The opinion of the court was delivered by: SOTOMAYOR
SONIA SOTOMAYOR, U.S.D.J.
Plaintiffs, formerly homeless and jobless individuals, allege that the defendants -- the Grand Central Partnership, Inc. ("GCP"), the Grand Central Partnership Social Services Corporation ("SSC"), and the 34th Street Partnership, Inc. ("34th SP") -- unlawfully paid them sub-minimum wages to perform clerical, administrative, maintenance, food service, and outreach work in the defendants' Pathways to Employment ("PTE") Program. Plaintiffs argue that the payment of sub-minimum wages allowed the defendants unfairly to underbid competitors who compensated their employees at lawful rates. Defendants maintain that the plaintiffs were not employees of the PTE Program, but were instead trainees receiving essential basic job skills development and counseling, and thus were not entitled to minimum wage payment.
Plaintiffs claim that the defendants violated the Federal Labor Standards Act ("FLSA"), 29 U.S.C. § 201, and the New York State Minimum Wage Act, N.Y. Labor Law § 650. They seek judgment that the plaintiffs were employees of the defendants and damages in the amount of back wages, liquidated damages, and reasonable attorneys' fees and costs.
For the reasons to be discussed, the Court finds that the defendants' program did provide the plaintiffs with some meaningful benefits. Nonetheless, despite the defendants' intent, they did not structure a training program as that concept is understood in case law and regulatory interpretations but instead structured a program that required the plaintiffs to do work that had a direct economic benefit for the defendants. Therefore, the plaintiffs were employees, not trainees, and should have been paid minimum wages for their work.
The work the plaintiffs performed competed with other business enterprises paying minimum wages. Despite the attractive nature of the defendants' program in serving the needs of the homeless, the question of whether such a program should be exempted from the minimum wage laws is a policy decision either Congress or the Executive Branch should make. The defendants had the right to apply for an exemption from the minimum wage requirements of the FLSA and the New York Minimum Wage Act, and should have done so. The Court, however, cannot grant an exemption where one does not exist in law.
I adopt as findings the following facts agreed upon by the parties in their Joint Pre-Trial Order:
1. Plaintiffs in this action are all homeless or formerly homeless persons. When this case was filed on February 1, 1995, forty individuals had signed consent forms to become Plaintiffs and are named in the caption of this case: Keith Archie; Rudy Askew; Raymond Del Valle; Percival Dennis; Cynthia Dilbert; Joyce Dorsey; William Farrior; Carlton Ford; Fitzroy Frederick; Miles Harp; Felicia Hart; Warren Hartshorn; Jay Hemphill; Derrick Johnson; William Johnson; William J. Johnson; Mona Lisa Larry; Gregory Lloyd; Frederick Mack; Ronald Manning; Mark McMillan; Regina Miller; Ernest Montgomery; James Moore; Dennis Novak; Nina Paul; Nathan Rhames; Jose Rodriguez; William Scott; David Solomon; Lee Springer; Zachary Suddith; Arnold Thornton; Stanley Turner; Tony Turner; Thelma Wall; James Whitman; Earl Williams; Jerome Williams; and Oscar Willis.
2. Defendants have taken the depositions of nine Plaintiffs. They have received responses to interrogatories from an additional 33 Plaintiffs. They have received affidavits from seven Plaintiffs, all of whom submitted interrogatory responses and four of whom were deposed.
3. Defendant Grand Central Partnership ("GCP") is a New York not-for-profit corporation organized and existing under the New York State Not-For-Profit Corporation Law with its principal place of business at 6 East 43rd Street.
4. Defendant Grand Central Partnership Social Services Corporation ("SSC") is a not-for-profit corporation organized and existing under the New York State Not-For-Profit Corporation law, and has its principal place of business at 152 East 44th Street, New York, New York.
5. Defendant 34th Street Partnership ("34th Street") is a business improvement district ("BID") organized and existing under the New York State Not-For-Profit Corporation law.
6. The SSC runs a multi-service drop-in center for the homeless (the "drop-in center," the "Multi-Service Center," the "Center"), for which it receives funding from New York City pursuant to contract (the "City Contract"), among other funding sources. The SSC was formed in 1989 to take over from the Moravian Church the running of the Center. At the Center, the SSC operates the Pathway to Employment ("PTE") program.
