There is no doubt that the PTE participants would have had great difficulty in obtaining jobs in the private sector and as such, benefitted enormously from the work opportunities provided by the defendants. As homeless individuals, many of the plaintiffs needed to be instructed on the most basic of job skills: including avoiding absenteeism, being prompt for work, working a full day, and punching a time clock. Counseling provided by the defendants helped some of the plaintiffs obtain housing and employment outside the program. Unfortunately, determining that the training benefits the participants is only one part of the Wage and Hour Test. Despite counseling, orientation packets, and progress reports, in none of the departments -- outreach, food service, maintenance, or administration -- did the defendants receive training that is similar to or even close to that which would be provided in a vocational school. In addition, the Court finds that PTE participants did displace regular employees, and often did not work under any meaningful supervision. At times, PTE participants even supervised other PTE participants. PTE participants often worked significant overtime hours, and the defendants have admitted that their contracts could not have been fulfilled without the work of PTE participants.
Thus, even though the PTE participants received a benefit, the defendants gained an immediate and greater advantage from the PTE Program: the ability to offer security and other services at below market rates. The defendants gained further advantage because the SSC, the GCP, and the 34th SP all utilized the services of PTE participants. Also, for reasons to be discussed below, I find that the participants did not understand that they were not entitled to wages for the time spent in the Program. Although the defendants assert that the Wage and Hour Test is not determinative of whether a person is an employee under the FLSA, it is a factor to be weighed in the analysis, and the defendants have failed to show that under the six-factor test, the PTE participants were trainees rather than employees.
Two important elements in determining the "economic reality" of an employment situation are whether there was an expectation or contemplation of compensation and whether the employer received an immediate advantage from any work done by the individuals. See Tony & Susan Alamo Found., 471 U.S. at 300 (citing Portland Terminal, 330 U.S. 148 at 153). For example, in Tony & Susan Alamo Found., the individuals who worked in the Foundation's businesses, like the trainees in Portland Terminal, expected no compensation for their labors. Id. The District Court in Tony & Susan Alamo Found. found that the Secretary had "failed to produce any past or present associate of the Foundation who viewed his work in the Foundation's various commercial businesses as anything other than 'volunteering' his services to the Foundation." Id. (citing Donovan v. Tony & Susan Alamo Found., 567 F. Supp. 556 (W.D. Ark. 1982)). In this case, instead, the record clearly reflects that the plaintiffs expected compensation for their services. In contrast to Tony & Susan Alamo Found., in which none of the individuals expected compensation for their services, and were true volunteers, the defendants are unable to find any PTE participant to testify that she did not expect compensation for his or her work. In fact, the defendants were well aware that the PTE participants were keenly interested in the compensation, for one of their proposed findings states: "Some clients fear losing their stipends, and having to rely solely on public benefits to pay for their housing, and therefore have asked and been permitted to remain in the PTE program. A per diem program was also created to permit graduates to work in the Center on an as-needed basis at minimum wage to provide income until a graduate found full-time employment." Defendants Proposed Findings at P 45 (citing Grunberg Dep. at 108-109). As noted previously, testimony from the plaintiffs clearly states that they participated in the program because they thought it was a job.
Defendants' documents indicate that the plaintiffs' expectation of compensation was not unfounded. While the defendants now characterize the PTE participants as trainees who received a stipend, a memorandum from Vincent Flynn to PTE participants in the Outreach program, relates the "Objectives for it's [sic] employees," and refers to the PTE participants as employees. PE 61 ("Upon completion of the volunteer entry [of a least three weeks], the employee will elevate to our Work Program status for twelve weeks."). Performance evaluations for the PTE participants refer to them as workers and do not mention "training" or refer to the individuals as "trainees." See PE 48-50.
A former director of the Outreach program testified that he informed the outreach workers that they were to be paid on a weekly basis for their work. See Flynn Dep. at 120. The periods of time that the plaintiffs were required to work were called "shifts," and they had to "clock in and out" in order to get paid. See PE 7. Plaintiffs kept detailed payroll sheets to calculate the plaintiffs' hours, identical to records kept for staff employees. See PE 57-60. When the plaintiffs worked in excess of an eight hour shift or more than forty hours per week, the additional time was called "overtime." See PE 52. Overtime slips indicate that the plaintiffs worked overtime hours when an individual failed to show or additional coverage was needed, and that there were times when these overtime hours were worked during the "graveyard shift" (Midnight to 8 a.m.). See id. A PTE participant received time-and-a-half -- $ 1.50 -- for an overtime hour.
