BOBBY IRIZARRY, RUBEN MORA, JOSELITO AROCHO, JOSEPH CREMA, ALFRED CROKER, FRANK DELEON, MARIO DIPRETA, WILLIAM HELWIG, ROBERT MISURACA, ROBERT PASTORINO, VICTOR PHELPS, DANIEL SALEGNA, GILBERTO SANTIAGO, Plaintiffs-Appellees,
JOHN CATSIMATIDIS, Defendant-Appellant. CARLOS TORRES, on behalf of himself and all others similarly situated, LEWIS CHEWNING, Plaintiffs-Counter-Defendants-Appellees, RAYMOND ALLEN, LLANOS BLAS, NABIL ELFIKY, MOHAMMED DABASH, CARLOS MARTINEZ, LUIS MORALES, STEVE GROSSMAN, FRANKLYN COLLADO, DAVID ADLER, DINO A. ZAINO, PATRICK LABELLA, ROBERT MASTRONICOLA, ANTHONY BROOKS, VICTOR BENNETT, CANDIDO MOREL, JOSE MARTINEZ, WAYNE HENDRICKS, HAROLD HORN, TROY MILLER, OUSMANE DIATTA, ELLIOT STONE, TINA RODRIGUEZ, GABRIEL KARAMANIAN, BRIAN HOMOLA, ANNA GARRETT, NELSON BETANCOURT, JOSE DELACRUZ, YURI LAMARCHE, MICHAEL GROSECLOSE, RODOLFO DELEMOS, PIO MOREL, ABIGAIL CLAUDIO, MALICK DIOUF, DAVID OTTO, ALEJANDRO MORALES, VICTOR DIAZ, PAUL PETROSINO, EDUARDO GONZALEZ, JR., JOSE BONILLA-REYES, VINCENT PEREZ, MARTIN GONZALEZ, CALVIN ADAMS, WILLIAM FRITZ, KATHERINE HALPERN, CHRISTIAN TEJADA, EDWARD STOKES, PLINIO MEDINA, TOWANA STARKS, LAWSON HOPKINS, RUBEN M. ALEMAN, EUGENE RYBACKI, EARL CROSS, MANOLO HIRALDO, ROBERT HAIRSTON, Plaintiffs, GRISTEDE'S OPERATING CORP., GRISTEDE'S FOODS NY, INC., NAMDOR, INC., GRISTEDE'S FOODS, INC., CITY PRODUCE OPERATING CORP., Defendants-Counter-Claimants, GALLO BALSECA, JAMES MONOS, Defendants.
Argued: December 13, 2012
A class of current and former employees of Gristede's supermarkets sued several corporate and individual defendants for alleged violations of the Fair Labor Standards Act and the New York Labor Law. The United States District Court for the Southern District of New York (Crotty, J.) granted partial summary judgment for the plaintiffs, concluding that John Catsimatidis, the owner, president, and CEO of Gristede's, was the plaintiffs' "employer" under both laws. Catsimatidis appeals, and we.
JONATHAN D. HACKER (Walter Dellinger, Brianne J. Gorod, Joanna Nairn, on the brief), O'Melveny & Myers LLP, Washington, D.C. for Appellant.
DEEPAK GUPTA, Gupta Beck PLLC, Washington, D.C. (Gregory A. Beck, Jonathan E. Taylor, Gupta Beck PLLC, Washington, D.C.; Adam T. Klein, Justin M. Swartz, Molly A. Brooks, Outten & Golden LLP, New York, NY, on the brief) for Appellees.
RACHEL GOLDBERG, Attorney, Office of the Solicitor (M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, on the brief), for Amicus Curiae Secretary of Labor.
Tsedeye Gebreselassie, Catherine K. Ruckelshaus, National Employment Law Project, New York, NY, for Amicus Curiae Make The Road New York, Brandworkers International, Restaurant Opportunities Center New York, Chinese Staff and Workers Association, National Mobilization Against Sweatshops, National Employment Law Project, Legal Aid Society of New York, Urban Justice Center, Asian American Legal Defense and Education Fund.