7. Plaintiffs became homeless for a range of reasons. All of the Plaintiffs eventually learned of and visited the Center for homeless persons operated by the SSC.
8. The SSC's current City Contract mandates that the SSC "operate the Center to [serve] the target population." An average of 200 clients are to be served per day, and the Center is to "operate 24 hours a day, 7 days per week." Pursuant to the contract, the SSC provides counseling, referrals, clothing, showers, and mail access, to those clients wishing such services. The SSC contracts that its delivery of these services will meet the social service standards established by the City. The contract also requires the SSC to operate an outreach program to serve homeless people outside the Center and, if possible, help bring them in for additional services. The SSC is required to "operate the Center with the purpose of resocializing clients, providing social services and rehabilitation services for clients with the goal of allowing clients to become appropriate for placement into alternative living arrangements."
9. The City Contract requires the SSC to "implement a Work Experience Program which will assist clients in developing alternate living skills for independent living." The Contract states that the "program shall aid clients in developing vocational skills for the purpose of future employment."
10. The City Contract provides funds for services to about 200 clients per day.
11. Homeless persons who visited the Center were known as "contacts" or "clients."
12. The Center allows any adult homeless person to become a client.
13. Upon arriving at the Center, clients usually were interviewed in a process known as "intake." The intake interviewer completed an Intake Interview form that asked where the client spent the last five nights, how he or she heard about the center, and what services the client requested.
14. Clients typically would also undergo another interview called an Assessment Interview. The form used with this interview asked for the client's family history, education, employment history, resources, legal history, medical history, mental health history, substance abuse history and housing history. The form also called for the interviewer to elicit the client's goals and asked the interviewer to provide an overall assessment and treatment plan for the client.
15. The SSC maintained a Self-Help Center at the Center, which contained various materials to assist clients in seeking a job.
16. The SSC identified individuals who had severe or chronic medical or mental health problems, or who otherwise needed to enter therapeutic programs or undergo intensive case management. Those individuals were referred to outside programs for certain services.
17. The SSC provided those clients who requested it counseling regarding substance abuse rehabilitation, housing, employment, entitlements, mental health, educational /vocational training, and family issues.
18. Some plaintiffs had mental health, physical health, or substance abuse problems, and some had limited work histories. Some had experienced periods of unemployment before coming to SSC.
19. The program that became known as PTE was started in 1989, and its structure has changed in some respects over time, but its basic elements and methods have remained consistent.
20. The PTE program was operated through the SSC and out of the SSC's offices.
21. Some SSC clients opted to join the PTE program. PTE participants were required to make arrangements for stable housing before entering PTE.
22. Once a participant entered the PTE program, he or she was assigned to one of five areas, all of which, directly or indirectly, contributed to the overall operation and goals of the Center. The five areas were maintenance, food services, administration, outreach and recycling (the recycling area was added in January 1993).
23. The PTE program required that an individual participate in the program for 40 hours per week. The target length of the program was 700 hours, but certain participants participated in the program for more than 700 hours.
24. SSC staff conducted various workshops, including workshops called "job readiness" and "motivational" workshops, designed for an audience that included PTE participants. Some such workshops covered areas such as how to prepare a resume, how to search help-wanted advertising, and how to interview for a job.
25. When individuals at the Center, including PTE participants, attended workshops, they were required to sign in.
26. Over the life of the PTE program, PTE participants received amounts ranging between $ 40 and $ 60 per week.
28. The Food Services department was responsible for operating the drop-in center's kitchen, which served over 400 meals per day.
29. PTE participants in the administration department answered the telephone, filed, made intra-office deliveries, maintained lists, dispensed mail, and recorded information.
30. On one occasion a PTE participant in the administration department performed administrative duties for an entity outside the Center. From November 1990 to April 1991, Terence Weaver ("Weaver") -- who became an Outreach supervisor in October 1994 and then coordinator of PTE from March 1995 to January 1996 -- was a PTE participant in administration. His participation took place at the Jewish Board of Family and Children's Services (the "Jewish Board"), an entity in the same building as the drop-in center. Among other things, Weaver compiled a resource list of 65 single room occupancies and information related thereto.
