purpose of
the FLSA. In response, defendants characterize the proposed
notice as an endorsement by the Court for putative collective
members to join the lawsuit. (Def. Opp. at 25.) They ask the
Court to deny plaintiffs' request in its entirety. We decline to
do so.
Both parties cite case law either authorizing or rejecting
the issuance of a reminder notice. Compare Guzelgurgenli,
2012 WL 3264314, at *15–16 (denying plaintiffs' request to
distribute a reminder notice when plaintiffs did “not identif[y]
any reason why a reminder notice [wa]s necessary”), with
Morris v. Lettire Constr. Corp., 896 F.Supp.2d 265, 281
(S.D.N.Y.2012) (authorizing reminder notice to promote
broad remedial purpose of FLSA). Given that notice under
the FLSA is intended to inform as many potential plaintiffs
as possible of the collective action and their right to opt-in,
we find that a reminder notice is appropriate. Lettire, 896
F.Supp.2d at 281; Raniere, 827 F.Supp.2d at 327; accord
Harris v. Vector Mktg. Corp., 716 F.Supp.2d 835, 847
(N.D.Cal.2010).
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5. Posting of Notice
*17 Finally, defendants oppose plaintiffs' request to post
the approved form of notice in a conspicuous location at
all TCG locations, arguing that such posting is unnecessary
where defendants provide sufficient contact information for
potential collective members. (See Def. Opp. at 24.) Based
on applicable precedent within this District, we agree and
deny plaintiffs' request to post notice. See Amador, 2013 WL
494020, at *7 (concluding that posting notice at potential
plaintiffs' work locations is unnecessary when the form of
notice is mailed to potential plaintiffs).
appropriate, see Raniere, 827 F.Supp.2d at 327 (collecting
cases), and defendants do not oppose this request. However,
defendants do object to the provision of email addresses
and telephone numbers, both because they do not maintain
such records for past employees and because providing
such disclosures may encourage plaintiffs' counsel to harass
potential collective members. (See Def. Opp. at 25.) While we
are unwilling to adopt defendants' suggestion that plaintiffs'
counsel would engage in harassing behavior, nonetheless
we agree with defendants' proposed limitation on disclosure
of data concerning potential class members. Thereby we
order defendants to produce the names, work locations, dates
of employment, and last known addresses for all tipped
employees who work or have worked at TCG since November
18, 2007 to plaintiffs' counsel by October 4, 2013.
III. Disclosure Request
Finally, plaintiffs seek expedited disclosure by defendants
of the names, work locations, dates of employment, last
known addresses, phone numbers, and email addresses of
all potential plaintiffs to the collective action in order to
send them the proposed notice and consent form. Numerous
courts have found that discovery of such information is
CONCLUSION
For the foregoing reasons, the motion (dkt. no. 71) is granted
in part and denied in part.
Footnotes
1
2
3
4
5
The background is derived from the Class and Collective Action Complaint (“Compl.”), filed November 17, 2011; Plaintiffs'
Memorandum of Law in Support of Plaintiffs' Motion for Preliminary Certification Pursuant to the Fair Labor Standards Act,
for Court–Authorized Notice to Similarly Situated Persons, and for Expedited Discovery, filed November 5, 2012 (“Pl.Mem.”);
the Declaration of Joseph A. Fitapelli, Esq. in Support of Plaintiffs' Motion for Preliminary Certification (“Fitapelli Decl.”), filed
November 5, 2012, and the exhibits annexed thereto; Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for
Preliminary Certification Pursuant to the Fair Labor Standards Act, for Court–Authorized Notice to Similarly Situated Persons, and
for Expedited Discovery, filed December 17, 2012 (“Def.Opp.”); the Declaration of Craig R. Benson in Opposition to Plaintiffs'
Motion for Preliminary Certification (“Benson Decl.”), filed December 17, 2012, and the exhibits annexed thereto; and the Reply
Memorandum of Law in Support of Plaintiffs' Motion for Preliminary Certification, filed January 16, 2013 (“Pl. Reply Mem.”) and
the exhibits annexed thereto.
Under the FLSA, a “tipped employee” is one who customarily and regularly receives more than $30 in tips per month. See 29 U.S.C.
§ 203(t).
Plaintiffs also bring FLSA claims against GMRI, Inc. (“GMRI”), a direct subsidiary of Darden, and RARE Hospitality International,
Inc. (“RARE”), a subsidiary of GMRI that owned and operated TCG locations before being sold to Darden. (Compl.¶ ¶ 5, 64–71,
80–86.)
Under section 203(m), the minimum required cash wage that an employer can pay a tipped employee is $2.13 per hour, so the
maximum tip credit that the employer can claim per employee is $5.12 per hour.
Plaintiffs have alleged that TCG MPs receive bonus compensation in amounts tied in part to the total labor hours worked by their
tipped employees. (See Foye Tr. at 204:24–206:17.) They claim that MPs were reluctant to permit tipped employees to clock in for
extra shifts—even if the employees in fact worked during those shifts—when they were approaching forty hours for that week. (See
White Tr. at 227:2–20; Oliver Tr. at 33:4–13.) Thus, to reduce total labor hours, plaintiffs contend that MPs effectively required
tipped employees to choose between working an overtime shift on the clock, but having future scheduled shifts taken away once they
surpassed forty hours, or working the same shift off the clock, but retaining any tips earned during that shift. See Tr. at 41:15–42:7
(“The policy, again, is don't go into overtime. If they're losing hours, if they're screaming for these hours, they get taken from the
next week. So you may gain a couple of hours here, but you're going to lose a shift in the following week. That's what the testimony
reflects.”).
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6
7
8
9
10
The eleven locations currently represented in this action are as follows: New York—Wall Street; New York—42nd Street; New
York—51st Street; Charlotte, North Carolina; Fort Lauderdale, Florida; Indianapolis, Indiana; McLean, Virginia; Orlando, Florida;
Pittsburgh, Pennsylvania; Phoenix, Arizona; and Tampa, Florida.
All references herein preceded by “Tr.” refer to the transcript of oral argument.
Defendants do not dispute that TCG's side work policies were standardized following the implementation of Universal Side Work
in November 2011.
As a result, defendants' reliance on Turner v. Millennium Park Joint Venture, LLC, 767 F.Supp.2d 951 (N.D.Ill.2011), is inapposite.
There, the court permitted silverware rollers to participate in a valid tip pool because it had been conclusively established that the
tipped employees voluntarily agreed to include them. Id. at 954.
We further point out defendants' incorrect legal assertion that there is “nothing unlawful about ... tip-sharing in the first instance if
it was voluntary.” Tr. at 27:21–22. To the contrary, defendants are prohibited from taking advantage of the FLSA's tip credit with
respect to tipped-employees who participate in a tip pool, voluntary or not, when that pool includes employees who do not customarily
and regularly receive tips as a part of their employment. See 29 U.S.C. §§ 203(m), 203(1); Chung, 246 F.Supp.2d at 228–30; Garcia,
2011 WL 135009, at *6–7.
End of Document
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13
Overview of New York State Wage and Hour Laws
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
1.
Employment Relationship
State Minimum Wage Rate
Exemptions to Coverage
Overtime Provisions
Allowances for Tips, Meals, Lodging
Tip Regulations
Split Shift & Spread of Hours
Call-in Pay
Required Uniforms and Uniform Maintenance
Unlawful Deductions from Wages
Frequency of Payments
Notices of Pay Rate & Wage Statements
Prohibition against Retaliation
Powers of the Commissioner of Labor
Burden-Shifting in the Absence of Employer Records
Comparison Chart
Employment Relationship: "Employee," "Employer," and Employer
Liability
(a)
New York Labor Law
Under New York labor laws and regulations, the definitions of both "employee" and
"employer" are short and simple:
•
•
Labor Law Article 19, the Minimum Wage Act defines an employee as
"any individual employed or permitted to work by an employer in any
occupation," and an employer as "any individual, partnership,
association, corporation, business trust, legal representative, or any
organized group of persons acting as employer."
The Miscellaneous Wage Order, a set of labor regulations promulgated
pursuant to Article 19, which applies to all industries not addressed in
other Wage Orders, defines an employee as "any individual employed,
suffered or permitted to work by an employer" subject to certain
exemptions. 12 NYCRR 14203.12(a). .
Given these expansive definitions, most employees in the state are entitled to minimum
wage and overtime pay, although there are specific exemptions contained in New York
Labor Law § 651(5), in various Wage Orders, and in court interpretations explained later
in this section.
1
(b)
Federal Fair Labor Standards Act
The Fair Labor Standards Act ("FLSA") defines "employer" to include "any person
acting directly or indirectly in the interest of an employer in relation to an employee," 29
U.S.C. § 203(d), which covers not only corporate employers, but also individual
corporate officers or others with power over employees.
(c)
Individual Liability
Both state and federal law impose liability on individual owners or employers for violations
of wage and hour laws. Liability depends upon the extent of the individual’s involvement in
the day-to-day aspects of the business and knowledge about the wage and hour violations.
There is no need to pierce the corporate veil.
The Labor Law, like the federal FLSA, defines "employ[]" to include "permit[] or suffer[] to
work." See Labor Law § 2(7); compare 29 U.S.C. § 203(g) ("`Employ' includes suffer or permit
to work"). In addition, the Labor Law as a whole, its Article 19 (the Minimum Wage Act
establishing required minimums) and its Article 6 (requiring payment of earned wages as
promised, even at levels above statutory minimums) all define "employer" broadly, clearly
including individuals. The general definition is "the person employing any such mechanic,
workingman or laborer, whether the owner, proprietor, agent, superintendent, foreman or other
subordinate," see Labor Law § 2(6); the Article 19 definition "includes any individual,
partnership, association, corporation… or any organized group of persons acting as employer,"
see § 651(6); and the Article 6 definition "includes any person, corporation… or association
employing any individual," see § 190(3).
Because complaints often allege violation of both FLSA and the Labor Law (both
Article 19 and Article 6) and are brought in federal court with pendent jurisdiction over
the Labor Law claims, there is more federal-court than state-court interpretation of the
Labor Law, and in light of the similar definitions of "employ," many federal cases give
both statutes the same construction. See, e.g., Zheng v. Liberty Apparel Co., 355 F.3d 61,
78 (2d Cir. 2003); Chen v. Street Beat Sportswear, Inc., 364 F.Supp.2d 269, 278
(E.D.N.Y. 2005) (collecting cases). For employer status, the federal cases generally
recognize an "economic reality" test, that is, a worker is "employed" by the entity or
entities, and/or person or persons, who in economic reality suffer or permit work to be
done, as shown by factors having to do with who controls the work. See, e.g., Zheng, 355
F.3d at 66-76; Herman v. RSR Sec. Servs., Ltd., 172 F.3d 132, 139 (2d Cir. 1999); Brock
v. Superior Care, Inc., 840 F.2d 1054, 1058-59 (2d Cir. 1988). In addition, the federal
cases specifically recognize that under this test, an individual corporate owner or officer
(as well as the corporation) can be a statutory employer and found personally liable for
violations if in economic reality he or she controls the work, as shown by such factors as
power to hire and fire, supervision and control of work schedules or conditions of
employment, and determination of the rate and method of payment.
2
The “overarching concern” when deciding whether FLSA liability exists is not how often
an individual dealt with employees but whether he or she possessed the power to control
the workers in question. In making that determination, courts use the "economic reality"
test, in which the relevant factors include whether the alleged employer (1) had the power
to hire and fire the employees, (2) supervised and controlled employee work schedules or
conditions of employment, (3) determined the rate and method of payment, and (4)
maintained employment records. Herman v. RSR Security Services, Ltd., 172 F.3d 132,
139 (2d Cir. 1999). No one of the four factors standing alone is dispositive, and any
relevant evidence may be examined. As the Herman court noted, employer status "does
not require continuous monitoring of employees, looking over their shoulders at all times,
or any sort of absolute control of one's employees. Control may be restricted, or exercised
only occasionally, without removing the employment relationship from the protections of
the FLSA."
It should be noted that while federal case law is clear regarding applicability of the
economic realities test, there has not been a definitive state court determination regarding
whether the economic realities test applies under the New York Labor Law. See Ovadia
v. Industrial Bd. of Appeals, 19 N.Y.3d 138 (2012), in which the Court of Appeals did not
take the opportunity to accept the economic realities test as the appropriate test.
(d)
Misclassification of employees
Misclassification of workers occurs when an employer improperly treats an individual as
an independent contractor instead of as an employee, or when an employer pays an
individual entirely "off the books," with minimal records, generally at insufficient wage
rates, and more often than not in cash. Employers who misclassify their workers avoid
complying with a number of laws, including, among others, those related to
unemployment insurance, workers’ compensation, social security, tax withholding,
temporary disability, and minimum wage and overtime laws that protect workers.
