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Kloppel v. Sears Holdings Corp.

United States District Court, W.D. New York

February 28, 2018





         In this putative class action, Plaintiffs Mike Kloppel and Wilson Adams allege that Defendants HomeDeliveryLink, Inc. (“HDL”), Sears Holdings Corporation, and Sears, Roebuck and Co. (together, “Sears”) misclassified them as independent contractors rather than employees and took illegal deductions from their pay while they performed delivery services for Defendants in New York State.

         Defendants move to dismiss Plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF. Nos. 12, 20. Additionally, Plaintiffs move to strike part of Defendant HDL's reply brief. For the reasons stated below, Sears' Motion to Dismiss is GRANTED in full and HomeDeliveryLink's Motion to Dismiss is DENIED in part and GRANTED in part. Plaintiffs' Motion to Strike is DENIED in full.


         Plaintiffs, along with other similarly situated individuals they seek to represent, delivered Sears merchandise to customers' homes throughout New York State. Plaintiffs contracted with Defendant HDL, a third party logistics provider, rather than directly with Defendant Sears. Plaintiffs allege that Defendant HDL treated them as independent contractors even though they were rightfully employees under New York law. They further allege that Defendant HDL unlawfully deducted “certain expenses directly from the compensation it [paid to Plaintiffs], including when HDL determine[d], in its sole discretion, that a delivery ha[d] been made in a manner it deem[ed] to be unsatisfactory (e.g., damaged goods, damage to customer property).” ECF No. 9 at 7. HDL “would also deduct other expenses from the compensation it pa[id] such as the cost of truck rental and fuel, ” and “the costs of workers' compensation insurance and general liability insurance from the compensation it paid to” Plaintiffs. Id. Finally, Plaintiffs allege that “Defendants failed to furnish Plaintiff[s] . . . with an accurate statement of wages listing hours worked, rates paid, gross wages, allowances, deductions taken, and net wages paid.” Id.


         I. Legal Standard

         Federal Rule of Civil Procedure 12(b)(6) provides that a party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In reviewing a motion to dismiss, a court “must accept as true all of the factual allegations contained in the complaint, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 572 (2007), and “draw all reasonable inferences in Plaintiff's favor.” Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The application of this standard is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.

         II. Defendant HDL's Motion to Dismiss

         A. The Fair Play Act

         Plaintiffs argue that under the New York State Commercial Goods Transportation Industry Fair Play Act (“Fair Play Act”), N.Y. Lab. Law § 862-b, they were rightfully employees and not, as Defendant HDL labeled them, independent contractors. HDL's wage deductions and failure to provide wage statements therefore violated several New York labor laws.

         The Fair Play Act, which became effective in New York on April 10, 2014, requires an employer to classify “[a]ny person performing commercial goods transportation services for a commercial goods transportation contractor . . . as an employee, ” and not as an independent contractor. N.Y. Lab. Law § 862-b(1). There is an exception to this presumption if the employer demonstrates that the worker: 1) is free from control and direction over the performance of his work; 2) performs work that is outside the usual course of business or is outside all of the employer's places of business, unless the employer contracts with third parties to place employees; and 3) is in an independently established trade, occupation, profession, or business. N.Y. Lab. Law § 862-b(1)(a-c). If the employer can demonstrate that a worker satisfies all three conditions, it may treat him as an independent contractor instead of as an employee. Consequently, the worker will not enjoy N.Y. Lab. Law §§ 198-b and 193's protections from wage deductions because those laws only apply to employees. For the same reason, the worker is not entitled to a wage statement under N.Y. Lab. Law § 195.

         Even if an employer cannot satisfy the above three-prong test, the Fair Play Act provides an additional test through which an employer may establish that a worker is an independent contractor: the “separate business entity” test. N.Y. Lab. Law § 862-b(2)(a-k). If the employer can establish that the worker meets all eleven factors of the separate business entity test, including that the worker or “business entity” owns or leases the “capital goods and gains the profits and bears the losses of the business entity” and “has the right to perform similar services for others on whatever basis and whenever it chooses, ” the employer may deem the business entity an independent contractor. Id. Again, N.Y. Lab. Law §§ 198-b, 193, and 195 would not protect the business entity.

         B. Preemption

         Defendant HDL argues that the Federal Aviation Administration Authorization Act (“FAAAA”) expressly preempts the Fair Play Act. Plaintiffs argue in response that the FAAAA's preemption clause does not cover the Fair Play Act.

         A defendant must plead and prove the affirmative defense of federal preemption. See Met. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (“Federal pre-emption is ordinarily a federal defense to the plaintiff's suit.”). The court may resolve the issue of preemption on a motion to dismiss if the facts necessary to determine the issue clearly appear on the face of the complaint. Fed.R.Civ.P. 12(b)(6). The defendant need not present empirical evidence for the court to find preemption, but the defendant should demonstrate the real and logical effects of the state statute from which the court may find that the statute is preempted. Mass. Delivery Ass'n v. Coakley, 769 F.3d 11, 20 (1st Cir. 2014); Costello v. BeavEx, Inc., 810 F.3d 1045, 1055 (7th Cir. 2016).

         1. Background and ...

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