Before: Wesley and Hall, Circuit Judges, Goldberg, Judge.[**]
Wesley, Circuit Judge.
After the failure of a settlement in a wage-and-hour case brought by a group of employees of Gristede's supermarkets, the plaintiff employees moved for partial summary judgment on the issue of whether John Catsimatidis, the chairman and CEO of Gristede's Foods, Inc., could be held personally liable for damages. The case turns on whether Catsimatidis is an "employer" under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 203(d), and the New York Labor Law ("NYLL"), N.Y. Lab. Law §§ 190(3), 651(6). The United States District Court for the Southern District of New York (Crotty, J.) granted partial summary judgment for the plaintiffs on the issue, establishing that Catsimatidis would be held jointly and severally liable for damages along with the corporate defendants. See Torres v. Gristede's Operating Corp., No. 04 Civ. 3316(PAC), 2011 WL 4571792 (S.D.N.Y. Sept. 9, 2011) ("Torres III"). Catsimatidis appeals. We affirm the district court's decision so far as it established that Catsimatidis was an "employer" under the FLSA; we vacate and remand the grant of partial summary judgment on plaintiffs' NYLL claims.
Catsimatidis is the chairman, president, and CEO of Gristede's Foods, Inc., which operates between 30 and 35 stores in the New York City metro area and has approximately 1700 employees. Although a series of mergers and acquisitions has complicated the question of which companies are responsible for the Gristede's business and supermarkets, the parties have not made corporate structure the focus of this case. They essentially agree that Catsimatidis is the owner and corporate head of all implicated companies, but they dispute the manner and degree of his control over the stores and employees.
In 2004, a group of then-current and former employees of Gristede's supermarkets sued several companies involved in operating the stores. The employees also sued three individual defendants: Catsimatidis, Gristede's District Manager James Monos, and Gristede's Vice President Gallo Balseca. The district court certified a class composed of "[a]ll persons employed by defendants as Department Managers or Co-Managers who were not paid proper overtime premium compensation for all hours that they worked in excess of forty in a workweek any time between April 30, 1998 and the date of final judgment in this matter (the 'class period')." Torres v. Gristede's Operating Corp., No. 04 Civ. 3316(PAC), 2006 WL 2819730, at *11 (S.D.N.Y. Sept. 29, 2006) ("Torres I") (quotation marks omitted). In this decision, the court noted that the parties disputed the duties of co-managers and department managers, though the scope of plaintiffs' duties are not at issue in this appeal.
After two-and-a-half years of litigation, the district court granted summary judgment for the plaintiffs on their FLSA and NYLL claims, which concerned reduction of hours, withholding of overtime, misclassification as exempt employees, and retaliation. See Torres v. Gristede's Operating Corp., 628 F.Supp.2d 447, 461-63, 475 (S.D.N.Y. 2008) ("Torres II"). The court held that plaintiffs were entitled to liquidated damages, the amount of which would be determined in future proceedings. Id. at 462 n.14, 465. Plaintiffs reserved the right to move separately for a determination that the individual defendants were individually liable as joint employers. Id. at 453 n.2.
Following the summary judgment order, the parties reached a settlement agreement, which the district court approved. The corporate defendants later defaulted on their payment obligations under the agreement. Defendants sought to modify the settlement, but the district court denied their request. Plaintiffs then moved for partial summary judgment on Catsimatidis's personal liability as an employer.
