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Benavides v. Serenity SPA NY Inc.

United States District Court, S.D. New York

September 1, 2017

GLORIA BENAVIDES, and FANNY YIN-FANG LIN on behalf of themselves, FLSA Collective Plaintiffs and the Class, Plaintiffs,
SERENITY SPA NY INC., et ano., Defendants.



         Plaintiffs Gloria Benavides and Fanny Yin-Fang Lin bring this putative class action against defendants Serenity Spa NY Inc. and Yu Qun Dai (together, "Defendants") alleging violations of the Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL"). Plaintiffs move for class certification as to their NYLL claims and for summary judgment as to their FLSA and NYLL claims. Defendants oppose both motions. For the reasons set forth below, Plaintiffs' motion for class certification is granted, but their motion for summary judgment is denied without prejudice.

         I. BACKGROUND

         A. Procedural History

         On November 20, 2015, Benavides commenced this action against Defendants, on behalf of herself and other similarly situated employees. Complaint, dated Nov. 20, 2015, Dkt, No. 1. The parties consented to my jurisdiction on February 18, 2016. Reference Order, dated Feb. 18, 2016, Dkt. No. 17. Benavides then filed an Amended Complaint on May 11, 2016. First Amended Complaint, dated May 11, 2016 ("Am. Compl."), Dkt. No. 35.[1]

         In her Amended Complaint, Benavides alleged that Defendants had been knowingly and willfully operating their business according to policies that violate the FLSA and NYLL. Id. ¶¶ 35-39. Specifically, she contended that Defendants failed to compensate employees consistent with the minimum wage and overtime provisions of the FLSA and NYLL. Id. ¶¶ 45-46, 55-56. She further alleged that Defendants violated NYLL's spread-of-hours provisions, failed to provide employees wage-and-hour notices as required by NYLL § 195(1), and failed to provide proper wage statements as required by NYLL § 195(3). Id. ¶¶ 57-59. Additionally, Benavides claimed that she had been subject to a racially hostile work environment in violation of New York State and City Human Rights Laws, as Hispanic employees were spoken to "harshly" and expected to "do the dirty or rough work" that Chinese employees were not required to do. Id. ¶¶ 28, 62, 67.[2] Defendants answered the Amended Complaint on May 25, 2016. Answer, dated May 25, 2016, Dkt. No. 40.

         Benavides subsequently moved for conditional collective certification on May 31, 2016, Motion to Certify Class, dated May 31, 2016, Dkt. No. 41, which Defendants opposed. Defendants' Memorandum of Law in Opposition to Plaintiffs Motion for Conditional Class Certification, dated June 14, 2016, Dkt. No. 45. The Court granted the motion in part and denied it in part. Benavides u. Serenity Spa NY Inc., 166 F.Supp.3d 474, 477 (S.D.N.Y. 2016). Specifically, the Court conditionally certified the collective action, and authorized notice and consent forms to be issued to all non-exempt employees who worked at Serenity Spa NY within three years of the date of the complaint. Id. at 483, 485. The Court also permitted Benavides to revise the proposed notice so that it could be sent to all non-exempt employees who worked at Serenity Spa NY within six years of the date of the complaint. Id. at 485-86. Although the Court did not approve her first revised notice and consent form, Order, dated Aug. 16, 2016, Dkt. No. 62, on August 19, 2016, the Court approved Benavides' second revised notice and consent form. Order, dated Aug. 19, 2016, Dkt. No. 65.

         On August 31, 2016, Benavides moved for class certification under Rule 23 for the NYLL claims. Motion for Class Certification, dated Aug. 31, 2016, Dkt. No. 71. On the same day, she moved for summary judgment as to the FLSA and NYLL claims. Motion for Summary Judgment, dated Aug. 31, 2016, Dkt. No. 75. Prior to Defendants filing a response to these motions, Benavides also moved to compel Defendants to produce the social security numbers of potential opt-in plaintiffs, because Defendants had failed to produce mailing addresses for 36 of the 52 potential plaintiffs. Letter Motion, dated Sept. 26, 2016 ("Pl. Mot."), Dkt. No. 79. Defendants consented to the production the social security numbers, Letter Motion, dated Sept. 27, 2016, Dkt. No. 80, and the Court directed Defendants to produce the information no later than October 5, 2016. Order, dated Sept. 28, 2016 ("Sept. Order"), Dkt. No. 81.

