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LOPEZ v. SILVERMAN

July 23, 1998

JOSE LOPEZ, ARTURO FLORES, and RUFINA HERRERA VARGAS, Plaintiffs,
v.
BARRY SILVERMAN, individually d/b/a Renaissance Sportswear, Ltd.; RICHARD PAK; PETER PAK; TUK CHA PAK, individually d/b/a Woo Brothers, Inc.; and HAN BYUL, INC., Defendants.



The opinion of the court was delivered by: COTE

OPINION and ORDER

 DENISE COTE, District Judge:

 Before the Court are cross-motions for summary judgment in this action under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and New York Labor Law Section 650 et seq. The essential allegations of plaintiffs Jose Lopez ("Lopez"), Arturo Flores ("Flores"), and Rufina Herrera Vargas ("Vargas"), three garment pressers in New York City's garment district, are that the defendants were their employers, and that these employers failed to pay them overtime compensation at the rates required by the above-referenced statutes. Defendant Barry Silverman ("Silverman"), the only one of the defendants to participate in these motions, contends that neither he nor the company for which he is principal, Renaissance Sportswear, Ltd. ("Renaissance"), was the plaintiffs' employer, inasmuch as the plaintiffs were employed at all relevant times by the other defendants, three members of the Pak family and their family-owned garment-sewing businesses. For the reasons set forth below, the Court concludes that all of the defendants, for at least some portion of the relevant time period, acted effectively as the plaintiffs' employers within the meaning of the FLSA and New York Labor Law, and therefore were obligated to pay the overtime wages of at least two of the plaintiffs pursuant to those statutes. Accordingly, the Court grants in part and in part denies the motions for summary judgment by both the plaintiffs and Silverman.

 BACKGROUND

 A. Procedural History

 The plaintiffs commenced this action on December 10, 1996, alleging federal question jurisdiction on the basis of their claim under the FLSA. The defendants named in the Complaint are Silverman, individually and doing business as Renaissance, and the Paks -- Han Bae ("Richard") Pak, his wife Tuk Cha ("Lucy") Pak, and their son Peter Pak -- all of whom were sued in their individual capacities and doing business as Woo Brothers, Inc. ("Woo") and Han Byul, Inc. ("Han"), the two businesses they owned and controlled. Without benefit of counsel, the Paks answered the Complaint on behalf of themselves and purportedly on behalf of Woo and Han. Silverman, acting through counsel on behalf of himself and Renaissance, moved to dismiss the Complaint under Rules 4(a) and 12(b)(6), Fed. R. Civ. P., or for a more definite statement pursuant to Fed. R. Civ. P. 12(e). Silverman's motion was denied on April 11, 1997, after which he filed an answer.

 On January 8, 1998, following extensive discovery, the plaintiffs moved by Order to Show Cause for a default judgment against Woo and Han on the ground that these corporate defendants had failed to retain counsel to represent them, as they were of course obliged to do. See, e.g., Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991); In re Sharon B., 72 N.Y.2d 394, 530 N.E.2d 832, 534 N.Y.S.2d 124, 125 (N.Y. 1988). When neither Woo nor Han appeared by counsel at the hearing on that motion, the Court entered the requested judgment against both defendants, for liability purposes only, pursuant to an Order and a Default Judgment dated January 23, 1998.

 The plaintiffs and Silverman (on behalf of himself and Renaissance) thereafter filed the instant cross-motions, with the plaintiffs seeking summary judgment against Silverman, Renaissance, and the Paks individually; and Silverman (and Renaissance) seeking summary judgment against all of the plaintiffs. *fn1" The Paks, apparently representing themselves pro se, have failed to participate in any respect in the briefing of these motions, notwithstanding their participation in the preceding discovery. Plaintiff Flores, who now resides in Mexico, likewise has declined to participate in these motions, insofar as he has evidently taken no part whatever in formal discovery, whether by choice or otherwise. Silverman contends that Flores will not appear for trial; that defense counsel requested to take Flores's deposition but was unable to do so given Flores's absence from the country; and that grounds therefore exist for dismissal of Flores's claims pursuant to Rule 37(d), Fed. R. Civ. P. The plaintiffs counter that there is no support for the assertion that Flores will not appear for trial, and they insinuate that Silverman simply declined to accept any of the alternative formats that they proposed for carrying out Flores's deposition. Nevertheless, neither the plaintiffs' moving papers, nor their papers in opposition to summary judgment, contain any affidavits or other admissible evidence in support of Flores's claims, or on his behalf.