Defendants assert that the plaintiffs had no expectation of compensation because some of the plaintiffs signed a "Letter of Agreement," stating that the signee would
attend at least three (3) training and/or motivational workshops per week . . . . understand that [she is] not an employee of GCPSSC, and any stipend [she] receive[s] for personal expenses related to [her] training is not considered a wage . . . . understand that [her] participation in the PTE program is voluntary and does not guarantee future employment with the Grand Central Partnership Social Services Corporation.
In addition to the testimony by certain plaintiffs that they were coerced into signing the Letter of Agreement, the Supreme Court has clearly stated that: "protestations, however sincere, cannot be dispositive . . . . If an exception to the [FLSA] were [sic] carved out for employees willing to testify that they performed work 'voluntarily,' employers might be able to use superior bargaining power to coerce employees to make such assertions, or to waive their protections under the [FLSA]." Tony & Susan Alamo Found., 471 U.S. at 301-02 (citations omitted). Further, the Agreement itself is dubious on its face, because there is no space indicating the date on which the Agreement was signed between the parties. This factor undermines the persuasiveness of the Letter Agreements because there appear to be no letter agreements from PTE participants who left the program before 1994, when the defendants first learned that a lawsuit was being contemplated.
As a result, any reliance the defendants place on the "Letter of Agreement" or an earlier "agreement" stating that an individual's "stipend for the entire 12 weeks is $ 40.00 per week," PE 20, is not appropriate in this case. Under the Supreme Court's analysis, neither are the Agreements dispositive in this case. The "Letter of Agreement" bears a strong resemblance to certain factors of the Wage and Hour Test, and appears to have been instituted after the possibility of a lawsuit became real. The prior "agreement" contains none of the relevant language that is present in the "Letter of Agreement." See PE 20. Further, the prior "agreement" instead supports the plaintiffs' expectation of weekly compensation as part of a job. See id. ("[The] stipend for the entire 12 weeks is $ 40.00 per week . . . . I understand that if my [the participant's] attendance is 95% or better, I will be awarded a bonus of $ 160.00.") (emphasis added).
If a defendant gains an immediate advantage from a plaintiff's labor, courts have held that the plaintiff is an employer for purposes of the FLSA. See McLaughlin v. Ensley, 877 F.2d at 1209-10 ("In sum, this court has concluded that the general test used to determine if an employee is entitled to the protections of the [FLSA] is whether the employee or the employer is the primary beneficiary of the trainees' labor . . . . The trainees were taught only simple specific job functions related to [defendant's] own business . . . . The skills learned were either so specific to the job or so general to be practically no transferable usefulness."); Donovan v. New Floridian Hotel, Inc., 676 F.2d 468, 471 (11th Cir. 1982) (stating that the district court in the case found that mental patients did work which was of "economic benefit" to the defendants and that the individuals were employees for purposes of the FLSA and entitled to back wages for their work).
In examining whether the defendants here received an immediate advantage from any work done by the plaintiffs, the Court does not disregard the fact that the plaintiffs received certain advantages as well -- such as basic job skills and the ability to create an employment history. But, it is also clear that the defendants could not have met their contractual obligations without the PTE program. As noted, without the PTE program, the defendants would have had great difficulty in meeting the obligations of the district plans of the GCP and the 34th SP. Further, the defendants would have not met the requirements of their contract with New York City -- a contract which requires the defendants to handle food services for clients and provide maintenance at the drop-in center. See Findings of Fact P 8. In addition, without the PTE participants, the defendants would not have been able to service the recycling and outreach contracts. According to a former director of the Outreach Program, there were only twenty-two staff members, but sixty-three program workers. See PE 41. The director stated that: "even if they [PTE participants] all showed up to work we did not have enough personnel to cover every location. Even the overtime did not -over [sic] all the locations." PE 41.
Finally, while the defendants did offer counseling sessions, it is difficult to envision that someone who is working a forty-hour week and also working the "graveyard shift" for overtime would be able to attend and benefit from those sessions. If the defendants truly intended primarily to provide a training program for the defendants, they would have either not allowed such overtime or scheduled counseling sessions to better accommodate those whose overtime included such shifts.
The plaintiffs have presented voluminous evidence that they performed productive work for the defendants, expected to be paid by the defendants, and produced more benefits for the defendants than they received through training provided by the PTE Program. Considering all the factors -- including the Wage and Hour Test, expectation of compensation, and immediate advantage to the employer -- the economic reality is that the PTE participants benefitted from the defendants' efforts, but the defendants benefitted more. The plaintiffs have satisfied each of the factors required to prove that they were employees and not trainees as that term is understood in case law. As a result, I conclude that the plaintiffs were employees of the defendants for purposes of the FLSA.