The district court granted the motion for reasons both stated on the record at the conclusion of oral argument on the motion, see Special App'x at 43-46, and memorialized in a written decision, see Torres III. The reasons included the fact that Catsimatidis "hired managerial employees, " "signed all paychecks to the class members, " had the "power to close or sell Gristede's stores, " and "routinely review[ed] financial reports, work[ed] at his office in Gristede's corporate office and generally preside[d] over the day to day operations of the company." Torres III, 2011 WL 4571792, at *2. According to the district court, "[f]or the purposes of applying the total circumstances test, it does not matter that Mr. Catsimatidis has delegated powers to others[; w]hat is critical is that Mr. Catsimatidis has those powers to delegate." Id. (citation omitted). The court concluded that "[t]here is no area of Gristede's which is not subject to [Catsimatidis's] control, whether [or not] he chooses to exercise it, " and that, therefore, Catsimatidis "had operational control and, as such,  may be held to be an employer." Id. at *3.
I. Definition of "employer" under the FLSA
The Supreme Court has recognized "that broad coverage [under the FLSA] is essential to accomplish the [statute's] goal of outlawing from interstate commerce goods produced under conditions that fall below minimum standards of decency." Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 296 (1985). Accordingly, the Court "has consistently construed the Act liberally to apply to the furthest reaches consistent with congressional direction." Id. (quotation marks omitted). "The common law agency test was found too restrictive to encompass the broader definition of the employment relationship contained in the [FLSA]." Frankel v. Bally, Inc., 987 F.2d 86, 89 (2d Cir. 1993). Instead, the statute "defines the verb 'employ' expansively to mean 'suffer or permit to work.'" Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (quoting 29 U.S.C. § 203(g)). Unfortunately, however, the statute's definition of "employer" relies on the very word it seeks to define: "'Employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The statute nowhere defines "employer" in the first instance.
The Supreme Court noted early on that the FLSA contains "no definition that solves problems as to the limits of the employer-employee relationship under the Act." Rutherford Food Corp. v. McComb, 331 U.S. 722, 728 (1947). The Court has also observed "that the 'striking breadth' of the FLSA's definition of 'employ' 'stretches the meaning of 'employee' to cover some parties who might not qualify as such under a strict application of traditional agency law principles' in order to effectuate the remedial purposes of the act.'" Barfield, 537 F.3d at 141 (quoting Darden, 503 U.S. at 326) (internal citation omitted).
"Accordingly, the Court has instructed that the determination of whether an employer-employee relationship exists for purposes of the FLSA should be grounded in 'economic reality rather than technical concepts.'" Id. (quoting Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33 (1961)). The "economic reality" test applies equally to whether workers are employees and to whether managers or owners are employers. See Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999).
"[T]he determination of the [employment] relationship does not depend on such isolated factors" as where work is done or how compensation is divided "but rather upon the circumstances of the whole activity." Rutherford, 331 U.S. at 730. Some early cases concerned managerial efforts to distance themselves from workers in an apparent effort to escape the FLSA's coverage. For example, in Goldberg, the Supreme Court considered whether a manufacturing cooperative was an "employer" of "homeworker" members who created knitted and embroidered goods in their homes and were paid by the month on a rate-per-dozen basis. 366 U.S. at 28-29. The Court concluded that this constituted an employer-employee relationship because management's authority made "the device of the cooperative too transparent to survive the statutory definition of 'employ' and the Regulations governing homework." Id. at 33. "In short, if the 'economic reality' rather than 'technical concepts' is to be the test of employment, these homeworkers are employees." Id. (internal citations omitted). Similarly, the Court noted in Rutherford that "[w]here the work done, in its essence, follows the usual path of an employee, putting on an 'independent contractor' label does not take the worker from the protection of the Act." 331 U.S. at 729.
The Second Circuit "has treated employment for FLSA purposes as a flexible concept to be determined on a case-by-case basis by review of the totality of the circumstances"; we have "identified different sets of relevant factors based on the factual challenges posed by particular cases." Barfield, 537 F.3d at 141-42.