 B. Facts

 Although the parties purport to "deny" numerous of each others' assertions of undisputed facts, many of these denials are wholly unsupported by specific factual allegations or other competent evidence, and thus are ineffective as responses to a motion for summary judgment. See Rule 56(e), Fed. R. Civ. P.; Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525-26 (2d Cir. 1994). Consequently, with regard to at least some portions of the time periods at issue, the pertinent facts are either admitted or in this context undisputed. Summary judgment is therefore appropriate, because even when viewing the evidence in the light most favorable to the respective non-movant, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Celotex Corp v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986), the parties' submissions taken together "show that there is no genuine issue as to any material fact and that the moving party," in at least some instances, "is entitled to a judgment as a matter of law." Rule 56(c), Fed. R. Civ. P.

 Renaissance is a garment manufacturer, located on West 36th Street in New York City, that designs, produces, markets, and sells women's clothing for resale to the public via retail clothiers, department stores, and other outlets. Silverman is the founder, owner, president, and sole shareholder of Renaissance, most aspects of which he personally oversees and operates on a daily basis. Specifically, Silverman's involvement includes designing, sketching, and marketing some of the garments himself; making all business decisions; hiring, firing, and setting salaries for all employees; and negotiating with contractors. Prior to opening Renaissance in 1991, Silverman had approximately 20 years of experience in the garment industry.

 Generally speaking, Renaissance functions as a garment "jobber," designing and producing garments, and then contracting out subsequent phases of the assembly process -- such as cutting and sewing -- to other entities employing production workers who perform these tasks according to Renaissance's specifications. With respect to sewing, for example, Renaissance supplies its contractors with virtually all of the materials and instructions necessary to sew and assemble the finished garments (with the exception essentially of thread), including patterns, pre-cut fabric, cutting control sheets, detailed sewing instructions, and trimmings such as zippers, buttons, shoulder pads, registration labels, care tags, etc. Renaissance determines the turn-around times that the contractors are required to meet for individual production jobs, usually between three weeks and three months, based on the completion dates requested in the purchase orders that Renaissance receives from its retail customers. For example, Renaissance might deliver to its sewing contractor all of the production materials necessary for a given project anywhere from one month to a few days prior to the completion date. Finally, Renaissance, particularly through Silverman in his capacity as its president and sole shareholder, closely monitors the quality of the garments that it produces and sends out for assembly by, among other things, maintaining contact with the contractors through at least occasional on-site visits of their facilities by Renaissance production managers and/or Silverman.

 Woo and Han were two such contractors that performed sewing and pressing operations for Renaissance. The two companies were in essence successor corporations, both owned and run by the Pak family out of the same location on 8th Avenue in New York City. Woo commenced doing business some time in 1993, and remained in existence until approximately January 1996; Han was started in approximately February 1996, and closed some time in June of that year. Woo was owned and operated by Lucy and Peter Pak, who also evidently acted as its officers, with the assistance of Richard Pak. In establishing Woo, the Paks assumed the debt, factory space, and equipment of a prior contractor, to whom they also paid $ 1,000; purchased an additional ten sewing machines; and paid rent to the building landlord. The Paks hired, supervised, and prepared and managed the payroll for all of their production workers, who sewed and pressed garments for Renaissance and other manufacturers.

 Each of the plaintiffs worked as a garment presser for Woo, and then Han, from some point in 1994 until June 1996. The plaintiffs have presented evidence as to the hours they worked, their salaries, and the Paks' payment practices, all of which purports to show that Han and Woo regularly denied the plaintiffs proper compensation, under federal and state law, in consideration of the number of hours they worked. Specifically, the plaintiffs assert that Lopez is owed $ 3,281.40 in overtime payments, that Vargas is owed $ 3,416.40, and that Flores is owed $ 2,941.20. Silverman issues a naked denial as to these amounts, yet he adduces no facts or allegations to demonstrate their falsity or unreliability. Nevertheless, Silverman is correct that the information and calculation of amounts with respect to Flores is derived solely through an affidavit from one of the plaintiffs' attorneys, and not through any testimony or statements by Flores.

 From February 1995 to March 1996, Woo performed an average of approximately one-fifth of Renaissance's garment production work, with the remaining 80 percent ostensibly being performed by other contractors. The parties dispute the percentage of Woo's work that was comprised of projects for Renaissance; while Silverman asserts only five to 15 percent of Woo's work was for Renaissance, the plaintiffs argue that the figure at times approached 95 percent. Both sides are able to point to at least some evidence in the record in support of their claims.