31. PTE participants were among those who performed outreach for the SSC.
32. Some PTE participants participated in the outreach program after midnight and before 6 a.m. because homeless individuals to whom outreach was directed were sleeping in public and private properties during those hours.
33. The SSC has a contract with the Port Authority of New York and New Jersey to provide recycling services at the World Trade Center. This contractual relationship, which began in 1993, provided another area where PTE participants could participate.
34. Outreach and recycling both generated revenues for the SSC. According to an SSC income statement for the fiscal year ending June 30, 1994, the SSC received around $ 950,000 from outreach and recycling contracts. These monies were used to cover the costs of performing outreach and recycling as well as to fund various SSC expenses, including those associated with the programs and activities of the Center.
35. At some point, the SSC began requiring PTE participants to produce three vouchers, each demonstrating attendance at a workshop, before they could receive their weekly amount.
36. Some PTE participants did not attend workshops even when such participation was required.
37. Staff members at the SSC maintained notes on some PTE participants on sheets with titles such as "Progress Notes."
38. In July 1993, the SSC began a video resume program, pursuant to which individuals seeking employment, including PTE participants and staff members, were videotaped and the tapes aired on television.
39. Between July 1993 and 1995, Lisa Davis, as the SSC's Employment Coordinator, sent a number of PTE participants on interviews for jobs outside the Center. Ms. Davis assisted clients in finding jobs outside the center, including by conducting practice interviews and contacting prospective employers. Ms. Davis maintained a report regarding her job placement efforts.
40. Some PTE participants were hired at minimum wage by the SSC as staff members following their participation in PTE.
41. Some PTE participants signed a document entitled "Pathway to Employment Enrollment Contract." Some PTE participants signed a printed document entitled "Grand Central Partnership Social Services Corporation Multi-Service Center PTE Letter of Agreement" which included the statement "I understand that I am not an employee of GCPSSC, and any stipend I receive for personal expenses related to my training is not considered a wage."
42. Both Daniel Biederman, the president of the GCP, and Ira Mandelker, a former Program Director of the SSC and a former Associate Director of the 34th SP, testified that PTE participants were not volunteers.
43. PTE does not constitute a "Work Experience Program" under New York City's "WEP" regulations. PTE is not a recipient of Job Training Partnership Act funds.
ADDITIONAL FINDINGS OF FACT
On the basis of the testimony
presented at the bench trial held on April 16 and 17, 1997, and the Exhibits admitted at trial, which are made a part of the record in this case, I find pursuant to Fed. R. Civ. P. 52, the following additional facts:
45. At one time or another between 1990 and 1995, each plaintiff participated in a work program that the defendants call the PTE program. Some of the defendants' officers and most plaintiffs referred to it as a "work program" or simply as a job. See Mandelker Dep. at 310 ("The term 'work program' has been regularly used as a shorthand for the Pathway to Employment Program."); Flynn Dep. at 54 ("[The PTE Program] was a work program."); Springer Aff. P 2; Hart Aff. PP 2, 27.
46. As noted, defendant, 34th Street Partnership ("34th SP"), has its principal place of business at 6 East 43rd Street. See PE 62; PE 76 P 11. 34th SP is an association of property owners of businesses located in the vicinity of Pennsylvania Station in Manhattan ("Penn Station"). Like the GCP, it assesses its members a fee and uses the proceeds to provide services within the Penn Station district.
47. The GCP, SSC, and 34th SP are all closely affiliated. The defendants share employees -- including key executives -- office space, and operations. Indeed, the GCP and 34th SP's controller consolidated the financial statements of the GCP and SSC and described the SSC as a "subsidiary" of the GCP. See Schaly Dep. at 28-30, 43-44 [David Schaly is the Controller and Assistant Treasurer for the GCP and the 34th SP]; Biederman Dep. at 195; Mandelker Dep. at 546. Robert Hayes, an agent of the defendants who was commissioned by them to issue a report describing the SSC's activities, concluded that the SSC was a "subsidiary" of the GCP and that "the SSC has become an entity resembling a department of the Grand Central Partnership." PE 32 (Hayes Report) at 14, 32 (emphasis added).