The problem of misclassification is manifold: (1) workers are deprived of certain
protections that employees are entitled to under the law, leaving them with more
vulnerable job status and less money in their pockets; (2) law-abiding businesses are
placed at a competitive disadvantage because of the disproportionate unemployment
insurance and workers’ compensation expenses they incur for their employees; and (3)
the state loses significant amounts of revenue from unpaid taxes that could buttress
unemployment insurance and other funds.
In September 2007, then-Governor Spitzer signed an Executive Order creating an
interagency strike force to address the problem of employers who inappropriately classify
employees as independent contractors or pay workers off the books as part of the
underground economy. Since then, the interagency task force has been charged with
coordinating efforts to root out misclassification and with issuing annual reports that
indicate progress and future steps. (The February 2012 report is available here:
http://www.labor.ny.gov/agencyinfo/PDFs/Misclassification-Task-Force-Report-2-32012.pdf.)
3
Misclassification is common in certain industries, and several states have passed laws
specifically to address it. New York's law regarding misclassification, the Construction
Industry Fair Play Act, is limited to the Construction Industry. Effective in October,
2010, this law created a presumption that a construction worker is an employee, not an
independent contractors, unless that worker meets three specific conditions that denote a
traditional independent contractor. In addition, Act created a 12-part test to determine
when a sole proprietor, partnership, corporation or other business entity can properly be
considered a “separate business entity” from the contractor for whom it provides a
service; it is only if the entity meets all of the 12 criteria that it will not be considered an
employee of the contractor. If all 12 criteria are not met, that entity is itself subject to the
Act's presumption of workers as employees.
2.
State Minimum Wage Rate:
The state minimum wage rate is set forth in Labor Law § 652(1). The statute contains a
provision indexing the state rate to federal law, and as a result, the state minimum wage
increased to $7.25 per hour in July 2009 when the federal minimum wage increased.
The minimum wage is generally applicable to all employees, subject to specific
exemptions in Labor Law § 651(5). The minimum wage statute sets forth the basic
outlines of the law, while accompanying regulations known as wage orders provide much
more detailed descriptions of legal requirements, both for general employment as well as
in specific industries.
In non-farm industries, the Commissioner of the Department of Labor (the
"Commissioner") may appoint a wage board, comprising representative employers,
employees, and members of the general public, to examine and make recommendations
about the adequacy of wages in particular industries. The wage orders currently in effect
in New York are:
o
o
o
o
o
Building Service Industry, 12 NYCRR § 141
Farm Workers, 12 NYCRR § 190
Hospitality Industry, 12 NYCRR § 146 1
Miscellaneous Industries, 12 NYCRR § 142
Not for Profit, 12 NYCRR § 143
The Hospitality Wage order, effective January 1, 2011, changed a number of minimum
wage provisions as they relate to workers in hotels and restaurants. Specifically, the
minimum wage for a food service worker (defined as an employee who is "primarily
engaged in the serving of food and beverages," such as wait staff and bartenders, and
excluding restaurant delivery workers) is $5/hour with a maximum tip credit of
$2.25/hour, for a total of at least $7.25/hour. The minimum wage for a service employee
(defined as an "employee, other than a food service worker, who customarily receives
1
In January, 2011, the Hospitality Wage Order replaced the prior Hotel Industry Wage Order, 12 NYCRR
§ 138, and Restaurant Industry Wage Order, 12 NYCRR § 137.
4
tips at the rate of $1.60 or more per hour) is $5.65/hour with a maximum tip credit of
$1.60/hour, for a total of at least $7.25/hour. In addition, most workers in restaurants and
hotels (subject to exemptions set forth in § 146-3.2 of the Wage Order) must be paid an
hourly rate instead of by salary or by weekly rate. (Tip credits are explained in further
detail in section 5 below.)
Throughout this outline, the references will typically be to requirements in the
Miscellaneous Wage Order unless specifically noted.
Labor Law § 652(2), provides that changes to wage orders (other than provisions
involving food service workers) shall be made to reflect changes occasioned by statute or
indexing. Section 652(2) also provides that all allowances in wage orders (other than for
food service workers) must be increased in an amount that is proportionate to the
increase in the wage rate.
3.
Exemptions to coverage
The full list of exemptions to coverage under state minimum wage laws is contained in
Labor Law § 651(5). Specifically enumerated occupations, such as farm workers and
individuals working in a bona fide executive, administrative, or professional capacity, are
not covered by minimum wage laws altogether.
Exemptions to minimum wage coverage must be narrowly construed, since the minimum
wage law is remedial and humanitarian legislation. See Settlement Home Care v.
Industrial Bd. of Appeals of Dep't of Labor, 151 A.D.2d 580 (N.Y. App. Div. 2d Dep't
1989) at 581- 582: "The State Minimum Wage Act constitutes remedial legislation
designed to relieve the financial hardship experienced by persons employed in
occupations "at wages insufficient to provide adequate maintenance for themselves and
their families." As such, it is to be liberally construed so as to permit as many individuals
as possible to take advantage of the benefits it offers (see generally, Matter of
Mlodozeniec v Worthington Corp., 9 A.D.2d 21, 189 N.Y.S.2d 468, affd 8 N.Y.2d 918,
204 N.Y.S.2d 163, 168 N.E.2d 834, appeal dismissed and cert denied 364 U.S. 628, 5 L.
Ed. 2d 363, 81 S. Ct. 356). Conversely, exceptions to this remedial legislation are to be
narrowly construed so as not to frustrate the legislative purpose underlying its enactment.
Job titles alone are not determinative of coverage; enforcement agencies and courts look
to an employee’s actual job duties and tasks performed to determine whether he or she is
covered.
4.
Overtime Provisions.
Under the FLSA's overtime provision, the overtime rate is the same for all industries and
is equal to one and one half times the employee's regular rate for all hours in excess of
forty hours per week, with certain variations and exemptions set forth in § 207 of the
5
statute. In contrast, state labor law does not set forth general overtime requirements.
Instead, overtime provisions are generally contained in the various Wage Orders. 2
Employees covered by overtime provisions must be paid at least one and a half times
their regular rate of pay for all hours in excess of forty hours per week. In order to figure
out if an employee has been paid the proper overtime, you must determine the "regular
rate" of pay. This is easy if the employee is paid on an hourly basis, because that hourly
rate is usually the regular rate. When employees are paid according to other methods
(day rate, weekly rate, piece rate, etc.), the federal regulations specify how to calculate
the "regular rate." 29 C.F.R. 778.108 et. seq.
There are several exceptions or special circumstances which warrant further treatment:
(a) Weekly rates: Many employers pay a weekly rate to employees instead of an
hourly rate. For example, an employer might pay $600 per week for 50 hours of
work. Does this arrangement comply with the overtime requirement?
It does if there is an explicit agreement between the employer and employee
that the weekly salary includes specified regular and overtime rates. In the
absence of such an explicit agreement, courts do not deem weekly salaries to
include the overtime premium for employees who work overtime hours.
In the example above ($600 for 50 hours), in the absence of an explicit
agreement, the approach taken by both the New York and United States
Departments of Labor, as well as the courts, is to divide total wages by total
hours to determine the "regular rate": here, the regular rate is $12/hour ($600
÷ 50 hours) . Then the overtime rate is derived from the regular rate: here, the
overtime rate is $18/hour ($12 × 1.5). In order to comply with minimum wage
and overtime provisions while paying a set weekly salary the employer would
have to pay $660/week instead of $600/week (40 regular hours × $12/hour,
plus 10 overtime hours × $18/hour = $660).
However, enforcement agencies and courts would not identify an overtime
violation if there were an explicit agreement between the employer and
employee that the set weekly rate included specified regular and overtime
rates. Here, the employer would have to prove that there was an explicit
mutual agreement that the $600 weekly rate was set by, for example, adding
40 hours at a regular rate of $10.91/hour, and 10 hours at an overtime rate of
$16.365/hour for a total of $600.05/week. In addition, the employer would
2
The Domestic Workers Bill of Rights (effective November 2010) created a
statutory right to overtime pay for domestic workers. It also created the right to a
weekly day of rest; three paid days of rest annual after one year of work for the
same employer; and protection from harassment under New York State Human
Rights Law.
6
have to prove that if the employee worked more than 50 hours in a week, the
employee was paid an overtime rate for those hours over 50. The burden is on
the employer to prove both the agreement and its terms.
Many overtime violations are the result of employers wanting to pay weekly
rates to overtime-eligible employees and neglecting to account for the
overtime requirement in setting and/or communicating that employee's weekly
pay. Although paying a weekly rate to overtime eligible employees is legally
permissible, one certain way to avoid overtime violations based on weekly
rates is to pay on an hourly basis instead of a weekly rate. The Hospitality
Wage Order requires employers in that industry to pay an hourly wage, and
not on any other basis. 12 NYCRR 146-2.5.
Federal cases on this issue include: Overnight Motor Transp. Co, Inc. v.
Missel, 316 U.S. 572; Martin v. Tango’s Restaurant, Inc., 969 F.2d 1319 (1st
Cir. 1992); Wirtz v. Leon’s Auto Parts Company, 406 F.2d 1250 (5th Cir.
1969); Walling v. Stone, 131 F.2d 461 (7th Cir. 1942); Mumbower v.
Callicott, 526 F.2d 1183 (8th Cir. 1975); Marshall v. Chala Enterprises, Inc.,
645 F.2d 799 (9th Cir. 1981); Brennan v. Valley Towing Co., 515 F.2d 100
(9th Cir. 1975); Triple ‘AAA’ Company v. Wirtz, 378 F.2d 884 (10th Cir.
1967), cert. denied 389 U.S. 959 (1967). Some courts have gone further to
specify that the burden of proof is on the employer to prove such agreement
and understanding. Marshall v. Chala Enterprises, Inc., 645 F.2d at 801;
Brennan v. Elmer’s Disposal Service, Inc., 510 F.2d 84, 88 (9th Cir. 1975).
(b)
Less than complete overtime coverage: Some employees receive a lesser
degree of overtime coverage. Specifically, live-in employees are entitled to overtime after
they have worked 44 hours per week instead of 40. Also, under the Miscellaneous Wage
Order, certain employees who are exempt from federal overtime coverage are still
entitled to receive overtime in New York. However, in such situations, the overtime rate
for those employees is one and a half times the minimum wage, not one and a half times
the employee's regular rate of pay.
(c)
Intersection of overtime and tip allowances: Some of the Wage
Orders contain tip allowances (discussed in more detail in Section 5), which
allow employers to pay a lower rate for employees who regularly receive tips.
The Hospitality Wage order explains the appropriate methodology when
workers who receive tips work overtime hours. Specifically, overtime pay is
calculated first, and then the tip allowance is taken. The employer may NOT
first subtract the tip allowance and then calculate the overtime rate, because
this would result in the employer receiving a higher than allowable tip
allowance for overtime hours. See 12 NYCRR § 146-1.4, example 2.
5.
Allowances for Tips, Meals, and Lodging.
7
(a)
Tips
The various Wage Orders contain allowances for tips provided by clients or customers, as
well as for meals and lodging provided by the employer. These allowances permit the
employer to pay a slightly lower minimum rate because the employee is getting
additional compensation through the tips, meals, or lodging. Each wage order contains
different allowances, so the individual wage orders should be carefully consulted when
allowances might come into play.
In general, tips may be considered a part of the minimum wage if:
•
the particular occupation is one in which tips are usually given;
•
there is substantial evidence that the employee received in tips at
least the amount of the allowance claimed by the employer (e.g. a statement
signed by the employee); and
•
the allowance claimed by the employer is recorded on a weekly
basis as a separate item in the payroll record. 12 NYCRR § 142-2.5(b)(1).
For non-hospitality jobs in which tips are customary (e.g., car washes, beauty salons), the
Miscellaneous Wage Order sets forth the range of tip allowances which an employer may
claim. See 12 NYCRR § 142-2.5 (b)(2).
If the average of tips
received per hour is…
Is less than $1.10
Tip Allowance
Cash Wage
NONE
Is between $1.10 to $1.75
Is $1.75 or more
$1.10
$1.75
Employer must pay the
minimum wage of $7.25
$6.15
$5.50
No allowance for tips is permitted for an employee whose weekly average of tips is less
than $1.10 per hour. The tip allowances are maximum thresholds, and as such no
allowance can be aimed in excess of these amounts, matter how high the employee's tips
may be.
For hospitality jobs in which tips are customary, the Hospitality Wage Order significantly
changed the regulatory scheme governing tip credits. See 12 NYCRR § 146-1.3.