         On October 7, 2016, Defendants filed their opposition to Benavides' motions. Defendants' Memorandum of Law in Opposition to Plaintiffs Motion for Class Certification and Summary Judgment, dated Oct. 7, 2016 ("Opp. Mem."), Dkt. No. 87. Defendants argue that Benavides cannot meet all the requirements under Rule 23 to certify a class action, and that there are genuine disputes of material fact precluding summary judgment. Id. at 2. As part of their opposition papers, Defendants attached, inter alia, five declarations from current Serenity Spa NY employees. Opp. Mem. Exs. I-M (together "Empl. Decs.").

         Benavides replied to Defendants' opposition on October 31, 2016, and, in addition to addressing Defendants' arguments opposing the motion, objected to the use of declarations from current Serenity Spa NY employees. Reply Memorandum of Law in Support of Plaintiffs Motion for Class Certification and Summary Judgment, dated Oct. 31, 2016 ("Reply"), Dkt. No. 92, at 1-4. Additionally, on November 2, 2016, Benavides wrote to the Court to request that the employee declarations be stricken from the record, or disregarded until the employees had been deposed. Letter, dated Nov. 2, 2016 ("Pl. Nov. Letter"), Dkt. No. 93. In their own letter to the Court, Defendants objected to the request and provided additional arguments as to why the declarations should be accepted. Letter, dated Nov. 8, 2016 ("Def. Nov. Letter"), Dkt. No. 94.

         Finally, on November 28, 2016, Benavides filed Fanny Yin-Fang Lin's consent to become a party plaintiff, Consent, dated Nov. 8, 2016 ("Consent"), Dkt. No. 95, accompanied by a declaration from Lin in support of the motion for class certification and summary judgment. Declaration of Fanny Yin-Fang Lin, dated Nov. 23, 2016 ("Lin Decl."), Dkt. No. 96. On December 5, 2016, Defendants wrote to request that the Court disregard Lin's declaration, as it had been filed after the briefing schedule for the motions had expired. Letter, dated Dec. 5, 2016, Dkt. No. 97.[3]

         B. Factual Background

         1. Statement of Facts

         Serenity Spa NY is a spa located at 1397 Third Avenue in Manhattan, and is operated by individual defendant Yu Qun Dai through corporate defendant Serenity Spa NY, Inc. Am. Compl. ¶ 7. Serenity Spa NY, Inc. is incorporated under the laws of New York, and Dai has been its sole shareholder and senior executive at all relevant times. Id. ¶¶ 7-8; Defendants' Rule 56.1 Counter-statement, dated Oct. 7, 2016 ("Def. R. 56.1"), Dkt. No. 89, ¶ 2. In that role, she was at the spa every day. Am. Compl. ¶ 8; Def. R. 56.1 ¶ 10.

         It is undisputed that Dai exercised control over the employment terms and conditions of Serenity Spa NY employees. More specifically, Dai had the power to hire and fire Serenity Spa NY employees, and to set their work schedules. Id. She maintained employment records and set the payroll policies (though Defendants note that she relied on her accounting company's professional advice). Def. R. 56.1 ¶¶ 7-8. Additionally, although Plaintiffs contend that Dai also had the authority to determine the employees' compensation, Defendants clarify that she was able to determine their hourly rate of pay and the percentage of the commission that they would receive for each beauty service, but not the total amount of commission. Id. ¶ 6.

         Benavides was employed at Serenity Spa NY during two distinct periods of employment, though the precise dates are unclear. Am. Compl. ¶ 23. The first period began at some point between November and January 2012, and ended in January 2013. Def. R. 56.1 ¶ 12. The second period began in either August or September 2014, and ended in or about August 2015. Id. ¶ 13. The parties agree that while Benavides was employed at Serenity Spa NY she worked as a nail technician (a.k.a. manicurist), Am. Compl. ¶ 23, but disagree as to whether she was employed as a massage therapist and waxer as well, as Defendants maintain that she could "also perform other type[s] of beauty services such as massage and waxing, " but was only employed as a nail technician. Def. R. 56.1 ¶ 11.

