18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 259 deductions from customer revenue violated the CMWA. The Second Circuit reasoned that even assuming that Plaintiffs were employees who received wages, the deducted fees were not wages under the statute because the franchise agreement expressly provided for the deductions and defined franchisees’ compensation as the funds remaining after the deductions were taken. Because the CMWA did not apply to the portion of gross franchise revenue that the parties agreed is not part of the franchisees’ compensation, the contract did not violate the CMWA and by extension did not violate public policy. As such, the Second Circuit concluded that it lacked the power to void the agreement and to make a new and different agreement between the parties as Plaintiffs urged. Additionally, the Second Circuit held that Defendant was properly granted summary judgment on Plaintiffs’ claim that Defendant’s collection of franchise fees unjustly enriched the franchisor in violation of Connecticut’s anti-kickback statute. The Second Circuit agreed with the District Court that the gravamen of the Plaintiffs’ unjust enrichment claim was that Defendant obtained something of value from Plaintiffs in exchange for something of no value. The Second Circuit disagreed with Plaintiffs’ theory and determined that because the franchise agreements were bona fide agreements under which Plaintiffs received a valuable franchise rights in exchange for their fees, the receipt of funds was not a violation of the anti-kickback statute. For these reasons, the Second Circuit affirmed the District Court’s orders dismissing the CMWA claim and granting summary judgment in favor of Defendant as to Plaintiff’s claim of unjust enrichment under the Connecticut anti-kickback statute. Schofield, et al. v. Gold Club Tampa, 2021 U.S. Dist. LEXIS 27234 (M.D. Fla. Feb. 12, 2021). Plaintiff, a former exotic dancer at Defendants’ restaurant and adult entertainment club, filed a collective action alleging that Defendants failed to minimum wages and overtime compensation, and unlawfully kept a portion of Plaintiffs’ tips in violation of the FLSA. Defendants previously had filed a motion to compel arbitration and stay the case, which the Court granted. However, after Defendants failed to pay their share of the arbitration fee, the Court vacated its prior order and lifted the stay of the case. Plaintiff subsequently filed a motion for partial summary judgment requesting that the Court find that she was misclassified as an independent contractor, and thus was an employee of Defendants. The Court granted Plaintiff’s motion. In addressing the issue of employee classification, the Court noted that it would consider several factors, including: “(i) the nature and degree of control over the alleged employee; (ii) the alleged employee’s opportunity for profit or loss; (iii) the alleged employee’s investment in equipment or materials; (iv) whether the service rendered required a special skill; (v) the degree of permanency and duration of the working relationship; and (vi) the extent to which the service rendered is an integral part of the alleged employer’s business.” Id. at *10-11. With respect to the element of control, Defendants asserted that Plaintiff controlled most parts of her work, including her schedule, costume, music, choreography, and whether she would pursue stage or private dances. Id. at *13. However, the Court concluded that Plaintiff did not control any meaningful aspects of Defendants’ business, as Defendants controlled the flow of customers into the club, tracked and handled the income generated by each dancer, and required dancers to sign in and out before and after their shifts. The Court also found that Defendants’ risk of profit and loss far exceeded that of the dancers, since Defendants’ argument “‘that dancers can hustle to increase their profits” . had been “almost universally rejected.” Id. at *21. Regarding the parties’ investments in equipment, the Court opined that while Plaintiff spent her own money on her outfits and accessories, this investment was minor compared to Defendants’ investment in the club. Additionally, the Court reasoned that dancers did not possess a special skill under the FLSA and that the dancers were an integral component of Defendants’ business. As the Court stated, “‘without exotic dancers,” the club would not be a :”strip club…” Id . at *22. Finally, though the factor of permanency and duration of employment weighed in Defendants’ favor, the Court held that this factor was accorded little weight in comparison to the other five factors. For these reasons, the Court granted Plaintiff’s motion for partial summary judgment. (xvii) Individual Executive Liability In FLSA Collective Actions Alvarado, et al. v. GC Dealer Services, 2021 U.S. Dist. LEXIS 3237 (E.D.N.Y. Jan. 6, 2021). Plaintiffs, a group of auto service workers, filed a class and collective action alleging that Defendants failed to pay overtime compensation and minimum wages in violation of the FLSA and the New York Labor Law. Plaintiffs moved for partial summary judgment on several issues, including that Defendant’s Chief Executive Officer, Jennifer Ayala and General Manager Jack Beckerman, were individually liable as "employers" under the FLSA. Id . at *51. First, Defendants did not specifically oppose, or otherwise address, Plaintiffs’ motion to the extent it sought summary judgment declaring that Beckerman was an "employer" within the meaning of the FLSA, and thus abandoned