Minimum wage
Maximum tip credit
Total minimum hourly
wage employee receives
Food service
workers
$5.00
$2.25
$7.25
Service employees Service employees
in resort hotels*
$5.65
$4.90
$1.60
$2.35
$7.25
$7.25
8
*if the tips received are at least $4.10/hour. This group includes chambermaids in resort
hotels.
Under federal law, the tip allowances are the same for all industries.
(b)
Meals and lodging
In both hospitality and non-hospitality jobs, meals and lodging furnished by an employer
to an employee may be considered a part of the minimum wage. 12 NYCRR § 146-1.9
(hospitality), 12 NYCRR § 142-2.5(a) (miscellaneous).
Under the Miscellaneous Wage Order, the maximum meal allowance is $2.50 per meal,
and the maximum lodging allowance is $3.10 per day. 12 NYCRR § 142-2.5(a)(1)(i).
Under the Hospitality Wage Order, the maximum credit an employer may claim depends
on the type of establishment. 12 NYCRR § 146-1.9. In restaurants, the maximum meal
credit is $2.50 per meal, subject to two restrictions: an employer may not claim credit for
more than one meal if the employee works less than 5 hours that day, and may not claim
credit for more than two meals on any day. The maximum lodging credit is $1.50/day
or$9.60/week for food service workers, and $1.75/day or $11.30/week for all other
workers.
In hotels open year-round, the maximum meal credits and restrictions are the same as
those for restaurants. The maximum lodging credit is $0.35/hour.
In resort hotels, for employees who receive both meals and lodging, an employer may
claim a maximum combined credit of $13.75/day for food service workers and
$16.25/day for all other workers. For employees who receives meal but not lodging, an
employer may claim a maximum meal credit of $2.75/day for food service workers and
$3.25/day for all other workers. For employees who receive lodging but not meals, an
employer may claim a maximum lodging credit $0.35/hour.
6.
Tip Regulations
(a)
Tip Appropriation
Labor Law §196-d strictly prohibits employers from appropriating tips intended for
employees. In this regard, the statute provides:
"No employer or his agent or an officer or agent of any corporation, or any other
person shall demand or accept, directly or indirectly, any part of the gratuities,
received by an employee, or retain any part of a gratuity or of any charge
purported to be a gratuity for an employee."
In Samiento v. World Yacht Inc., 10 NY3d 70 (2008), the New York Court of Appeals
settled the question of whether a charge that is not a voluntary payment by a customer
9
can be a “charge purported to be a gratuity” within the meaning of the statute. The
employer in that case was an operator of various dining and banquet cruises for which
customers were charged a set 15-20% "service charge" that customers were led to believe
displaced traditional tips for wait staff.
In holding that these service charges must be paid to the service employees as tips, the
Court held that a charge that is “represented to the consumer as compensation to [the
employer’s] wait staff in lieu of the gratuity” is covered by § 196-d, and that the standard
to be applied when determining whether a charge or fee is a “charge purported to be a
gratuity” is the expectation of a reasonable customer, as this standard is consistent with
the purpose of the section. If the employer’s agents lead a customer to believe that a price
includes a fixed charge as a gratuity, then that percentage must be paid, in full, to the wait
staff; an employer cannot be permitted to retain these monies.
The Hospitality Wage Order addresses the issue of administrative charges (in the form of
automatically added service charges for banquets, special functions, and package deals)
in § 146-2.19. If such a charge is purported to be a gratuity or tip for service employees
and food service workers, those charges must be distributed to those employees and not
retained by the employer. However, if such a charge is not purported to be a gratuity or
tip, customers must be notified clearly, such that they do not assume they are no longer
obligated to pay tips to the wait staff separately. Notification can be in the form of a
statement in the customer's contract, menu, or bill.
(b)
Tip-pooling and tip-sharing
Tip pooling and tip sharing are addressed in the Hospitality Wage Order in 12 NYCRR §
146-2.14 - 2.17.
Under the Hospitality Wage Order, tip sharing is the practice by which directly tipped
employees (i.e., those who receive tips from customers without an intermediary) give a
portion of tips to other service employees or food service workers who participated in
providing service. Tip pooling is the practice by which directly tipped employees' tips are
put into a common pool, then distributed among themselves as well as indirectly tipped
employees. Neither tip sharing nor tip pooling is a violation of labor law.
In addition, employers may actually require food service workers to participate in tip
sharing or in tip pooling. If tip sharing is required, the employees must conduct those
transactions themselves, and the employer must record the division and maintain those
records for six years. If tip pooling is required, only food service workers may receive
distributions from the pool.
7.
Split Shift and Spread of Hours
10
Depending on the wage order, there are two situations in which an employee must be
paid one hour of the minimum wage of $7.25 in addition to regular minimum and
overtime wages.
The first is when the employee works a split shift. A split shift is a schedule of daily
hours in which the working hours required or permitted are not consecutive. (A meal
period of one hour or less cannot be considered an interruption of consecutive hours.)
See 12 NYCRR § 142-2.4 for the split shift provision in the Miscellaneous Wage Order.
The second is when the employee works a spread of hours over 10 hours. A spread of
hours is the interval between the beginning and end of an employee's workday, which
includes working time, time off for meals, and intervals off duty. Note that although the
employee is not owed wages for proper meal breaks or for off-duty intervals, these times
are included in the computation of total time worked for purposes of determining the
spread of hours. See 12 NYCRR § 142-2.4 (Miscellaneous Wage Order), 12 NYCRR §
146-1.6 (Hospitality Wage Order).
Note that the Hospitality Wage Order clarifies that the spread of hours requirement
applies regardless of the employee's regular rate of pay, which was considered an open
question and is still arguably open under the Miscellaneous Wage Order.
•
Example 1: Employee works two shifts, one from 9am-noon and the
second from 3pm-7pm. The employee must be paid for 7 hours of work,
plus an additional hour at the minimum wage for the split shift.
Regular hours worked (7 hrs. @ $7.25)
$50.75
Split Shift (1 hr. @ $7.25)
7.25
Total Wages Due
$58
•
Example 2: Employee works from 9am-9pm Monday through Thursday,
with two 1-hour meal periods each day. On Friday, the employee works
from 9am-1pm and from 6pm-9pm. The employee must be paid for 47
hours of work, plus $7.25 for each day on which the employee worked a
split shift or a spread of hours.
Regular pay (40 hrs. @ $7.25)
$290
Overtime pay (7 hrs. @ $10.88
76.16
5 split/spreads (5 hrs. @ $7.25)
36.25
Total wages due
$402.41
In the above example, the employee worked both a split shift and a spread of
hours on Friday. However, only one hour of additional pay at $7.25 is required for
that day, not one hour additional pay for each.
8.
Call-In Pay
New York labor law provides that employees must be at least partially paid on occasions
when they report to work only to find that the employer has to work for them that day.
11
Generally, in miscellaneous industries, an employee who by request or permission of the
employer reports for work on any day must be paid for four hours, or the number of hours
in the regularly scheduled shift, whichever is less, at the minimum hourly wage ($7.25
per hour.). 12 NYCRR § 142-2.3.
In the hospitality industry, an employee who reports for work must be paid according to
shift-specific guidelines. See 12 NYCRR § 146-1.5. If the employee was scheduled for
one shift, the employer must pay for three hours, or the number of hours in the regularly
scheduled shift, whichever is less. If the employee was scheduled for two shifts totaling
six hours or less, the employer must pay for six hours, or the number of hours in the
regularly scheduled shift, whichever is less. If the employee was scheduled for three
shifts totaling eight hours or less, the employer must pay for eight hours, or the number of
hours in the regularly scheduled shift, whichever is less.
For purposes of computing call-in pay, a regularly scheduled shift is a shift that is
recognized by its repetitiveness and is one that the employee customarily, usually, or
normally works.
Example: A retail store cashier regularly works 2.5 hours/day on Tuesdays,
Wednesdays, and Thursdays and 8 hours/day on Friday, for a total of 15 hours
weekly. During one week the cashier is needed for only 1.5 hours on Tuesday
and is sent home on Friday immediately after reporting to work because of bad
weather and slow business. In addition to paying the employee for all hours
actually worked, the employer must also pay call-in pay of 1 hour for Tuesday
(the lesser of 4 hours and the regularly scheduled shift of 2.5 hours), and 4 hours
for Friday (the lesser of 4 hours and the regularly scheduled shift of 8 hours), each
at the minimum hourly wage of $7.25.
9.
Required Uniforms and Uniform Maintenance
A “required uniform” is clothing worn by an employee, at the request of the employer,
while performing job-related duties or to comply with state, city, or local law, rule, or
regulation. It does not include clothing that may be worn as part of an employee’s
ordinary wardrobe. 12 NYCRR § 142-2.22 (Miscellaneous); 12 NYCRR § 146-3.10
(Hospitality).
Where an employee purchases a required uniform, the employer must reimburse the
employee no later than the time of the next payment of wages. 12 NYCRR § 146-1.8
(Hospitality). Also, if the employee must launder and maintain a required uniform (i.e.,
if the employer does not utilize a laundry service or launder uniforms on-site), the
employer must pay the employee, in addition to the minimum wage: $9/wk if the
employee works > 30 hours weekly; $7.10/wk if the employee works 20-30 hours
weekly; and $4.30/wk if the employee works < 20 hours weekly. 12 NYCRR § 142-2.5
(c)(5) (Miscellaneous); 12 NYCRR § 146-1.7 (a) (Hospitality).
12
For hospitality workers, there is a "wash and wear" exception to uniform maintenance
requirements. 12 NYCRR § 146-1.7 (b). Under this exception, employers do not have to
pay for maintenance if the uniforms can be routinely washed with other clothing, are
supplied in sufficient number, and do not have any special cleaning or ironing
requirements.
10.
Unlawful Deductions From Wages
Prior to September 7, 2012, Labor Law § 193 provided that no employer shall make any
deduction from the wages of an employee, except deductions which:
• are authorized or required by law (e.g., for Social Security and income tax
purposes); or
• are expressly authorized in writing by the employee and
• are for the benefit of the employee (e.g., health insurance or pension
contributions).
The prohibition against unlawful deductions applied to all employees regardless of wages
earned or job category.
In Angello v. Labor Ready, Inc., 7 NY3d 579 (2006), the Court of Appeals clarified the
meaning of payments that are "for the benefit of the employee" as set forth in Labor Law
§ 193(1)(b). In that case, the court considered a situation in which the employer gave its
employees the choice of being paid by a check which could be cashed anywhere, or by a
cash voucher redeemable only from the employer for the full amount of wages less a
transaction fee charged by the employer. (There was no question in that case that the
election to be paid by check or voucher was purely voluntary.) In ruling that this
transaction fee was an impermissible wage deduction, the Court found that a deduction
from wages is "literally an act of taking away or subtraction," and that the deduction was
equivalent to a "service fee," and not a deduction similar to those which, being supportive
to the employee in some respect, are therefore "for the benefit of the employee." Rather,
the only benefit to the workers was one of convenience, which the court held was not a
benefit covered by the statute.
Of note, the Court held that the legislative history of §193:
(M)anifests the legislative intent to assure that the unequal
bargaining power between an employer and an employee
does not result in coercive economic arrangements by
which the employer can divert a worker's wages for the
employer's benefit.
The Labor Ready Court gave guidance for interpretation of the term "similar payment"
by noting that the deductions authorized by Labor Law §193(1)(b) are either monetary,
meaning that they are investments of money for the later benefit of the employee (such as
deductions for insurance premiums, pension or health and welfare benefits and payments
for United States bonds) or are supportive, meaning that the deducted wages are used by
13
someone other than the employee or employer to support some purpose of the employee
(such as contributions for charitable organizations or payments for dues or assessments to
a labor organization).
Other examples of prohibited deductions from wages are deductions for:
• Spoilage or breakage
• Cash shortages or losses
• Errors on checks or unpaid checks
• Fines or penalties for lateness, misconduct, or quitting by employee
without notice
On September 7, 2012, Governor Cuomo signed A 10785, to take effect sixty days after
signing, which, among other things, significantly increased the number and types of
permissible deductions from wages, to include items such as discounted parking passes,
fitness center dues, day care, and similar expenses. It also authorized the Commissioner
of Labor to promulgate regulations related to deductions from wages.
11.
Frequency of Payments
Employers have some latitude in determining whether to pay a worker an hourly rate or a
set weekly or biweekly salary. However, for certain categories of workers, New York
Labor Law § 191 dictates how frequently those workers must receive their pay.
Manual workers must be paid weekly and not later than seven calendar days after the end
of the week in which the wages are earned. Manual workers for non-profit entities must
be paid in accordance with their agreed terms of employment but not less frequently than
semi-monthly. A manual worker is one who spends more than 25% of working time
engaged in some kind of physical labor, which is interpreted broadly to include countless
physical -- not necessarily taxing or difficult -- tasks.