         There is no dispute that Benavides' work schedule lasted approximately 10 hours each day. Def. R. 56.1 ¶¶ 14, 16. However, Defendants contend that Benevides was regularly given a meal break about 40 to 45 minutes each day and was also free to take as many snack breaks as she wanted and for as long as she wanted. Id. Thus, Defendants contend that because she was given as many snack breaks as she wanted, as well as a meal break, Benevides' total break time amounted to about two hours each day, resulting in an eight-hour work day and no overtime. Id. ¶¶ 14-16.

         Benavides was paid in cash with no wage statements. Am. Compl. ¶ 26. At least five Serenity Spa NY employees were paid "off the books" (meaning "in cash without any wage statements"), and though some were paid "on the books, " Defendants implemented the same policies for "on the books" and "off the books" employees, including paying all non-exempt employees on an hourly basis. Def. R. 56.1 ¶¶ 20-22. What that hourly rate of pay was, however, is in dispute. Benavides states that all hourly employees were paid $5.45 to $5.65 per hour for 2009 to 2013; $5.65 in 2014; and $5.65 to $7.50 in 2015. Id. ¶¶ 23-25. Defendants dispute these numbers, and point to a selection of payroll reports showing that employees were paid at rates ranging from $5.65 per hour to $12.50 per hour at various times between 2014 and 2015. Id. (citing Opp. Mem. Exs. D-F).

         There is also disagreement about Benavides' rate of pay during her 2012-13 term of employment. Benavides contends that she was paid at a rate of $7.00 per hour, while Defendants argue that she was paid $7.50 per hour. Id. ¶ 17. The parties agree that she was paid $7.50 per hour when she worked at the spa from 2014 to 2015. Id. ¶ 18.

         Defendants maintain that it was customary at the outset of employment to provide oral notice to their employees that Defendants would be taking a tip credit and that the employees could therefore keep all of their tips. Id. ¶¶ 28, 34. However, Benavides alleges that she and other employees never received notice that Defendants would take a tip credit, that the employees were entitled to retain all their tips, or that the tip credit taken by Defendants could not exceed the value of the tips the employees actually received. Am. Compl. ¶ 30. Nonetheless, the parties agree that, prior to August 2015, Defendants did not provide any written wage-and-hour notices to their employees, including Benavides. Def. R. 56.1 ¶¶ 29-31. The written wage-and-hour notices that Defendants have provided for employees since August 2015 state that "Yun Qun Dai" and "Serenity Spa NY" are the employers, and do not specify the exact amount of tip credit allowance claimed as part of the employees' hourly pay rate. Id. ¶¶ 32-33. The notices either leave the amount of the tip credit blank, state "N/A, " state an incorrect amount, or provide a range of numbers that are incorrect. Id. ¶ 33.

         For those employees who did receive wage statements, they were issued under the name "Serenity Spa NY, Inc., " though the statements did not state the phone number for Defendants, or the amount of tip credit allowance that was claimed for the relevant time period. Id. ¶¶ 35, 37-38. The parties disagree as to whether the wage statements accurately reflect the actual hours worked by employees, as Plaintiffs contend that the numbers are rounded to the nearest whole number, while Defendants argue that the numbers are accurate, and if there is deviation due to rounding, it is in the employees' favor by rounding the hours up. Id. ¶ 36.

         Plaintiffs argue that Defendants did not keep any record of the amount of tip credit allowance they claimed for each employee in any given pay period. Id. ¶ 40. However, Defendants counter that the amount of tip credit they took can be deduced by calculating the difference between the prevailing minimum wage and the lower rate that employees were paid. Id.[4] Plaintiffs allege that all non-exempt employees were paid the regular hourly rate for hours worked more than 40 hours in the week, instead of receiving time and one-half for overtime pay. Id. ¶ 41. Defendants do not directly dispute this assertion, but argue that "almost all" employees did not work overtime, so the time and one-half rate of pay did not apply. Id.

         Finally, Defendants acknowledge that they did not consult an attorney regarding compliance with wage-and-hour regulations until August 2015, id. ¶ 42, and did not use a punch clock system to record the employees' hours. Id. ¶ 43.