 For any given job, Renaissance generally paid Woo (and later Han) by the piece. That is, Renaissance would determine, pursuant to certain criteria, the rate that it would pay for each garment produced according to its specifications. The standard fees ranged from $ 1.50 to $ 3.50 per garment, although the Paks apparently had some ability to negotiate for a slightly higher rate, approximately 25 cents per piece, for some more complex assignments. Woo and Han were paid only after successfully completing a job, i.e., following inspection of the completed garments by Renaissance personnel either at its facility or the Paks' shop, and payment was usually made weekly, for garments produced during that week. Peter Pak did testify, however, that perhaps on one occasion during Han's existence Renaissance paid the Paks a percentage of the fee due on a job "in advance prior to receiving the whole shipment," where Renaissance had been very late in delivering some component of the production, such as trimming, and the Paks were in danger of losing money and had to "make payroll." When a production was completed and inspected, the garments were either picked up by Renaissance or delivered to it, after which Renaissance sold the garments to its retail and other customers.

 Peter Pak left Woo in approximately October 1995 to begin work as a production manager for Renaissance. Lucy Pak continued to operate Woo until some time in January 1996, at which point the business closed. Three or four weeks later, Lucy Pak opened Han in the same location and using the same machinery as Woo, and employing at least some (if not all) of the same workers. Peter Pak had no official relationship with Han; he was not an officer of the company, and his mother, Lucy, was its sole owner. While the plaintiffs allege that Woo began performing an increasing percentage of Renaissance's work from the time that Peter Pak left for the Renaissance production manager job, it is undisputed in any event that Han performed an average of 75 percent of Renaissance's work, *fn2" and that such work comprised at least 80 percent -- and perhaps approaching 95 to 100 percent -- of Han's total business. *fn3" Indeed, given these circumstances, Richard Pak testified that when Renaissance gave Han fewer work orders, Han would tell its workers to stay home until it had work for them to do.

 During the roughly five months of Han's existence, Peter Pak, as Renaissance production manager, maintained very close and frequent contact with his mother's company, directly checking the quality of Han's work so as to ensure that it met Renaissance's specifications, and directly communicating with Han's workers and his mother, Han's principal, about problems and performance. For example, whereas a prior Renaissance production manager, Raoul Martinez, visited Woo to check the specifications of garments approximately twice a week, for up to two hours at a time, Peter Pak, after assuming the production manager job, made such quality assurance visits to Han on an "almost daily basis," and at minimum "no less than three days" per week, for up to "three hours, depending on the necessity."

 It is conceded for purposes of this motion that Peter Pak and/or Martinez, on at least one occasion, did personally and specifically instruct Han workers and the Paks on how garments were to be sewn and pressed. Similarly, Silverman admits that on at least one occasion he personally inspected garments at Woo and/or Han and showed an employee how to press a garment. Moreover, in his capacity as the company's president and shareholder, Silverman also generally monitored the quality of the garments produced by contractors for Renaissance. For example, he met daily with his production managers to discuss the status of projects, as well as the production manager's responsibility for conducting on-site checks of contractors' work. In addition, either Silverman or his production manager communicated directly with contractors such as Woo and Han, through verbal or written instructions, when garments had not been produced according to Renaissance's specifications, and adjustments were required. In these circumstances, when corrections had to be made or garments were "a little sloppy," the testimony shows that Renaissance still did not reduce its scheduled payments to the Paks.

 Nevertheless, it is undisputed that neither Silverman nor any other Renaissance employee exercised direct control over the wages or hours of the Paks' workers, including the plaintiffs, or the funding and management of Woo or Han. Specifically, Silverman and/or Renaissance did not directly: hire or fire the Paks' employees; determine those employees' hours, set their rates of pay, or manage the payroll of Woo or Han; assist Woo or Han with the rental or purchase of equipment, or the rent for their factory space; or invest any funds in Woo or Han.

 In keeping with the foregoing, Peter Pak, as Renaissance production manager, also took no part in hiring or firing workers at Han and never helped his mother "with supervising" them. Rather, he states that on his visits to Han he "just was there to look out for the interests of Renaissance," as "an agent of Renaissance." Peter Pak did serve, however, as the "go-between" in negotiating contract prices between Renaissance and Han, i.e., between Silverman, who would set the price, and Pak's mother Lucy, who as noted had some limited ability to negotiate a small increase. In addition, Peter Pak on at least one occasion inspected Han's payroll records "to make sure in the interests of Renaissance that all the wages were being paid on time and properly."