Clerical or other workers' wages must be paid in accordance with the agreed terms of
employment, but not less frequently than semi-monthly. Commission salespersons'
commissions (considered wages for the purposes of this section) must be paid in
accordance with the agreed terms set forth in the written commission agreement, but not
less frequently than once a month. Finally, § 191 does not apply to persons employed in a
bona fide executive, administrative, or professional capacity whose earnings are in excess
of $900 a week. (Definitions for all these categories are in the text of § 191.)
For purposes of federal law, federal courts have held that the FLSA requires, by
implication, that wages be paid promptly.
12.
Notices of Pay Rate and Wage Statements
(a)
Notices of Pay Rate
14
The Wage Theft Prevention Act, effective April 2011, amended Section 195 of the Labor
Law to require employers to provide a Notice of Pay Rate to new employees upon hire
and then at the beginning of every year of employment after that. The Notice of Pay Rate
must contain: the employee's pay rate and designated payday; the employer's intent to
claim allowances (such as for tips or meals) as part of the minimum wage; the basis of
wage payment (e.g., pay by the hour, shift, day, week, piece); and any "doing business
as" names that the employer uses.
The Notice of Pay Rate must be given for signature to the employee in the employee's
primary language. It must be signed upon hire, and then annually on or before February 1
of each year of employment. Like other payroll records, these Notices of Pay Rate must
be kept on file for six years.
Employers in the hospitality industry have additionally required to provide a new Notice
of Pay Rate when a worker receives an increase in pay. 12 NYCRR § 146-2.2.
Employers outside the hospitality industry, when a worker receives an increase in pay, do
not have to provide a new Notice of Pay Rate as long as the employee's new wage rate is
clearly shown on the next payment of wages, i.e. in a pay stub accompanying the
worker's paycheck.
The Wage Theft Prevention Act does not provide for any exemptions. As such, the
Notice of Pay Rate requirements apply to professional, administrative, and executive
employees. The penalty for not giving proper notice, to any employee, is $50 per week
per employee.
Sample Notices of Pay Rate (in English, Spanish, Chinese, Korean,
Creole, Polish and Russian) are available on the DOL's website at
http://labor.ny.gov/formsdocs/wp/ellsformsandpublications.shtm.
(b)
Wage Statements ("paystubs")
The labor law also requires that employees receive wage statements with each payment
of wages. The statement must list: hours worked, rates paid, gross wages, allowances
claimed as part of the minimum wage, deductions, and net wages.
The Wage Theft Prevention Act expanded wage statement requirements by adding
information that must be provided on them. In addition to the items listed above,
statements must show the name, address and phone number of the employer, as well as
the beginning and ending date for the period covered by that payment. If proper wage
statements are not given, an employer can be charged $100 per week per worker by the
Department of Labor.
The Wage Orders also contain provisions regarding required wage statements. See 12
NYCRR § 142-2.7 (Miscellaneous); 12 NYCRR § 146-2.3 (Hospitality).
13.
Prohibition against Retaliation
15
Labor Law § 215 prohibits retaliation against employees for complaints about violations.
Acts of retaliation include any adverse employment action against an employee for
complaining, including discharging, threatening, penalizing, or “in any other manner
discriminating against” the employee, including lowering the employee's wage rate;
assigning the employee to a less desirable job duty or shift; demotion; and reducing the
employee's hours. The prohibition against retaliation covers any employee who has
complained to his/her employer, to the DOL, or to the OAG; has instituted or is about to
institute a complaint proceeding for a labor violation; or has provided information or has
testified in a labor investigation or proceeding. The prohibition also applies if the
employer (or agent of the employer) believes the employee has complained to anybody
about a labor violation.
It is illegal for the employer himself/herself to engage in the retaliatory action, as well as
for any other person (including the employer's agent, or someone associated with the
employer or the corporation) to retaliate as well. The loopholes regarding who exactly
would have to engage in the retaliatory action, and what actions constitute retaliation,
were closed when the Wage Theft Prevention Act went into effect in the state in April
2011.
The Wage Theft Prevention Act also expanded the remedies available to employees.
Section 215 provides that the Commissioner can order "all appropriate relief," including
enjoining the retaliatory conduct; where a violation has been found, the Commissioner
can order rehiring or reinstatement of the employee, and award either lost compensation
or front pay in lieu of reinstatement. The Commissioner of Labor can also impose a civil
penalty of up to $10,000 for a retaliation violation, per employee who has been retaliated
against. The statute of limitation in retaliation cases is two years.
14.
Powers of the Commissioner of Labor
Provisions of state law and regulations relating to wage and hour protections are
administratively enforced by the Department of Labor’s Division of Labor Standards.
The central office of the Division is located in Albany with district offices throughout the
state. Locations and contact information for such offices can be obtained through the
Department’s website, www.labor. ny.gov.
Investigations may be conducted by the Division based upon complaints received from
affected employees, employee advocates and others, or upon the Commissioner’s own
initiative. The general powers and duties of the Commissioner of Labor are contained in
Labor Law § 21. The Commissioner and her authorized representatives have expansive
powers to enforce the labor law, including the authority to enter and inspect employers’
premises (Labor Law § 25); to examine employers’ books and records (Labor Law § 26);
and to issue subpoenas (Labor Law § 39). If the Commissioner finds labor law violations
following a Labor Standards investigation, the Commissioner issues an Order to Comply,
itemizing the violations and setting forth the nature of violations found, amount of unpaid
wages, and penalties and liquidated damages assessed. Employers can appeal Orders to
16
Comply to the Industrial Board of Appeals (IBA), and Orders which are not appealed
may be entered as judgments in court. For wage and hour cases, the state statute of
limitations is six years (Labor Law Sections 198.3 and 663). Under federal law, the
statute of limitations is 2 years, or 3 years if the violation is found to be willful.
Penalties available under Labor Law § 218 for violations of laws relating to payment of
wages and the minimum wage law or a related rule or regulation are subject to interest at
the statutory rate currently16%, a rate tied to the state banking law(§219(1)) and
penalties. If there are previous violations, or the violation is willful or egregious, a
penalty equal to 200% of the total amount found to be due is typically assessed. [Labor
Law §218(1)].
Non-monetary violations are also subject to penalties of up to $1,000 for first violation,
$2,000 for a second violation, and $3,000 for third or subsequent violation.. In assessing
such penalties, the Commissioner may give consider the size of the employer’s business,
the history of past violations, good faith of the employer, and the gravity of the
violations.
If an Order to Comply has been issued, then 10 days after the employer's appeal period
ends, DOL can require the employer to post a bond and/or provide a list of assets. If the
employer fails to do so, the Commissioner may impose a penalty of up to $10,000.
Finally, the Wage Theft Prevention Act permits the Commissioner to add 15% in
damages to a judgment if the employer fails to pay in full within 90 days of the final
Order to Comply.
In addition to unpaid wages and penalties, employers in violation are also liable for
liquidated damages equaling 100% of an employee's underpayments, 3 unless the
employer demonstrates that the underpayment was based on a good faith mistake.
Federal law also includes liquidated damages equal to 100% of underpayments.
Public Notice of Violations: If an employer is found in violation of certain parts of the
New York Labor Law, the DOL has the authority to post notice of such violations at the
workplace for up to a year.
15.
Burden Shifting in the Absence of Employer Records
(a)
Required Recordkeeping
New York labor law requires employers to keep extensive payroll records and maintain
those records for no less than 6 years. Generally, in all industries, employers must have
records showing for each employee:
•
•
name and address
Social Security Number
3
Liquidated damages were 25% prior to the effective date of the Wage Theft Prevention Act in April,
2011.
17
•
•
•
•
•
•
•
•
wage rate
number of hours worked daily and weekly, including times of arrival
and departure
split shifts and spread of hours over 10
[when a piece-rate method of payment is used] number of units
produced daily and weekly
amount of gross wages
deductions from gross wages
allowances [if any] claimed as part of the minimum wage
net wages paid
The record requirements are essentially the same for employers in the hospitality
industry, with minor differences. All employers must make these records available for
inspection upon the request of the DOL, including when those records are kept off-site or
in another state.
(b)
Absence of records
Labor Law § 196-a provides that, where an employee (or the recognized and certified
collective bargaining agent acting on the employee's behalf), files a complaint regarding a
wage violation the failure of an employer to keep adequate records will not operate as a
bar. Rather, in such a case the employer in violation shall bear the burden of proving that
the complaining employee was paid wages, benefits and wage supplements. In other
words, the burden is on the employer to keep and maintain records adequate to show that
he or she has complied with the law.
The public policy behind the burden of proof imposed by Labor Law
§196-a was set forth by the court in Matter of Mid-Hudson Pam Corp. v. Hartnett, 156
AD2d 818, 821 (3rd Dept. 1989):
When an employer fails to keep accurate records as
required by statute, the Commissioner is permitted to
calculate back wages due to employees by using the best
available evidence and to shift the burden of negating the
reasonableness of the Commissioner's calculations to the
employer ... In such a situation the amount and extent of
underpayment is a matter of just and reasonable inference
and may be based upon the testimony of employees ... The
public policy of providing protection to workers is
embodied in the statute which is remedial and militates
against creating an impossible hurdle for the employee ...
Were we to hold otherwise, we would in effect award
petitioners a premium for their failure to keep proper
records and comply with the statute. That result should not
pertain here. (Citations omitted). (Emphasis added).
18
A similar but slightly different approach applies under federal law. The United
States Supreme Court, in Anderson v. Mt. Clemens Pottery, 328 U.S. 680, 66 S.Ct. 1187,
reh’g denied, 329 U.S. 822, 67 S.Ct. 25 (1946), clearly outlined the burden of proof in a
situation where the Employer has failed to maintain required records:
[W]here the employer's records are inaccurate or inadequate and the employee
cannot offer convincing substitutes, .... [t]he solution... is not to penalize the
employee by denying him any recovery on the ground that he is unable to prove
the precise extent of uncompensated work. Such a result would place a premium
on an employer's failure to keep proper records in conformity with his statutory
duty.... [W]e hold that an employee has carried out his burden if he proves that he
has in fact performed work for which he was improperly compensated and if he
produces sufficient evidence to show the amount and extent of that work as a
matter of just and reasonable inference. The burden then shifts to the employer to
come forward with evidence of the precise amount of work performed or with
evidence to negative the reasonableness of the inference to be drawn from the
employee's evidence. If the employer fails to produce such evidence, the court
may then award damages to the employee, even though the result be only
approximate.
Anderson v. Mt. Clemens Pottery, 328 U.S. 680, 687-8 (1946). See also, Reich v.
Southern New England Telecommunications Corp., 121 F.3d 58, 66 (2d Cir. 1997),
quoting Martin v. Selker Bros., 949 F.2d 1286, 1296-97 (3d Cir. 1991) (“When a
defendant in a suit for lost wages under the FLSA fails to maintain employment records
as required by the Act, an employee (or the Secretary on behalf of a group of employees)
may `submit sufficient evidence from which violations of the Act and the amount of an
award may be reasonably inferred.’" )
In practice, if the employer does not have contemporaneous, precise and accurate
records, calculations of underpayments are based on the employee's credible testimony,
even if it is approximate.
19
Comparison chart: federal and state wage and hour law
Statute of Limitations
Class action?
Liquidated damages
Retaliation
Individual liability
Tip allowance
Source of overtime
requirement
Split shift / spread of hours
requirement?
Call-in pay requirement?
Wash and wear exemption
to uniform maintenance
allowance?
Frequency of payment
requirement?
Burden shifting in absence
of employer payroll records
NEW YORK
6 years
Yes
100% unless good faith
Prohibited
Yes
Depends on industry:
consult wage order
Regulation (wage orders)
FEDERAL
2 years; 3 years if willful
Only by opt-in
100% unless good faith
Prohibited
Yes
Same for all industries
Statute
Yes (See 12 NYCRR §
No
142-2.4 for misc. wage
order)
Yes (See 12 NYCRR § 142- No
2.3 for misc. wage order)
Only for hospitality workers Yes
Yes
No
Set by statute (Labor Law §
196-a)
Case law (See Anderson v.
Mt. Clemens Pottery, 328
U.S. 680 (1946) and
progeny)
No
Promised wage enforcement Yes
by agency?
20
Materials from the Defense
By Carolyn D. Richmond, Esq., Fox Rothschild LLP
FOX ROTHSCHILD LLP
Carolyn D. Richmond, Esq.
100 Park Avenue, 15th Floor
New York, NY 10017
Tel: (212) 878-7900
Fax: (212) 692-0940
ATTORNEYS FOR DEFENDANTS
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
JOHN DOE, individually and on behalf of all others
similarly situated,
ECF Case
Plaintiffs,
No. XX-cv-XXXX
- against –
XYZ CORP.,
ANSWER AND
AFFIRMATIVE DEFENSES
Defendants.