II. New York Minimum Wage Act
The New York 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.'" In re Settlement Home Care, Inc., 151 A.D.2d 580, 581, 542 N.Y.S.2d 346, 347 (2d Dep't 1989) (citing N.Y. Labor Law § 650). It is to be liberally construed so as to permit as many individuals as possible to take advantage of its benefits. 151 A.D.2d at 581, 404 N.Y.S.2d at 347-48. Under the Act, an employee includes any "individual employed or permitted to work by an employer in any occupation," with the exception of a few narrow categories. N.Y. Labor Law § 651(5). An employer includes any "individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons acting as employer." N.Y. Labor Law § 651(6). Defendants do not assert that they are covered by any of the exemptions under the Act.
Defendants place special emphasis on Albany College of Pharmacy v. Ross, 94 Misc. 2d 389, 404 N.Y.S.2d 779 (Sup. Ct. 1978), for their claim that the plaintiffs are not entitled to the minimum wage under the New York Labor Law. In Ross, the issue was whether pharmacists who supervised students placed with them by a college-administered professional practice program were "employers." Relying on the four common-law elements of a master-servant relationship -- selection and engagement of the servant, the payment of wages, the power of dismissal, and the power of control of the servant's conduct -- the court held that the individual pharmacists were not employers because the colleges, not the pharmacists, "directed, controlled, monitored and evaluated" the students. Id. at 390, 404 N.Y.S.2d at 780.
Apart from the fact that in the instant case the PTE participants worked for the defendants and thus Ross is not applicable, Ross is instructive because it states that the element of control is part of an employment relationship. See id. at 391, 404 N.Y.S.2d at 781. Defendants exercised control over the plaintiffs, selecting which persons participated in the program. See Grunberg Dep. at 111-15. Further, the defendants have stated that "anyone found under the influence of drugs and/or alcohol . . . [would] be dismissed automatically from the program." DE 18. As a result, even under the Ross analysis, the plaintiffs are employers for purposes of the New York State Minimum Wage Act. Thus, I conclude that the defendants have violated the New York State Minimum Wage Act.
III. Statute of Limitations Argument
In their trial memorandum, defendants asked leave to amend their answer to assert the statute of limitations as a defense in this action under FRCP 15(a). At trial, the Court ruled upon one part of defendants' arguments. See Trial Transcript at 13 (denying "the motion to amend as futile, to the extent that all of this [revolves] around the one and only issue, i.e., are you an employer."). Here, the Court addresses the remaining defense arguments.
"The contention that all or part of an action is barred by the statute of limitations is an affirmative defense. If not raised by the defendant in his answer, it is waived." Wade v. Orange County Sheriff's Office, 844 F.2d 951, 955 (2d Cir. 1988) (citing Fed. R. Civ. P. 8(c)); see also Brock v. Wackenhut Corp., 662 F. Supp. 1482, 1487 (S.D.N.Y. 1987) (statute of limitations period in the FLSA is a "procedural limitation on relief that must be pleaded as an affirmative defense"). Generally, permission to amend a complaint should be freely granted. See Foman v. Davis, 371 U.S. 178, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). A court plainly has discretion, however, to deny leave to amend where the motion is made after an inordinate delay, no satisfactory explanation is offered for the delay, and the amendment would prejudice the other party. See Tokio Marine & Fire Insurance Co. v. Employers Insurance of Wausau, 786 F.2d 101, 103 (2d Cir. 1986). The burden is on the party who wishes to amend to provide a satisfactory explanation for the delay. See Sanders v. Thrall Car Mfg. Co., 582 F. Supp. 945, 952 (S.D.N.Y. 1983), aff'd, 730 F.2d 910 (2d Cir. 1984).
The defendants' request to amend their complaint here was made after inordinate delay, in a memorandum on the eve of trial. Further, while raising the affirmative defense of statute of limitations, defendants have given no explanation whatsoever for their delay. Finally, I find that this amendment is not in the interest of justice because litigating this question at such a late date would cause the plaintiffs hardship and force them to spend additional resources. As a result, I deny the defendant's request to amend their complaint and find that the plaintiffs' claims are not barred by the statute of limitations.
For the reasons discussed, I conclude that the defendants' practices violated the FLSA and the New York State Minimum Wage Act. I hereby order the Clerk of the Court to enter judgment for the plaintiffs on liability. I also award damages in the amount of the back wages to which the plaintiffs are lawfully entitled -- i.e., the difference between the subminimum hourly rate at which the defendants compensated the plaintiffs and the lawful minimum wage for every hour worked up to 40 hours a week, and time-and-a-half for every hour worked beyond 40 hours a week. In addition, I award plaintiff liquidated damages in an amount equal to the back wages due plaintiffs pursuant to 29 U.S.C. § 216(b). Finally, I order the defendants to pay plaintiffs their reasonable attorneys' fees and costs connected with this action. This matter is referred to the magistrate judge for an inquest on damages for each individual plaintiff consistent with his Order.
Dated: New York, New York
March 18, 1998