         2. Declarations Submitted by Defendants

         In their response to Plaintiffs' motions, Defendants included declarations from five current Serenity Spa NY employees: Adriana Polo, Rosa Naula, Li Wei Li, Qi Hong Xia, and Yin Ming Mei. With slight variations in substance and wording, the declarations all state that the employees did not work overtime, were free to take breaks and did so throughout the day, and to the extent they overlapped with Benavides, they did not see her taking overtime. Id. Each employee states that there was a poster in Serenity Spa NY that informed them of the basics of minimum wage law and overtime, and, with minimal variation, that Dai "told me that I can keep all my tips and explained to me some details about why my hourly compensation will be lower than the normal minimum wage." See, e.g., Opp. Mem. Ex. I, ¶¶ 12-13. Further, they maintain that they in fact kept their tips, in addition to receiving daily commission. Id. ¶ 11.


         A. The Court Declines to Consider the Declarations from the Five Current Employees

         Plaintiffs object to Defendants' reliance on the five employee declarations, and argue that they should be stricken from the record, or at least disregarded until Plaintiffs can depose the declarants. Reply at 1. Plaintiffs contend that the statements are of '"limited evidentiary value'" because it is not evident that the employees knew that their testimony could adversely affect their recovery or that they had a right to seek independent counsel, as Defendants' counsel did not represent them. Id. (quoting Amador v. Morgan Stanley & Co. LLC, No. 11-CV-4326 (RJS), 2013 WL 494020, at *8 (S.D.N.Y. Feb. 7, 2013)). Plaintiffs also point to the lack of Spanish translations for allegedly Spanish-speaking employees. Id. at 3.

         Defendants respond that, although such declarations may be rejected in the context of a motion for conditional certification of a collective action, that is so because a plaintiff is only required to meet a "very modest showing, " which does not apply in the context of class certification or summary judgment, where there are no requirements that a plaintiff have the opportunity to depose the declarants. Def. Nov. Letter at 2-3.[5] Additionally, Defendants maintain that the employees would have been informed of their rights through the court-approved notice that was sent out after Plaintiffs' collective action motion was granted. Id. at 2.

         The Court declines to consider these declarations for three reasons: (1) Defendants have not demonstrated that the employees were on notice of their rights; (2) the weight of authority is against the use of the declarations; and (3) their content is of negligible evidentiary value. First, on September 26, 2016, Plaintiffs moved to compel Defendants to produce the social security numbers for some of the potential opt-in plaintiffs because Defendants had not provided their addresses, and wrote that, "[a]s a result, we have not been able to mail the court- approved notice of this action to potential plaintiffs." Pl. Mot. at 1. The Court ordered Defendants to produce the information to Plaintiffs by October 5, 2016. Sept. Order. Thus, from the plain language of Plaintiffs' letter-motion, none of the notices had been sent out at the end of September, making it extremely unlikely that the employee declarants had received any notice of their rights in advance of making the declarations on October 7, 2016. See Empl. Decs, (all dated October 7, 2016). Defendants' speculation about when Plaintiffs' counsel would have sent out the notices is thus unavailing in light of the time frame in which the notices were mailed. Additionally, the simplest way for Defendants to have demonstrated that the employee declarants were aware of their rights would have been for the employees to attest as much in their declarations-or even to state that they had received the court-approved notice. But the employees did not do so, and Defendants cannot now benefit from an assumption that the employees were aware of their rights, and understood how their statements could adversely impact them.

         Second, by analogy, declarations submitted by employers of current employees are regularly disregarded in the context of conditional certification of a collective action, both because of the chance for coercion by the employer, but also because the evidentiary burden is relatively low. See Amador, 2013 WL 494020, at *8 ("statements gathered by an employer from its current employees are of limited evidentiary value in the FLSA context because of the potential for coercion"); Ravenell v. Avis Budget Car Rental, LLC, No. 08-CV-2113 (SLT) (ALC), 2010 WL 2921508, at *5 (E.D.N.Y. July 19, 2010) ("the employee declarations submitted by [defendant] 'should be discounted at this stage' because Plaintiffs have not yet been able to depose the employees who signed them") (quoting Francis v. A & E Stores,Inc., No. 06-CV-1638, 2008 WL 4619858, at *3 (S.D.N.Y. Oct. 16, 2008)); Damassiav. Duane Reade, Inc., No. 04-CV-8819 (GEL), 2006 WL 2853971, at *7 (S.D.N.Y. Oct. 5, 2006) ("Given that the Court must be 'lenient' in deciding whether plaintiff has met its 'minimal' burden at this ...

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