Defendants XYZ Corp., (“Defendants”), by their attorneys, Fox Rothschild LLP, hereby
answer the First Amended Complaint (“Complaint”) filed by John Doe, individually and on
behalf of all others similarly situated (“Plaintiffs”) as follows:
In response to all non-numbered paragraphs, and each and every substantive allegation of
the Complaint, Defendants deny that they violated the law and/or that it harmed Plaintiffs in any
way.
NATURE OF THE ACTION
1.
Defendants deny the allegations set forth in Paragraph “1” of the Complaint,
except they admit that certain Plaintiffs worked at certain XYZ Corp. locations.
2.
Defendants deny the allegations set forth in Paragraph “2” of the Complaint,
except they admit that certain Defendants operate certain XYZ Corp. locations.
3.
Defendants deny the allegations set forth in Paragraph “3” of the Complaint.
4.
Defendants deny the allegations set forth in Paragraph “4” of the Complaint,
except they admit that certain Plaintiffs worked as delivery workers.
ACTIVE 22880151v1 10/14/2013
5.
Defendants deny the allegations set forth in Paragraph “5” of the Complaint.
6.
Defendants deny the allegations set forth in Paragraph “6” of the Complaint.
7.
Defendants deny the allegations set forth in Paragraph “7” of the Complaint.
8.
Defendants deny the allegations set forth in Paragraph “8” of the Complaint.
9.
Defendants deny the allegations set forth in Paragraph “9” of the Complaint,
except they admit that certain Plaintiffs worked as delivery workers.
10.
Defendants deny the allegations set forth in Paragraph “10” of the Complaint.
11.
Defendants deny the allegations set forth in Paragraph “11” of the Complaint.
12.
Defendants deny the allegations set forth in Paragraph “12” of the Complaint.
13.
Defendants deny the allegations set forth in Paragraph “14” of the Complaint,
except they admit that Plaintiffs may seek relief pursuant to the statutory provisions references in
Paragraph “14” of the Complaint. Defendants deny that they violated the law and further deny
that Plaintiffs are entitled to any damages.
14.
Defendants deny the allegations set forth in Paragraph “15” of the Complaint,
except they admit that Plaintiffs purport to bring this action on behalf of a putative collective
pursuant to the statutory provision referenced in Paragraph “15” of the Complaint. Defendants
affirmatively deny the existence of any such collective.
JURISDICTION AND VENUE
15.
Defendants admit that Plaintiffs have invoked the jurisdiction of the Court under
the statutes referenced in Paragraph “16” of the Complaint. The remainder of the allegations in
Paragraph “16” of the Complaint are legal conclusions to which no response is required; to the
extent a response is required, Defendants deny the allegations.
16.
Defendants admit that Plaintiffs have laid venue in this district. The remainder of
the allegations in Paragraph “17” of the Complaint are legal conclusions to which no response is
required; to the extent a response is required, Defendants deny the allegations.
2
THE PARTIES
Plaintiffs
17.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Doe’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “18” of the Complaint.
18.
Defendants deny the allegations set forth in Paragraph “19” of the Complaint,
except they admit that Mr. Doe worked at a XYZ Corp. restaurant located at 123 Main Street in
Manhattan.
19.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Doe’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “20” of the Complaint.
20.
Defendants deny the allegations set forth in Paragraph “21” of the Complaint,
except they admit that Mr. Doe worked at a XYZ Corp. restaurant located at 123 Main Street in
Manhattan.
21.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Doe’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “22” of the Complaint.
22.
Defendants deny the allegations set forth in Paragraph “23” of the Complaint,
except they admit that Mr. Doe worked at a XYZ Corp. restaurant located at 123 Main Street in
Manhattan.
23.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Doe’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “24” of the Complaint.
24.
Defendants deny the allegations set forth in Paragraph “25” of the Complaint.
3
25.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Lopez’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “26” of the Complaint.
26.
Defendants deny the allegations set forth in Paragraph “27” of the Complaint,
except they admit that Mr. Doe worked at a XYZ Corp. restaurant located at 123 Main Street in
Manhattan.
27.
Defendants deny knowledge and information sufficient to form a belief as to
Plaintiff Doe’s current residence. Defendants deny the remaining allegations set forth in
Paragraph “28” of the Complaint.
28.
Defendants deny the allegations set forth in Paragraph “29” of the Complaint,
except they admit that Mr. Doe worked at a XYZ Corp. restaurant located at 123 Main Street in
Manhattan.
Defendants
29.
Defendants deny the allegations set forth in Paragraph “30” of the Complaint.
30.
Defendants admit the allegations set forth in Paragraph “31” of the Complaint.
31.
Defendants deny the allegations set forth in Paragraph “32” of the Complaint,
except they admit that XYZ Corp. is a domestic corporation organized and existing under the
laws of the State of New York.
32.
Defendants deny the allegations set forth in Paragraph “33” of the Complaint,
except they admit that XYZ Corp. is a domestic corporation organized and existing under the
laws of the State of New York.
33.
Defendants deny the allegations set forth in Paragraph “34” of the Complaint,
except they admit that XYZ Corp. is a domestic corporation organized and existing under the
laws of the State of New York.
34.
Defendants deny the allegations set forth in Paragraph “35” of the Complaint.
4
35.
Defendants deny the allegations set forth in Paragraph “36” of the Complaint.
36.
Defendants deny the allegations set forth in Paragraph “37” of the Complaint.
FACTUAL ALLEGATIONS
Defendants Constitute Joint Employers
37.
Defendants deny the allegations set forth in Paragraph “38” of the Complaint.
38.
Defendants deny the allegations set forth in Paragraph “39” of the Complaint.
39.
Defendants deny the allegations set forth in Paragraph “40” of the Complaint.
40.
The allegations in Paragraph “41” of the Complaint are legal conclusions to which
no response is required; to the extent a response is required, Defendants deny the allegations.
41.
Defendants deny the allegations set forth in Paragraph “42” of the Complaint.
42.
The allegations in Paragraph “43” of the Complaint are legal conclusions to which
no response is required; to the extent a response is required, Defendants deny the allegations.
43.
Defendants deny the allegations set forth in Paragraph “44” of the Complaint,
except that they admit that the Corporate Defendants had a gross annual volume of sales that
exceeded $500,000.
44.
Defendants deny the allegations set forth in Paragraph “45” of the Complaint.
Individual Plaintiffs
45.
Defendants deny the allegations set forth in Paragraph “46” of the Complaint,
except they admit that Plaintiffs all worked as delivery workers.
46.
Defendants deny the allegations set forth in Paragraph “47” of the Complaint,
except they admit that Plaintiffs purport to bring this action on behalf of a putative collective
pursuant to the statutory provision referenced in Paragraph “47” of the Complaint. Defendants
affirmatively deny the existence of any such collective.
Plaintiff John Doe
47.
Defendants deny the allegations set forth in Paragraph “48” of the Complaint.
5
48.
Defendants deny the allegations set forth in Paragraph “49” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
49.
Defendants deny the allegations set forth in Paragraph “50” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
50.
Defendants deny the allegations set forth in Paragraph “51” of the Complaint.
51.
Defendants admit the allegations set forth in Paragraph “52” of the Complaint.
52.
Defendants deny the allegations set forth in Paragraph 53” of the Complaint.
53.
Defendants deny the allegations set forth in Paragraph “54” of the Complaint.
54.
Defendants admit the allegations set forth in Paragraph “55” of the Complaint.
55.
Defendants admit the allegations set forth in Paragraph “56” of the Complaint.
56.
Defendants deny the allegations set forth in Paragraph “57” of the Complaint.
57.
Defendants deny the allegations set forth in Paragraph “58” of the Complaint.
58.
Defendants deny the allegations set forth in Paragraph “59” of the Complaint.
59.
Defendants deny the allegations set forth in Paragraph “60” of the Complaint.
60.
Defendants deny the allegations set forth in Paragraph “61” of the Complaint.
61.
Defendants deny the allegations set forth in Paragraph “62” of the Complaint.
62.
Defendants deny the allegations set forth in Paragraph “63” of the Complaint.
63.
Defendants deny the allegations set forth in Paragraph “64” of the Complaint.
64.
Defendants deny the allegations set forth in Paragraph “65” of the Complaint.
65.
Defendants deny the allegations set forth in Paragraph “66” of the Complaint.
Plaintiff John Doe
66.
Defendants deny the allegations set forth in Paragraph “67” of the Complaint.
67.
Defendants deny the allegations set forth in Paragraph “68” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
6
68.
Defendants deny the allegations set forth in Paragraph “69” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
69.
Defendants deny the allegations set forth in Paragraph “70” of the Complaint.
70.
Defendants admit the allegations set forth in Paragraph “71” of the Complaint.
71.
Defendants deny the allegations set forth in Paragraph “72” of the Complaint.
72.
Defendants deny the allegations set forth in Paragraph “73” of the Complaint.
73.
Defendants admit the allegations set forth in Paragraph “74” of the Complaint.
74.
Defendants deny the allegations set forth in Paragraph “75” of the Complaint.
75.
Defendants admit the allegations set forth in Paragraph “76” of the Complaint.
76.
Defendants deny the allegations set forth in Paragraph “77” of the Complaint.
77.
Defendants deny the allegations set forth in Paragraph “78” of the Complaint.
78.
Defendants deny the allegations set forth in Paragraph “79” of the Complaint.
79.
Defendants deny the allegations set forth in Paragraph “80” of the Complaint.
80.
Defendants deny the allegations set forth in Paragraph “81” of the Complaint.
81.
Defendants deny the allegations set forth in Paragraph “82” of the Complaint.
82.
Defendants deny the allegations set forth in Paragraph “83” of the Complaint.
83.
Defendants deny the allegations set forth in Paragraph “84” of the Complaint.
84.
Defendants deny the allegations set forth in Paragraph “85” of the Complaint.
85.
Defendants deny the allegations set forth in Paragraph “86” of the Complaint.
Plaintiff John Doe
86.
Defendants deny the allegations set forth in Paragraph “87” of the Complaint.
87.
Defendants deny the allegations set forth in Paragraph “88” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
88.
Defendants deny the allegations set forth in Paragraph “89” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
7
89.
Defendants deny the allegations set forth in Paragraph “90” of the Complaint.
90.
Defendants admit the allegations set forth in Paragraph “91” of the Complaint.
91.
Defendants deny the allegations set forth in Paragraph “92” of the Complaint.
92.
Defendants admit the allegations set forth in Paragraph “93” of the Complaint.
93.
Defendants deny the allegations set forth in Paragraph “94” of the Complaint.
94.
Defendants deny the allegations set forth in Paragraph “95” of the Complaint.
95.
Defendants deny the allegations set forth in Paragraph “96” of the Complaint.
96.
Defendants deny the allegations set forth in Paragraph “97” of the Complaint.
97.
Defendants deny the allegations set forth in Paragraph “98” of the Complaint.
98.
Defendants deny the allegations set forth in Paragraph “99” of the Complaint.
99.
Defendants deny the allegations set forth in Paragraph “100” of the Complaint.
100.
Defendants deny the allegations set forth in Paragraph “101” of the Complaint.
101.
Defendants deny the allegations set forth in Paragraph “102” of the Complaint.
102.
Defendants deny the allegations set forth in Paragraph “103” of the Complaint.
103.
Defendants deny the allegations set forth in Paragraph “104” of the Complaint.
Plaintiff John Doe
104.
Defendants deny the allegations set forth in Paragraph “105” of the Complaint.
105.
Defendants deny the allegations set forth in Paragraph “106” of the Complaint.
106.
Defendants deny the allegations set forth in Paragraph “107” of the Complaint.
107.
Defendants deny the allegations set forth in Paragraph “108” of the Complaint.
108.
Defendants deny the allegations set forth in Paragraph “109” of the Complaint.
109.
Defendants deny the allegations set forth in Paragraph “110” of the Complaint.
110.
Defendants deny the allegations set forth in Paragraph “111” of the Complaint.
111.
Defendants deny the allegations set forth in Paragraph “112” of the Complaint.
112.
Defendants deny the allegations set forth in Paragraph “113” of the Complaint.
8
113.
Defendants deny the allegations set forth in Paragraph “114” of the Complaint.
114.
Defendants deny the allegations set forth in Paragraph “115” of the Complaint.
115.
Defendants deny the allegations set forth in Paragraph “116” of the Complaint.
116.
Defendants deny the allegations set forth in Paragraph “117” of the Complaint.
117.
Defendants deny the allegations set forth in Paragraph “118” of the Complaint.
118.
Defendants deny the allegations set forth in Paragraph “119” of the Complaint.
119.