48. For a period of time in 1994, participants in the PTE Program worked from the offices of the 34th SP. See Weaver Dep. at 154-55.
49. One element of the PTE Program that varied during the program's existence was the amount of time required to complete the program. Until early 1994 or early 1995, the program had a completion requirement of 700 hours of work over an indeterminate number of weeks ("the Completion Requirement"). See Crain Dep. II at 112-13; Mandelker Dep. at 113-14; Hart Aff. P 53; Moore Aff. P 10. Starting in or around March 1995, the Completion Requirement changed to approximately 40 hours per week for 20 weeks. Prior to that time, the Completion Requirement was 25 weeks. See Weaver Dep. at 104. Notwithstanding the various Completion Requirements, however, the SSC has always knowingly permitted many PTE participants to continue working in the Program indefinitely. See PE 33 (setting forth total accumulated hours of some PTE workers in the Program); PE 34 (same); Mandelker Dep. at 499-504 (explaining PE 34); West Aff. P 1; Del Valle Aff. P 31; Flynn Dep. at 175-78 (explaining PE 33). As a result, several plaintiffs accumulated over 700 hours of work in the program. See PE 34.
50. The PTE Program enabled the SSC to obtain significant revenue-generating contracts with outside corporations by underbidding businesses who compensated their employees at higher rates. See Anderson Dep. at 19-20, 48-59 (Chase Manhattan Bank representative); Haddock Dep. at 29-30, 43-50 (Fleet Bank representative); PE 22 (contract between SSC and Fleet Bank). As agreed upon in paragraph 34 supra and according to an SSC income statement for the fiscal year ending June 30, 1994, the SSC generated over $ 950,000 in revenues from contracts to provide "outreach" and recycling services. It generated an additional $ 45,000 by providing laborers to The New York City Parks Department to work in Bryant Park in Manhattan. See PE 46; Schaly Dep. at 78-79 (explaining certain line items of SSC income statements), 99-100 (explaining SSC's services to Parks Department). These revenues were used not only to pay certain expenses incurred by the drop-in center, but also to pay the salaries of some of defendants' officers. See Schaly Dep. at 83-35; Grunberg Dep. at 132-34; PE 47 (Transcript of the Minutes of the Committee on General Welfare of the New York City Council ("City Council Transcript")) at 130-31 (testimony of SSC Executive Director Jeffrey Grunberg). Daniel Biederman, President of the GCP and 34th SP, is paid $ 335,000 per year for heading the GCP, 34th SP, and one other BID, the Bryant Park Restoration Corporation. See Biederman Dep. at 209. Jeffrey Grunberg, Executive Director of the SSC and 34th SP's Vice President of Social Services, is paid over $ 127,000 per year. See Grunberg Dep. at 188-89. In addition, the PTE Program permitted the GCP and 34th SP to meet their designated business objectives of keeping the midtown Manhattan area safe and clear of homeless persons. See Biederman Dep. at 57-59, 74; PE 35 (letter of Jeffrey Grunberg).
A. Operation of the Work Program
51. Most clients discovered the PTE Program soon after arriving at the drop-in center. See Hart Aff. PP 19-24, Springer Aff. P 8; Moore Aff. P 10.
52. The intake interview with new clients usually lasted only a few minutes. See Hart Aff. P 28; Del Valle Aff. P 10. Among other things, clients were asked about any specific services they wished to obtain from agencies outside the SSC. No meaningful assessment of the client's employment history or job training needs was made during the intake interview. See Hart Aff. P 28; Brown Aff. P 33 ("I asked the contact whether they needed any services. No assessment of the client's employment history or job training needs was made during the intake interview.")
53. Within a few days of the initial intake interview, clients were expected to have a second interview lasting no more than one hour. During the second interview clients typically were asked about their personal goals. Some clients were asked about their general work history, and whether they were interested in a training program or a job program. See Hart Aff. PP 26-29.