In Carter v. Dutchess Community College, 735 F.2d 8 (2d Cir. 1984), we identified factors that are likely to be relevant to the question of whether a defendant is an "employer." In that case, prison inmates teaching classes in a program that was managed by a college claimed the college was their employer. The district court rejected this assertion because "the college had only qualified control over the inmate instructors; the Department of Correctional Services always maintained ultimate control." Barfield, 537 F.3d at 142 (describing Carter) (quotation marks omitted). This Court, however, concluded that the "ultimate control" rule "would not comport with the 'remedial' purpose of the FLSA, which Congress intended to 'have the widest possible impact in the national economy.'" Id. (quoting Carter, 735 F.2d at 12). Instead, we established four factors to determine the "economic reality" of an employment relationship: "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." Id. (quoting Carter, 735 F.2d at 12).
Barfield also discusses the factors this court has used "to distinguish between independent contractors and employees, " 537 F.3d at 143 (citing Brock v. Superior Care, Inc., 840 F.2d 1054, 1058-59 (2d Cir. 1988)), and "to assess whether an entity that lacked formal control nevertheless exercised functional control over a worker, " id. (citing Zheng v. Liberty Apparel Co., 355 F.3d 61, 72 (2d Cir. 2003)). None of the factors used in any of these cases, however, comprise a "rigid rule for the identification of an FLSA employer." Id. "To the contrary, . . . they provide 'a nonexclusive and overlapping set of factors' to ensure that the economic realities test mandated by the Supreme Court is sufficiently comprehensive and flexible to give proper effect to the broad language of the FLSA." Id. (quoting Zheng, 355 F.3d at 75-76).
a. Individual liability
None of the cases above dealt specifically with the question we confront here: whether an individual within a company that undisputedly employs a worker is personally liable for damages as that worker's "employer." The only case from our Circuit to confront the question squarely is RSR, 172 F.3d 132. RSR provided guards, pre-employment screening, and other security services. It was sued for FLSA violations with regard to its security guards. Its chairman of the board, Portnoy, was found by the district court after a bench trial to be an "employer" under the statute. We affirmed, in a decision that both applied the four-factor test from Carter and noted other factors bearing upon the "overarching concern [of] whether the alleged employer possessed the power to control the workers in question." Id. at 139.
As background, we noted that "[a]lthough Portnoy exercised broad authority over RSR operations . . ., he was not directly involved in the daily supervision of the security guards." Id. at 136. Nonetheless, because "he was the only principal who had bank credit, he exercised financial control over the company." Id. "Thus, he had authority over" the operations manager, who directly supervised the guards. Id. "Portnoy kept himself apprised of RSR operations by receiving periodic reports [including] work orders, memos, investigation reports, and invoices concerning the business operations, as well as weekly timesheets of [a manager's] duties." Id. at 137. He also "referred a few individuals to RSR as potential security guard employees, " "assigned guards to cover specific clients, sometimes set the rates clients were charged for those services, gave [a manager] instructions about guard operations, and forwarded complaints about guards to" a manager. Id.
Portnoy also "signed payroll checks on at least three occasions" and "established a payment system by which clients who wanted undercover operatives would pay" Portnoy's separate labor-relations firm. Id. Additionally, Portnoy "represented himself to outside parties as" being "the 'boss' of RSR" by "allowing his name to be used in sales literature, by representing to potential clients that he was a principal with control over company operations . .. and by giving [a manager] instructions with respect to  clients' security needs." Id.
We determined that at least three of the four Carter factors applied. First, Portnoy had hired employees, and although this "involved mainly managerial staff, the fact that he hired individuals who were in charge of the guards [was] a strong indication of control." Id. at 140. Second, Portnoy had, "on occasion, supervised and controlled employee work schedules and the conditions of employment." Id. Third, he had "participate[d] in the method of pay[ing]" the guards, even though he was not involved in determining their salaries, because he had previously "ordered a stop to the illegal pay practice of including security guards on 1099 forms as independent contractors, " and he "had the authority to sign paychecks throughout the relevant period." Id. Although there was no evidence that Portnoy had been involved in maintaining employment records, we confirmed that the fact that "this fourth factor is not met is not dispositive." Id. The "'economic reality' test encompasses the totality of circumstances, no one of which is exclusive." Id. at 139. In sum, we determined that ...