Defendants deny the allegations set forth in Paragraph “120” of the Complaint.
120.
Defendants deny the allegations set forth in Paragraph “121” of the Complaint.
Plaintiff John Doe
121.
Defendants deny the allegations set forth in Paragraph “122” of the Complaint.
122.
Defendants deny the allegations set forth in Paragraph “123” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
123.
Defendants deny the allegations set forth in Paragraph “124” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
124.
Defendants deny the allegations set forth in Paragraph “125” of the Complaint.
125.
Defendants admit the allegations set forth in Paragraph “126” of the Complaint.
126.
Defendants deny the allegations set forth in Paragraph “127” of the Complaint.
127.
Defendants admit the allegations set forth in Paragraph “128” of the Complaint.
128.
Defendants deny the allegations set forth in Paragraph “129” of the Complaint.
129.
Defendants deny the allegations set forth in Paragraph “130” of the Complaint.
130.
Defendants deny the allegations set forth in Paragraph “131” of the Complaint.
131.
Defendants deny the allegations set forth in Paragraph “132” of the Complaint.
132.
Defendants deny the allegations set forth in Paragraph “133” of the Complaint.
133.
Defendants deny the allegations set forth in Paragraph “134” of the Complaint.
134.
Defendants deny the allegations set forth in Paragraph “135” of the Complaint.
9
135.
Defendants deny the allegations set forth in Paragraph “136” of the Complaint.
136.
Defendants deny the allegations set forth in Paragraph “137” of the Complaint.
Plaintiff John Doe
137.
Defendants deny the allegations set forth in Paragraph “138” of the Complaint.
138.
Defendants deny the allegations set forth in Paragraph “139” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
139.
Defendants deny the allegations set forth in Paragraph “140” of the Complaint,
except they admit that Plaintiff Doe worked as a delivery worker.
140.
Defendants deny the allegations set forth in Paragraph “141” of the Complaint.
141.
Defendants admit the allegations set forth in Paragraph “142” of the Complaint.
142.
Defendants deny the allegations set forth in Paragraph “143” of the Complaint.
143.
Defendants deny the allegations set forth in Paragraph “144” of the Complaint.
144.
Defendants deny the allegations set forth in Paragraph “145” of the Complaint.
145.
Defendants deny the allegations set forth in Paragraph “146” of the Complaint.
146.
Defendants deny the allegations set forth in Paragraph “147” of the Complaint.
147.
Defendants deny the allegations set forth in Paragraph “148” of the Complaint.
148.
Defendants deny the allegations set forth in Paragraph “149” of the Complaint.
149.
Defendants deny the allegations set forth in Paragraph “150” of the Complaint.
150.
Defendants deny the allegations set forth in Paragraph “151” of the Complaint.
151.
Defendants deny the allegations set forth in Paragraph “152” of the Complaint.
152.
Defendants deny the allegations set forth in Paragraph “153” of the Complaint.
153.
Defendants deny the allegations set forth in Paragraph “154” of the Complaint.
154.
Defendants deny the allegations set forth in Paragraph “155” of the Complaint.
155.
Defendants deny the allegations set forth in Paragraph “156” of the Complaint.
Defendants’ General Employment Practices
10
156.
Defendants deny the allegations set forth in Paragraph “157” of the Complaint.
157.
Defendants deny the allegations set forth in Paragraph “158” of the Complaint.
158.
Defendants deny the allegations set forth in Paragraph “159” of the Complaint.
159.
Defendants deny the allegations set forth in Paragraph “160” of the Complaint.
160.
Defendants deny the allegations set forth in Paragraph “161” of the Complaint.
161.
Defendants deny the allegations set forth in Paragraph “162” of the Complaint.
162.
Defendants deny the allegations set forth in Paragraph “163” of the Complaint.
163.
Defendants deny the allegations set forth in Paragraph “164” of the Complaint,
except they admit that Plaintiffs were delivery workers.
164.
Defendants deny the allegations set forth in Paragraph “165” of the Complaint,
except they admit that Plaintiffs were tipped workers.
165.
Defendants deny the allegations set forth in Paragraph “166” of the Complaint.
166.
The allegations in Paragraph “4167” of the Complaint are legal conclusions to
which no response is required; to the extent a response is required, Defendants deny the
allegations.
167.
Defendants deny the allegations set forth in Paragraph “168” of the Complaint.
168.
Defendants deny the allegations set forth in Paragraph “169” of the Complaint.
169.
Defendants deny the allegations set forth in Paragraph “170” of the Complaint.
170.
Defendants deny the allegations set forth in Paragraph “171” of the Complaint.
171.
Defendants admit the allegations set forth in Paragraph “172” of the Complaint.
172.
Defendants deny the allegations set forth in Paragraph “173” of the Complaint.
173.
Defendants deny the allegations set forth in Paragraph “174” of the Complaint.
174.
Defendants deny the allegations set forth in Paragraph “175” of the Complaint.
175.
Defendants deny the allegations set forth in Paragraph “176” of the Complaint.
176.
Defendants deny the allegations set forth in Paragraph “177” of the Complaint.
11
FLSA COLLECTIVE ACTION ALLEGATIONS
177.
In response to Paragraph “178” of the Complaint, Defendants do not dispute that
Plaintiffs purport to bring this action on behalf of a putative collective. Defendants deny that
Plaintiffs are entitled to proceed collectively.
178.
The allegations in Paragraph “179” of the Complaint are legal conclusions to
which no response is required; to the extent a response is required, Defendants deny the
allegations.
179.
Defendants deny the allegations set forth in Paragraph “162” of the Complaint.
FIRST CAUSE OF ACTION
(VIOLATION OF THE MINIMUM WAGE PROVISIONS OF THE FLSA)
180.
In response to Paragraph “181” of the Complaint, Defendants repeat and restate
each of the above responses as if fully set forth herein.
181.
Defendants deny the allegations set forth in Paragraph “182” of the Complaint.
182.
Defendants deny the allegations set forth in Paragraph “183” of the Complaint.
183.
Defendants deny the allegations set forth in Paragraph “184” of the Complaint.
184.
Defendants deny the allegations set forth in Paragraph “185” of the Complaint.
185.
Defendants deny the allegations set forth in Paragraph “186” of the Complaint.
186.
Defendants deny the allegations set forth in Paragraph “187” of the Complaint.
SECOND CAUSE OF ACTION
(VIOLATION OF THE OVERTIME PROVISIONS OF THE FLSA)
187.
In response to mis-numbered Paragraph “186” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
188.
Defendants deny the allegations set forth in mis-numbered Paragraph “187” of the
Complaint.
189.
Defendants deny the allegations set forth in mis-numbered Paragraph “188” of the
Complaint.
12
190.
Defendants deny the allegations set forth in mis-numbered Paragraph “189” of the
Complaint.
THIRD CAUSE OF ACTION
(VIOLATION OF THE NEW YORK MINIMUM WAGE ACT)
191.
In response to mis-numbered Paragraph “190” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
192.
Defendants deny the allegations set forth in mis-numbered Paragraph “191” of the
Complaint.
193.
Defendants deny the allegations set forth in mis-numbered Paragraph “192” of the
Complaint.
194.
Defendants deny the allegations set forth in mis-numbered Paragraph “193” of the
Complaint.
195.
Defendants deny the allegations set forth in mis-numbered Paragraph “194” of the
Complaint.
FOURTH CAUSE OF ACTION
(VIOLATION OF THE OVERTIME PROVISIONS OF THE NEW YORK LABOR
LAW)
196.
In response to mis-numbered Paragraph “195” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
197.
Defendants deny the allegations set forth in mis-numbered Paragraph “196” of the
Complaint.
198.
Defendants deny the allegations set forth in mis-numbered Paragraph “197” of the
Complaint.
199.
Defendants deny the allegations set forth in mis-numbered Paragraph “198” of the
Complaint.
FIFTH CAUSE OF ACTION
(VIOLATION OF THE SPREAD OF HOURS WAGE ORDER OF THE NEW YORK
COMMISSIONER OF LABOR)
13
200.
In response to mis-numbered Paragraph “199” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
201.
Defendants deny the allegations set forth in mis-numbered Paragraph “200” of the
Complaint.
202.
Defendants deny the allegations set forth in mis-numbered Paragraph “201” of the
Complaint.
203.
Defendants deny the allegations set forth in mis-numbered Paragraph “202” of the
Complaint.
SIXTH CAUSE OF ACTION
(VIOLATION OF THE NOTICE AND RECORDKEEPING REQUIREMENTS OF THE
NEW YORK LABOR LAW)
204.
In response to mis-numbered Paragraph “203” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
205.
Defendants deny the allegations set forth in mis-numbered Paragraph “204” of the
Complaint.
206.
Defendants deny the allegations set forth in mis-numbered Paragraph “205” of the
Complaint.
SEVENTH CAUSE OF ACTION
(VIOLATION OF THE WAGE STATEMENT PROVISIONS OF THE NEW YORK
LABOR LAW)
207.
In response to mis-numbered Paragraph “206” of the Complaint, Defendants
repeat and restate each of the above responses as if fully set forth herein.
208.
Defendants deny the allegations set forth in mis-numbered Paragraph “207” of the
Complaint.
209.
Defendants deny the allegations set forth in mis-numbered Paragraph “208” of the
Complaint.
PRAYER FOR RELIEF
14
210.
In response to the paragraph and sub-paragraphs “a-s” that follow the phrase
“WHEREFORE, Plaintiffs respectfully request that this Court enter judgment against
Defendants” Defendants deny the allegations set forth in that paragraph and the sub-paragraphs
and affirmatively aver that neither Plaintiffs nor any individual or group who Plaintiffs purport to
represent are entitled to any of the relief requested or any other relief.
DEFENDANTS’ AFFIRMATIVE DEFENSES
FIRST AFFIRMATIVE DEFENSE
211.
The Complaint, and each claim purported to be alleged therein, fails to state a
claim upon which relief can be granted.
SECOND AFFIRMATIVE DEFENSE
212.
The Complaint, and each claim purported to be alleged therein, is barred in whole
or in part, by the equitable doctrines of laches, unclean hands, and/or avoidable consequences.
THIRD AFFIRMATIVE DEFENSE
213.
To the extent Plaintiffs and putative collective and/or class action members have
received other benefits and/or awards attributable to an injury for which it seek compensation in
this case, such benefits and/or awards should offset, in whole or in part, any award it receive here
for the same injury.
FOURTH AFFIRMATIVE DEFENSE
214.
At all times material hereto, the actions of Defendants were justified under the
circumstances and at all times material hereto Defendants acted in a manner that was proper,
reasonable and lawful and in the exercise of good faith.
FIFTH AFFIRMATIVE DEFENSE
215.
With respect to some or all of the claims brought or allegedly brought by the
Named Plaintiffs on behalf of themselves and/or on behalf of any putative class or collective
action, Defendants affirmatively plead that any act(s) and/or omission(s) that may be found to be
15
in violation of the rights afforded by applicable law were not willful but occurred in good faith
and with reasonable grounds for believing that it were in complete compliance with applicable
law.
SIXTH AFFIRMATIVE DEFENSE
216.
Plaintiffs cannot establish or satisfy the requirements necessary to proceed
collectively under 29 U.S.C. §216(b) because, inter alia, Plaintiffs are not similarly situated to
the putative collective.
SEVENTH AFFIRMATIVE DEFENSE
217.
Plaintiffs’ claims are barred, in whole or in part, by the applicable statutes of
limitations, including but not limited to 29 U.S.C. § 255.
EIGHTH AFFIRMATIVE DEFENSE
218.
Plaintiffs are precluded from recovering any amounts from Defendants where
Defendants have paid Plaintiffs all sums legally due under the Fair Labor Standards Act, 29
U.S.C. §§ 201 et seq., the New York Minimum Wage Act, N.Y. Labor Law §§ 650 et seq.,
Article 6 of the New York Labor Law, N.Y. Labor Law §§ 190 et seq., and all of their
implementing regulations (collectively “Applicable Law”).
NINTH AFFIRMATIVE DEFENSE
219.
Plaintiffs may not recover liquidated damages, because: (1) Defendants and all of
their officers, directors, managers, and agents acted in good faith and did not commit willful
violation of Applicable Law; (2) Defendants and their officers, directors, managers, and agents
did not authorize any such willful violation with respect to Plaintiffs or any alleged member of
any purported class or collective action, the existence of which Defendants affirmatively deny;
and (3) Plaintiffs have failed to plead facts sufficient to support recovery of such damages.
TENTH AFFIRMATIVE DEFENSE
16
220.
Plaintiffs are precluded from recovering any amounts from Defendants for failure
to pay compensation for hours worked because such time was worked without manager
knowledge or approval.
ELEVENTH AFFIRMATIVE DEFENSE
221.