54. During the second interview, some clients also were asked what they sought from the SSC. Several plaintiffs responded that they were seeking a job. See Hart Aff. P 29; Brown Aff. P 6; Del Valle Aff. P 11; Springer Aff. P 8.
55. Some plaintiffs were not interviewed, but nevertheless learned about the Program through word of mouth. In or around November 1993, for example, plaintiff Lee Springer arrived at the SSC's center, where he was "hoping to find another job." Soon thereafter, Springer learned from others at the center that there were positions available in the SSC's kitchen. Springer, who already had substantial experience in cooking and general kitchen work, approached the SSC's kitchen supervisor, Ivan Anthony, and "told him that [he] was looking for a job." Anthony acknowledged that there were job openings in the SSC's kitchen, and stated that after 20 hours of unpaid service, Springer would receive a kitchen job that paid $ 50 per week. See Springer Aff. PP 8-9, 12.
57. By contrast, clients who were deemed mentally and physically fit for work and who expressed an interest in obtaining a job in the PTE Program were permitted to remain in the center and obtain a "blue card" identifying them as members of the center. See Hart Aff. P 20; Moore Aff. P 11. Clients who displayed initiative and an intention to "go back to work" were qualified to participate in the PTE Program. See Flynn Dep. at 122-23; Brown Aff. P 35.
58. In the PTE Program's early years, participants were asked to sign a document that described the Program as a twelve-week program divided into three phases, each lasting four weeks. According to the document, PTE participants were to work 40 hours each week during the first phase followed by phases that would involve some "training" component and seminars. See PE 20 ("Throughout the first phase, [the PTE participant] will be given a 40 hour work week. Throughout the second phase, [the PTE participant] will be given a 32 hour work week and 8 hours of required training. Throughout the third phase, [the PTE participant] will be given a 24 hour work week and 16 hours of required training; seminars; interviews; and interview feedback meetings.")
59. The SSC recorded the "date of hire" of PTE participant, and in some cases created a special list of hiring dates for PTE workers. See PE 72; Flynn Dep. at 181. Thereafter, a PTE participant was assigned to a specific work location within one of the departments. Each PTE participant was expected to work the next day on his or her assigned shift. In general, PTE participants were assigned to departments based on the needs of the SSC rather than the needs of the participant. See Brown Aff. PP 10, 56; Springer Aff. P 8; Archie Aff. P 13; Del Valle Aff. P 12.
60. PTE participants in all departments were assigned to work 8-hour shifts. Their regular workweek was five days per week, for a total of 40 hours. See Moore Aff. P 17; Brown Aff. P 13; Hart Aff. P 35; Springer Aff. P 10; Flynn Dep. at 77, 125-26.
61. In addition to registering their hiring dates, the SSC and the 34th SP attempted to record the total number of hours that PTE participants worked. According to plaintiffs' recollections and defendants' own calculations, several plaintiffs worked well over 700 hours -- and some for more than 1000 hours -- in the PTE program before leaving, being terminated or being promoted to a staff position. See Springer Aff. P 19 (1,500 hours); West Aff. P 1 (1,400 hours); Hart Aff. P 52; Del Valle Aff. P 31; see PE 33, 34 (defendants' calculations of the total number of hours worked by PTE participants as of June 1994).
62. At all relevant times, PTE participants who were unable to work on their assigned shifts were required to provide a bona fide excuse and to complete a PTE excused absence sheet. See Hart Aff. P 48; PE 5 (PTE excused absence sheet); PE 36 (memorandum describing "Administrative PTE Procedures"); PE 17 ("PTE enrollment contract").
63. As noted, the SSC generally compensated PTE participants at a rate ranging from $ 40 to $ 60 per week for a 40-hour work week, or $ 8 to $ 10 per eight-hour day. This amounts to approximately $ 1 to $ 1.50 per hour worked. PTE participants were paid no more than $ 1.50 per hour, however, for the work they performed in each of the PTE departments. See Mandelker Dep. at 192-94, 200.
64. PTE participants who worked fewer than 40 hours in one week had their pay reduced by a corresponding amount. See Moore Aff. P 20; Hart ...