 As a Renaissance representative, Peter Pak specifically retained the right to conduct such payroll inspections, at least after May 1996, pursuant to an agreement between Renaissance and Han. That agreement followed an investigation of Han by the United States Department of Labor ("DOL"), in May 1996, for failure to pay overtime. As a result of the investigation, the Paks entered into a settlement agreement with DOL on behalf of Han, whereby they agreed to pay 13 weeks of overtime for the period from December 10, 1995, to March 9, 1996. Also in response to the investigation, Silverman commissioned the drafting of a contract that he required all of his garment contractors to sign as a condition of doing business with Renaissance. The contract provided that, in light of Renaissance's intent to comply with the FLSA and DOL regulations, the contractor agreed, inter alia, to comply with all FLSA wage and hour provisions; to keep payroll records and supply them to Renaissance upon request; and to permit Renaissance to monitor the contractor's compliance with the FLSA through quarterly spot checks, unannounced inspections, employee interviews, and the like. Finally, the contract provided that Renaissance would be reimbursed for any back wages that it paid on the contractors' behalf, and that Renaissance could terminate the garment contract at issue without recourse if the contractor failed to comply with any of its provisions.

 It is accepted for purposes of this motion that the Paks breached their agreement with DOL. Whether due to Han's troubles with DOL or a decrease in the quality of Han's work, Renaissance stopped contracting out production jobs to Han in June 1996, and Han ceased operations soon thereafter. All three of the Paks testified in essence that the loss of Renaissance's business forced Han to close. When that occurred, Han was evicted from its factory space and its equipment was sold to pay off its outstanding rent.

 DISCUSSION

 Given that it is undisputed, for purposes of this motion, that at least plaintiffs Lopez and Vargas were denied proper overtime compensation during the period in which they worked at Woo and Han, the only issue for the Court at present is whether the defendants -- or more precisely, which of them, and for what periods of time -- were the plaintiffs' employers within the meaning of the FLSA and New York Labor Law, and therefore responsible for paying those outstanding overtime wages. *fn4" These inquiries necessitate a close examination of the pertinent statutes, the implementing regulations, and the cases interpreting both.

 A. Statutory Framework

 The FLSA defines "employee," with certain exceptions not relevant here, as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). The statute in turn provides that "employ" "includes to suffer or permit to work," id. § 203(g), and that "employer," in relevant part, "includes any person acting directly or indirectly in the interest of an employer," id. § 203(d). See also Danneskjold v. Hausrath, 82 F.3d 37, 40 (2d Cir. 1996); Brock v. Superior Care, Inc., 840 F.2d 1054, 1058 (2d Cir. 1988). In reviewing these sections, the Second Circuit has remarked upon "the expansive nature of the FLSA's definitional scope." Frankel v. Bally, Inc., 987 F.2d 86, 89 (2d Cir. 1993). See also Superior Care, 840 F.2d at 1058 ("The definition is necessarily a broad one in accordance with the remedial purpose of the Act."). Indeed, the Supreme Court has noted that the FLSA "defines the verb 'employ' expansively," with "striking breadth," and in such a way as to "stretch[] the meaning of 'employee' to cover some parties who might not qualify as such under a strict application of traditional agency law principles." Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 117 L. Ed. 2d 581, 112 S. Ct. 1344 (1992). See also Rutherford Food Corp. v. McComb, 331 U.S. 722, 728, 91 L. Ed. 1772, 67 S. Ct. 1473 (1947); United States v. Rosenwasser, 323 U.S. 360, 363 n.3, 89 L. Ed. 301, 65 S. Ct. 295 (1945) (noting that FLSA's definition of employee has been called the "'broadest definition that has ever been included in any one act'") (quoting 81 Cong. Rec. 7,657 (1938) (statement of Sen. Black)); Frankel, 987 F.2d at 89.

 In addition, DOL regulations promulgated under the FLSA recognize that an employee may have more than one employer under the statute's broad definitions:

 
A single individual may stand in the relation of an employee to two or more employers at the same time under the [FLSA], since there is nothing in the act which prevents an individual employed by one employer from also entering into an employment relationship with a different employer. . . .

 29 C.F.R. § 791.2(a). See also, e.g., Torres-Lopez v. May, 111 F.3d 633, 638 (9th Cir. 1997). This circumstance, known as "joint employment," arises where "the facts establish that the employee is employed jointly by two or more employers, i.e., that employment by one employer is not completely disassociated from employment by the other employer(s)." 29 C.F.R. § 791.2(a). In such situations,

 
all of the employee's work for all of the joint employers during the workweek is considered as one employment for purposes of the [FLSA] . . . [and] all joint employers are responsible, both individually and jointly, for compliance with all of the applicable provisions of the [FLSA], including the overtime provisions . . . .

 Id. Finally, the regulations provide examples demonstrating when "a joint employment relationship generally will be considered to exist," which includes circumstances where the employee "performs work which simultaneously benefits two or more employers," and:

 
(1) . . . there is an arrangement between the employers to share the employee's services . . . ; or (2) . . . one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or (3) . . . the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

 Id. § 791.2(b) (footnotes omitted). *fn5" As with the underlying statutory definitions from which it derives, courts recognize that "the concept of joint employment should be defined ...


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