The Court should not exercise supplemental jurisdiction over the counts in the
Complaint that purport to arise under the New York Labor Law.
TWELFTH AFFIRMATIVE DEFENSE
222.
The Complaint fails to state a claim upon which relief consisting of compensatory
or liquidated damages or any other damages, interests, costs, or fees allowed by applicable law
may be granted.
THIRTEENTH AFFIRMATIVE DEFENSE
223.
Plaintiffs cannot establish or satisfy the requirements for class certification
pursuant to Rule 23 of the Federal Rules of Civil Procedure and, therefore, the class certification
allegations of the Complaint should be stricken and dismissed.
FOURTEENTH AFFIRMATIVE DEFENSE
224.
Plaintiffs’ claims are barred in whole or in part by the provisions of Section 10 of
the Portal-to-Portal Act, 27 U.S.C. § 259, because actions taken in connection with Plaintiffs’
compensation were done in good faith in conformity with and reliance upon written
administrative regulations, orders, rulings, approvals, interpretations, and written and unwritten
administrative practices or enforcement policies of the Administrator of the Wage and Hour
Division of the United States Department of Labor.
FIFTEENTH AFFIRMATIVE DEFENSE
225.
Plaintiffs’ claims are barred in whole or in part to the extent that the work it
performed falls within exclusions, exceptions, or credits provided for in the Fair Labor Standards
Act, the New York Labor Law, and their implementing regulations.
17
SIXTEENTH AFFIRMATIVE DEFENSE
226.
Plaintiffs’ claims are barred in whole or in part to the extent that some or all of the
disputed time is not compensable pursuant to the provisions of the Portal-to-Portal Act of 1947
and/or New York law.
SEVENTEENTH AFFIRMATIVE DEFENSE
227.
Plaintiffs’ claims are barred in whole or in part by the doctrine of de minimis non
curat lex.
EIGHTEENTH AFFIRMATIVE DEFENSE
228.
Plaintiffs’ and the putative class members’ and the putative collective’s claims are
barred by the doctrine of res judicata and collateral estoppel.
NINETEENTH AFFIRMATIVE DEFENSE
229.
Defendants assert all affirmative defenses provided by Section 195 of the New
York Law and all statutory affirmative defenses to New York State record keeping requirements.
TWENTIETH AFFIRMATIVE DEFENSE
230.
Defendants reserve the right to assert such other additional and/or affirmative
defenses that may become known to it through discovery.
DEFENDANTS’ PRAYER FOR RELIEF
231.
Except as expressly admitted and alleged herein, Defendants deny each and every
allegation set forth in the Complaint and denies Plaintiffs are entitled to any relief whatsoever.
Further, Defendants deny the existence of any purported class or group of persons who Plaintiffs
purport to represent.
WHEREFORE, having fully answered and responded to the allegations of the Complaint,
Defendant respectfully requests that:
A.
Plaintiffs’ individual claims be dismissed with prejudice in their entirety;
18
B.
Collective and/or class action status be denied or, in the alternative, that all
collective and/or class claims be dismissed with prejudice;
C.
Each and every request for relief in the Complaint be denied;
D.
Judgment be entered against Plaintiffs and for Defendants;
E.
Defendants be awarded its costs, including reasonable attorneys’ fees and
expenses in an amount and manner permitted by applicable law; and
F.
Defendants be granted such other and further relief as this Court may deem just
and proper.
Dated: New York, New York
October xx, xxxx
FOX ROTHSCHILD LLP
By: __________________________
Carolyn D. Richmond
100 Park Avenue, Suite 1500
New York, New York 10017
(212) 878-7900
Attorneys for Defendant
19
CONFIDENTIAL
ATTORNEY CLIENT PRIVILEGED
ATTORNEY WORK PRODUCT
FOX ROTHSCHILD LLP
M E M O R A N D U M
TO:
Clients
FROM:
Carolyn Richmond
DATE:
October 2013
RE:
Employment Issues
The following is an overview of the significant overtime exemption requirements under federal and New
York law. Application of the tests requires a very fact specific review for each individual job.
I.
Exempt vs. Non-Exempt
A.
Federal Wage and Hour Exemptions
New York State employers must contend with applying the overtime exemption tests under both
Federal and New York State laws. Under the Fair Labor Standards Act (“FLSA”), employers are
required to pay employees 1 ½ times the regular rate for each hour, or fraction thereof, worked in excess
of 40 during any given workweek. The FLSA, however, contains specifically defined exemptions from
its minimum wage and overtime provisions. The white-collar exemptions generally include executive,
administrative, professional (including computer-related professionals) and outside sales employees.
Revised in 2004, the United States Department of Labor (“DOL”) provides insight into these tests.
Under the FLSA, an employee who is paid on a salary basis, earns a salary of more than $455
per week (or $23,660 per year)(this rises to $543.75 under New York law at present, and will rise further
with the January 2014 New York minimum wage increase), and meets the revised duty requirements of
the executive, administrative or professional exemptions will be exempt from the FLSA’s overtime
requirements.
1.
Salary Basis
An employee must be paid on a salary basis, as well as meet the duty requirements of the
applicable test. “Salary” means that the employee regularly receives a set amount of pay each pay period
which is not subject to reduction because of variations in the quantity or quality of the employee’s work.
ACTIVE 22879756v1 10/14/2013
It is important to note that simply paying an employee a “salary” is not enough to pass the test—they
must meet the minimum salary amount and the other components of this test. The employee’s
compensation cannot be subject to deductions, which include: for absences occasioned by the employer
or the operating requirements of the business; for lack of work if the employee is ready, able and willing
to work; for employee absences of less than a day for personal reasons or for sickness or disability
unless the deduction is made for absences of a day or more and is in accordance with a bona fide plan,
policy or practice of providing compensation for loss of salary occasioned by sickness or disability; for
absences caused by jury duty, attendance as a witness, or temporary military leave; or, for disciplinary
reasons unless involving an infraction of a safety rule of major significance. Additional compensation
besides the salary is not inconsistent with the salary basis of payment.
2.
Executive Exemption
Another key white collar exemption is the “executive exemption”. In order to qualify for the
executive exemption, an employee must: have a primary duty of managing the enterprise or managing a
customarily recognized department or subdivision of the enterprise; customarily and regularly direct the
work of two (2) or more other full-time employees or their equivalent; and, have the authority to hire or
fire other employees (or make recommendations as to hiring, firing, promotion, or other change of status
of other employees that are given particular weight).
To determine whether an employee’s suggestions are given “particular weight,” factors to be
considered include, but are not limited to, whether it is part of the employee’s job duties to make
suggestions and recommendations; the frequency with which such recommendations are made or
requested; and, the frequency with which the employee’s suggestions and recommendations are relied
upon. Simply making occasional suggestions will not suffice under this exemptions, but the employee at
issue does not have to make the ultimate decision to meet the test.
Exempt executive employees also include any employee who owns at least a bona fide 20%
equity interest in the enterprise in which the employee is employed and who is actively engaged in the
management of the enterprise.
“Management” under the executive exemption definition includes activities such as interviewing,
selecting, and training employees; setting and adjusting rates of pay and hours of work; directing the
work of employees; maintaining production or sales records for use in supervision or control; appraising
employee’s productivity and efficiency for the purpose of recommending promotions or other changes
in status; handling employee complaints and grievances; disciplining employees; planning work;
determining the techniques to be used; apportioning work among employees; determining the type of
materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked, and
sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the
safety and security of the employees or the property; planning and controlling the budget; and
monitoring or implementing legal compliance measures.
The performance of concurrent non-exempt duties will not necessarily defeat the exemption of
an otherwise exempt executive employee. Whether or not an employee still qualifies for the exemption
when performing concurrent non-exempt work will be determined on a case-by-case basis. However,
2
ACTIVE 22879756v1 10/14/2013
caution is advised when evaluation employees who fall into this category. A “working supervisor”
whose primary duty is performing non-exempt work but who also directs the non-exempt work of other
employees, such as when the exempt supervisor is not available, will not qualify.
3.
Administrative Exemption
Among the trickiest of exemptions to apply is the “administrative” exemption. Under the
administrative test, the employee must: have the primary duty of performing office or non-manual work
directly related to the management or general business operations of the employer or its customers; and,
have a primary duty of exercising discretion and independent judgment with respect to matters of
significance.
“Directly related to management or general business operations” means work directly related to
assisting with the running or servicing of a business, such as work in functional areas such as tax,
finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement,
advertising, marketing, research, safety and health, personnel management, human resources, employee
benefits, labor relations, public relations, government relations, computer network, internet and database
administration, legal and regulatory compliance, and similar activities.
An exempt administrative employee also must exercise discretion and independent judgment
with respect to matters of significance. Exercising discretion and independent judgment involves the
comparison and evaluation of possible courses of conduct, and acting or making a decision after the
various possibilities have been considered. The term “matters of significance” refers to the level of
importance or consequence of the work performed. Employees can exercise “discretion and
independent judgment” even if their decisions or recommendations are reviewed at a higher level. In
addition, the fact that many employees perform the same type of work does not mean that they do not
exercise discretion and independent judgment. However, discretion and independent judgment mean
more than the use of skill in applying well-established techniques, procedures, or specific standards
described in manuals or other sources. However, the 2004 regulations specifically provide that the use
of manuals will not defeat an exemption where the manuals, guidelines or procedures contain or relate to
highly technical, scientific, legal, financial, or other similarly complex matters and can be understood or
interpreted only by those with advanced or specialized skills or knowledge. An employee does not
exercise discretion and independent judgment with respect to matters of significance simply because the
employer will experience financial loss if the employee fails to perform the job properly.
Executive assistants to business owners or senior executives, human resources managers, and
purchasing agents, if they perform the types of duties as described in detail in the 2004 U.S. DOL
regulations, generally meet the duty requirements of the administrative exemption. However, inspectors,
comparison shoppers, and public sector inspectors or investigators typically do not exercise discretion
and independent judgment are generally not exempt.
3
ACTIVE 22879756v1 10/14/2013
4.
Professional Exemption
In order to be exempt under the “learned professional” exemption, an employee must: have a
primary duty of the performance of work requiring an advanced knowledge (defined as work that is
predominantly intellectual in character and that includes work requiring the consistent exercise of
discretion and judgment); the advanced knowledge must be in a field of science or learning; and, the
advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual
instruction. Typically, doctors, lawyers and CPAs hired specifically for the use of those advanced
degrees fall under this category. Moreover, the 2004 regulations allowed for chefs with 4-year culinary
degrees (very few schools offer this degree) who were specifically hired into jobs requiring that degree
to sometimes qualify under this exemption as well.
5.
Computer Employees
To meet the new test for the computer employee exemption, the employee must: be compensated
either on a salary or fee basis at a rate no less than $455 per week ($543.75 in New York) or, if
compensated on an hourly basis, at a rate no less than $27.63 an hour; be employed as a computer
systems analyst, computer programmer, software engineer or other similarly skilled worker in a
computer field performing the duties described below; and, have a primary duty of:
the application of systems analysis techniques and procedures, including
consulting with users to determine hardware, software or system functional specifications;
the design, development, documentation, analysis, creation, testing or
modification of computer systems or programs, including prototypes based on and related to user and
system design specification;
the design, documentation, testing, creation or modification of computer programs
related to machine operating systems; or
a combination of the aforementioned duties, the performance of which requires
the same level of skills.
6.
Outside Sales Employees
To meet the federal test for outside sales employee exemption, the employee must: have a
primary duty making sales or obtaining orders or contract for services or for the use of facilities for
which a consideration will be paid by client or customer and be customarily and regularly engaged away
from the employer’s place or places of business. The salary requirements of the exemptions do not
apply to outside sales employees.
4
ACTIVE 22879756v1 10/14/2013
Work “that furthers the employee’s sales efforts” is considered exempt work, including writing
sales reports, updating or revising the employee’s sales or display catalogue, planning sales itineraries,
and attending sales conferences. Outside sales activity does not include sales made by mail, telephone,
or the internet, unless these forms of contact are used “merely as an adjunct to personal calls.”
Telephone or e-mail solicitations from any fixed site, whether home or office, is considered activity
based at the employer’s place of business and, thus, non-exempt (inside) sales work. Sales activity from
a hotel room during a sales trip or at a trade show, however, is not considered sales activity at the
employer’s place of business and, thus, is considered exempt activity.
Promotional work that is actually performed incidental to and in conjunction with the
employee’s own outsides sales or solicitation activity is exempt work. Promotional work that is
incidental to someone else’s sales activity is not considered exempt outsides sales work. For example, a
manufacturer’s representative who sets up displays, rotates stock, and rearranges merchandise on the
store shelf is performing exempt work only if it is incidental to and in conjunction with his/her own sales
or solicitations. In addition, the employee can be considered an exempt outside sales employee only if
that employee’s “primary duty” is making sales.
