Acosta v. Jani-King of Okla., Inc.
Opinion
This appeal arises out of the district court's dismissal with prejudice of the Secretary of Labor's complaint against Jani-King *1158 of Oklahoma, Inc. For the reasons below, we reverse.
Jani-King is a janitorial company providing cleaning services in the Oklahoma City area. The company engages individuals, pairs of related individuals, or small corporate entities which are allegedly composed predominantly or entirely of single individuals or pairs of related individuals to perform janitorial work on its behalf through franchise arrangements. Jani-King recently began requiring individuals and pairs of related individuals-both those already affiliated with Jani-King and those who are new-to form corporate entities, which then become the named parties to the franchise.
Following an investigation into Jani-King's employment practices, the Secretary of Labor filed a complaint against Jani-King, alleging violations of the Fair Labor Standards Act and seeking an injunction to require Jani-King to keep the requisite FLSA employee records. Specifically, the Secretary asserted that individuals who form corporate entities and enter franchise agreements as required by Jani-King "nonetheless personally perform the janitorial work on behalf of Jani-King" and, based on the economic realities of this relationship, are Jani-King's employees under the FLSA. (Appellant's Opening Br. at 5.)
Jani-King filed a motion to dismiss on two grounds: (1) under Rule 12(b)(6), the Secretary failed to plausibly suggest that every franchise owner should be treated as an employee under the FLSA, and (2) under Rule 12(b)(7), the Secretary failed to name the franchisees as necessary parties. 1 The district court granted Jani-King's Rule 12(b)(6) motion and dismissed the Secretary's complaint without prejudice. The Secretary then filed an amended complaint alleging that the individuals who personally perform the janitorial cleaning work for Jani-King through the franchise arrangements are employees under the FLSA, and asking that Jani-King be required to keep records about those individuals. In response, Jani-King raised the same Rule 12(b)(6) and 12(b)(7) motions, arguing that the Secretary is not free to ignore its corporate organization. The district court again granted Jani-King's Rule 12(b)(6) motion-this time with prejudice-concluding the amended complaint "ignores corporate forms" and does not plausibly suggest the FLSA applies to all janitorial cleaners. (Appellant's App. at 183 & n.9.) The Secretary now appeals.
We review de novo the district court's grant of a motion to dismiss pursuant to Rule 12(b)(6).
SEC v. Shields
,
*1159
Under the FLSA, employees of covered employers are afforded minimum wage and overtime pay protections.
See
Here, the Secretary's amended complaint alleged that Jani-King violated the FLSA because it did not "mak[e], kee[p], and preserv[e] the required records" for "Janitorial Cleaners ...who personally perform the janitorial cleaning work as designated by Defendant" "as a result of improperly classifying these individuals as independent contractors when they are, in fact, employees." (Appellant's App. at 80-81 (internal quotation marks omitted).) The amended complaint acknowledged that many of these "Janitorial Cleaners" are individuals or "corporate entities owned by one or sometimes two individuals" who have entered franchise agreements with Jani-King, but alleged a series of facts to show that, per the six-factor economic realities test, these individual Janitorial Cleaners are employees under the FLSA. ( Id. ) The district court, however, determined that the complaint failed to state a claim because "a corporate entity can never be an 'individual,' which is a statutory prerequisite to status as an 'employee.' " ( Id. at 182.) The court further explained that the Secretary's complaint did "not distinguish between those Janitorial Cleaners procured to perform cleaning services who are artificial entities and those Janitorial Cleaners who are individuals," instead lumping together all Janitorial Cleaners procured through franchise agreements in "conclusory fashion." ( Id. at 182-83.) The court ultimately concluded that "[b]ecause the factual allegations in the amended complaint do not plausibly suggest that the FLSA applies to, and protects, all Janitorial Cleaners as that term is used in this case, the Secretary has not nudged his claim across the line from conceivable to plausible." ( Id. at 183 [internal quotation marks and punctuation omitted].)
As Jani-King conceded at oral argument, the district court's decision was based on the incorrect determination that the Secretary's definition of "Janitorial Cleaners" was overly broad because it included corporate entities which could never be "employees" under the FLSA because they are not "individuals." (May 15, 2018 Oral Argument at 13:30-13:49.) In framing the amended complaint this way, the district court's order improperly ignores the economic realities test. It is well settled that the economic realities of an individual's working relationship with the employer-not necessarily the label or structure overlaying the relationship-determine whether the individual is an employee under the FLSA.
See, e.g.,
Tony & Susan Alamo Found. v. Sec'y of Labor
,
Jani-King argues, however, that the Secretary's complaint should still be dismissed because the Secretary has not alleged sufficient factual allegations to make a plausible FLSA claim as to each actor. Most of the cases Jani-King cites in support of this argument are civil rights cases against multiple government entities and officials where the defendants generally sought dismissal on qualified immunity grounds.
See, e.g.
,
Pahls v. Thomas
,
Jani-King complains that because the amended complaint did not mention a single franchise owner by name and did not include any allegations specific to any one individual, it failed to inform Jani-King of the grounds for the Secretary's claims against the company.
See
Robbins
,
For these reasons, we conclude that the Secretary's amended complaint contains sufficient factual matter to state a facially plausible claim for relief. The complaint identifies individuals (those who "personally perform the janitorial cleaning work") who could qualify as Section 203(e)(1)"employees" under the economic realities test if all the Secretary's well-pleaded factual allegations about the nature of the relationship between Jani-King and these individuals are accepted as true and viewed in the light most favorable to the Secretary. The complaint also alleges that Jani-King has violated the FLSA as to these employees by failing to comply with recordkeeping requirements. These allegations are sufficient to state a claim at this stage of the proceedings. In so concluding, we make no determination as to the merits of the Secretary's case-we only hold that it *1162 survives this initial Rule 12(b)(6) motion to dismiss.
We accordingly REVERSE and REMAND for further proceedings.
In its order addressing Jani-King's first motion to dismiss, the district court determined there was "no basis for dismissal under Rule 12(b)(7)" because Jani-King failed to address whether joinder of the franchisees was feasible. (Appellant's App. at 77.) Though Jani-King again raised this claim in its motion to dismiss the Secretary's amended complaint, the district court's second order did not address the Rule 12(b)(7) argument, and it is not before this court on appeal.
Reference
- Full Case Name
- R. Alexander ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff - Appellant, v. JANI-KING OF OKLAHOMA, INC., a Foreign Corporation, Defendant - Appellee.
- Cited By
- 50 cases
- Status
- Published