7.
Primary Duty
To qualify under the foregoing exemptions, an employee’s “primary duty” must be the
performance of exempt work. “Primary duty” means the principal, main, major, or most important duty
that the employee performs. Factors to be considered when assessing the primary duty of an employee
include the relative importance of the exempt duties as compared with other duties; the amount of time
spent performing exempt work; the employee’s relative freedom from other supervision; and, the
relationship between the employee’s salary and the wages paid to other employees for the same kind of
non-exempt work. While time spent performing work can be a useful guide, such time is not the sole
test. Employees who spend less than 50% of their time performing exempt work may still satisfy the
duty requirements of the applicable exemption.
Work that is “directly and closely related” to exempt work also is considered exempt work.
“Directly and closely related” means tasks that are related to exempt duties and contribute to, or
facilitate the performance of, exempt work.
C.
New York Wage and Hour Exemptions
Certain employees are also exempt from the provisions of the New York Labor Law. While
New York adopts the “white-collar” exemptions for executive, administrative, and outside salespersons,
in some cases, as discussed below, they contain more stringent requirements than the FLSA.
Primary Duty Test:
5
ACTIVE 22879756v1 10/14/2013
Like the federal regulations, New York’s wage and hour regulations set forth separate, detailed
definitions for exemptions from state overtime requirements. See 12 N.Y.C.R.R. 142-2.14.1 However,
it is important to note that under New York law, the mere fact that an employee is paid on a salary basis
and has a certain title will not automatically qualify the employee for exempt status. Rather, the
determinative factors are whether the duties, responsibilities, and salary of the employee comply with
the applicable state requirements. See Scholtisek v. Eldre Corp., 229 F.R.D. 381, 391-392 (W.D.N.Y.
2005).
Salary Basis Test:
There is a requirement that employees be paid on a salaried basis to meet the test for certain
exemptions. However, New York does not utilize a particular test to determine whether the employees
are paid on a salaried basis.
Exemptions:
Exemptions are narrowly construed by the New York State Department of Labor and courts, and
it is the employer’s burden to establish that an employee has been properly classified as exempt.
1.
Executive Exemption
An exempt “executive” employee is an individual who works in bona fide executive capacity
and:
(a) whose primary duty consists of the management of the enterprise in which such individual is
employed or of a customarily recognized department or subdivision thereof;
(b) who customarily and regularly directs the work of two or more other employees therein;
(c) who has the authority to hire or fire other employees or whose suggestions and recommendations as
to the hiring or firing and as to the advancement and promotion or any other change of status of other
employees will be given particular weight;
(d) who customarily and regularly exercise discretionary powers; and
(e) who is paid for his/her services a salary of not less than $543.75 per week (will rise on January 1,
2014), inclusive of board, lodging, other allowances and facilities.
2.
Administrative Exemption
An exempt “administrative” employee is an individual who works in a bona fide administrative
capacity and:
1
While New York classifies additional categories of employees as exempt (i.e. taxi-cab drivers, part-time babysitters, etc.),
we have only addressed certain broad categories of relevant employees in this memorandum.
6
ACTIVE 22879756v1 10/14/2013
(a) whose primary duty consists of the performance of office or non-manual field work directly related
to management policies or general operations of such individual's employer;
(b) who customarily and regularly exercises discretion and independent judgment;
(c) who regularly and directly assists an employer, or an employee employed in a bona fide executive or
administrative capacity (e.g., employment as an administrative assistant); or who performs, under only
general supervision, work along specialized or technical lines requiring special training, experience or
knowledge; and
(d) who is paid for his services a salary of not less than $536.10 per week, inclusive of board, lodging,
other allowances and facilities.
3.
Professional Exemption
An exempt “professional” employee is an individual who works in a bona fide professional
capacity and:
(a) whose primary duty consists of the performance of work: requiring knowledge of an advanced type
in a field of science or learning customarily acquired by a prolonged course of specialized intellectual
instruction and study, as distinguished from a general academic education and from an apprenticeship,
and from training in the performance of routine mental, manual or physical processes; or original and
creative in character in a recognized field of artistic endeavor (as opposed to work which can be
produced by a person endowed with general manual or intellectual ability and training), and the result of
which depends primarily on the invention, imagination or talent of the employee; and
(b) whose work requires the consistent exercise of discretion and judgment in its performance; or
(c) whose work is predominantly intellectual and varied in character (as opposed to routine mental,
manual, mechanical or physical work) and is of such a character that the output produced or the result
accomplished cannot be standardized in relation to a given period of time.2
4.
Outside Salesperson
The term “outside salesperson” means an individual who is customarily and predominantly
engaged away from the premises of the employer, and not at any fixed site and location, for the purpose
of:
(i) making sales;
(ii) selling and delivering articles or goods; or
(iii) obtaining orders or contracts for service or for the use of facilities.
2
Note unlike the executive and administrative exemption, there is no minimum salary requirement.
7
ACTIVE 22879756v1 10/14/2013
In addition, please note that in July 2007, the New York Labor Law was amended with regard to
compensation paid to “commission salesman,” which is defined under the Act as “any employee whose
principal activity is the selling of any goods, wares, merchandise, services, real estate, securities,
insurance or any article or thing and whose earnings are based on whole or in part on commission. The
term ‘commission salesman’ does not include an employee whose principal activity is of a supervisory,
managerial, executive or administrative nature.” N.Y. Labor Law § 190(6). The new amendment,
which took effect on October 16, 2007, requires that the agreements of such salespersons be: (a) in
writing; and (b) signed by both the employer and the employee. N.Y. Labor Law § 191(c). If you have
employees who fall within the scope of this definition, we would be happy to provide you with
assistance on the necessary legal content and requirements of the written agreement.
8
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Faculty Biographies
Joseph Fitapelli
Mr. Fitapelli is a seasoned attorney with extensive experience in state and federal court. He represents
individual employees, executives and companies in a full range of employment law related matters
including claims of discrimination, harassment, retaliation, wrongful discharge and breach of contract.
Mr. Fitapelli also frequently appears in the United States District Courts in single-plaintiff, collective and
class action lawsuits for failure to pay proper wages, overtime and commissions.
In addition to employment litigation, Mr. Fitapelli also negotiates severance agreements, executive
compensation packages and limited liability company agreements. He is frequently consulted by
companies regarding their employment policies and procedures. Mr. Fitapelli’s litigation experience also
extends to other complex, high exposure matters such as products liability, New York City Asbestos
Litigation, toxic mold cases, chemical release events and lead exposure claims.
Mr. Fitapelli has represented countless individuals from occupations as varied as restaurant and
hospitality workers, entertainers including an "A-List" actor and an Oscar winning director, financial
services employees, construction workers and teachers. He has also represented Fortune 500
companies, internet companies, insurers, land owners and developers.
He has successfully authored and argued appellate briefs and summary judgment motions that have led
to new interpretations of the law favoring his clients on issues such as expert preclusion, products
liability and landowner liability. Mr. Fitapelli has achieved consistent favorable results at trial,
arbitrations and mediations. His successes in handling high profile, complex cases have been featured on
television, internet and print media including but not limited to: NY1, The New York Law Journal, various
local newspapers and other legal publications. As a result, he is frequently consulted by members of the
business and legal communities on an array of matters.
A New York Law School graduate, he is also a presidential scholar and cum laude graduate of St. Francis
College with a B.A. in English. Mr. Fitapelli is a member of the American Bar Association, the American
Bar Association’s Section of Labor and Employment Law, the New York State Bar Association and
National Employment Lawyers Association (NELA) of New York. He is licensed to practice law in New
York State, the United States District Courts for the Southern and Eastern Districts of New York and the
United States Court of Appeals for the Second Circuit.
Mr. Fitapelli was named to Super Lawyers list of Rising Stars as one of the top attorneys in New York for
2012. Less than 2.5 percent of the lawyers in New York were selected to this list.
BERKE-WEISS & PECHMAN LLP
ATTORNEYS AT LAW
488 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 583-9500 · FAX: (212) 308-8582
WWW.BWP-LAW.COM
Louis Pechman represents both employers and employees before federal
and state courts and government agencies in all areas of workplace law,
including employment discrimination, union-management relations,
employment contracts, ERISA, non-competition agreements, independent
contractor issues, and wage/hour disputes. As a practitioner for over twenty
years in the labor and employment field, Mr. Pechman offers both individual
employees and employers practical guidance on improving the employment
relationship and, where appropriate, terminating that relationship.
Prior to forming his partnership ten years ago with Laurie Berke-Weiss,
Mr. Pechman has worked as a labor and employment attorney at three
Manhattan law firms, as in-house labor counsel with the New York Daily News,
and as a Field Examiner with the National Labor Relations Board. Admitted to
the New York and New Jersey Bars, he is a graduate of the Cornell University
School of Industrial and Labor Relations and the Fordham University School of
Law.
A frequent contributor to the New York Law Journal and other business
and legal publications, Mr. Pechman often gives presentations on employment
law topics, including the Americans with Disabilities Act, sexual harassment,
and the development of human resource policies and procedures. He has
lectured at the Fordham University School of Law, New York University, the
Extension Division of the Cornell University School of Industrial and Labor
Relations, and the American Bar Association. From 1994 through 1998, he was
Chair of the New York County Lawyers' Association Committee on Labor
Relations and Employment Law. Since 1996, Mr. Pechman has developed and
moderated NYCLA's annual program on "How to Handle an Employment
Discrimination Case."
Carolyn D. Richmond
Partner
[email protected]
New York, NY
212.878.7983
&DURO\QLVFRFKDLURIWKHILUP¶V+RVSLWDOLW\3UDFWLFH*URXS+HUSUDFWLFHODUJHO\FRQVLVWV
of representing and counseling employers in the hospitality industry, specifically
restaurants, hotels, caterers, night clubs, lounges and fitness centers. In particular,
Carolyn has extensive experience litigating wage and hour class actions, restrictive
covenants and employment discrimination cases. She also counsels clients extensively
with respect to workplace issues such as the hiring process, diversity awareness training,
union avoidance, employee handbooks and other policy initiatives.
Carolyn is also counsel to a number of employers in the retail, financial services,
healthcare and manufacturing industries. She frequently provides union avoidance and
sexual harassment training, and represents employers before a variety of state and
federal agencies.
Before Fox Rothschild
Carolyn also served as General Counsel to B.R. Guest Restaurants & James Hotels, where she was responsible for
the legal and business affairs for both expanding restaurant operations and the development of James Hotel
properties. This experience gave Carolyn an insider's perspective into both the business and legal needs of her
clients.
Beyond Fox Rothschild
Carolyn is a prolific writer and often is a guest speaker at legal conferences and industry
events on various labor and employment-related topics. She is active in the community
with several board appointments and memberships including:
Practice Areas
Hospitality
Labor & Employment
Franchising, Licensing & Distribution
Bar Admissions
New York
New Jersey
Education
J.D. New York Law School
B.S., Cornell University
Court Admissions
U.S. District Court, Southern, Eastern and
Northern Districts of New York
U.S. District Court, District of New Jersey
Board of Directors
Member, President's Council of Cornell
Women, Cornell University
Alumni Board of Directors, Cornell
University, School of Industrial & Labor
Relations
Advisory Board, Center for Hospitality
Research, Cornell University
Counsel, New York City Hospitality
Alliance
Board of Editorial Advisors, Hospitality
Law
Member of the President's Council of Cornell Women at Cornell University
Member of the Advisory Board for the Center for Hospitality Research at Cornell
University
Member of the Alumni Board of Directors for Cornell University, School of Industrial and Labor Relations
Serves on the Board of Editorial Advisors for Hospitality Law
Serves as Counsel to the New York City Hospitality Alliance
Serves on Culintro's Culinary Trade Organization's Board of Advisors
Carolyn is also involved with the PENCIL Partnership, and is teamed with a New York City charter school to help link the
business community with the students. Carolyn has testified before the New York City Council and New York State Department
of Labor concerning proposed changes to the law that would adversely affect New York businesses.
Client Resources
Restaurant Law Update
Lately, the food service industry has been under increasing scrutiny from government, plaintiff groups and social justice groups.
In this podcast, Carolyn discusses current issues in employment law affecting food service operators.
Listen to the Podcast
Honors and Awards
‡6HOHFWHGDVRQHRICrain's Forty Under 40 class of 2009, honoring a diverse group of New Yorkers who
have excelled in their respective fields
‡/DZ5HYLHZ2XWVWDQGLQJ6HUYLFH$ZDUG1HZ<RUN/DZ6FKRRO
‡$PHULFDQ-XULVSUXGHQFH$ZDUG1HZ<RUN/DZ6FKRRO
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