Acosta v. JM Osaka Inc.
Acosta v. JM Osaka Inc.
Opinion of the Court
MEMORANDUM OPINION
In this FLSA action, the Secretary of Labor, as authorized by statute,
I.
The Secretary of Labor has brought this FLSA action on behalf of approximately 58 employees
There are five named deféndants: (i) the two corporations that own the restaurants, JM Osaka, Inc. and IK Murusaki, Inc., (ii) the two individuals who jointly own and are the corporate officers of the restaurant corporations, In Ky Kim and Yeo Ing My, and (iii) Hoyung Ju, an individual alleged to be a manager of one of the restaurants. At' issue is defendant Hoyung Ju’s motion to dismiss on grounds of jurisdiction and that the complaint fails to state a claim because- he is not an “employer” under the FLSA, but is merely a manager of the restaurant.
The complaint alleges that Hoyung Ju served as manager of Murusaki and “overs[aw] the daily operation of the business.”. Doc. 1 at ¶ 6. In that role, he is alleged to have “supervised] and directed] the work of all employees of Mu-rusaki, including specific directions on how to prepare food.” Id. It is also alleged that he is “involved in the interviewing and hiring of employees” and “served as the point-of-contact and represented both Osaka and Murusaki vis-á-vis the U.S. Department of Labor[,]” bearing “responsibility for producing payroll and other employment records” and answering questions.
The complaint further alleges that from at least May 25, 2013 through April 13, 2017, all defendants, including Hoyung Ju failed to compensate- their .employees in
The complaint also alleges defendants failed to pay tipped and non-tipped employees appropriate, overtime compensation. Specifically, the complaint alleges that the salaries of non-tipped employees were not increased to time-and-a-half for hours worked in excess of 40-hours per week, and tipped employees, who worked between 40.65 and 47 hours a week at a rate of $2.50 to $3.00 per hour, were also not paid time-and-a-half for hours worked in excess of 40 per week, in violation of 15 U.S.C. § 207, which requires employers to pay overtime wages. The complaint also states that defendants failed to maintain adequate records of their employees, including employee names, addresses, wages, hours, and conditions of employment in violation 15 U.S.C. § 211. Doc.-1 at ¶ 11.
Hoyung Ju seeks dismissal of the complaint on two grounds: (i) lack of subject matter jurisdiction pursuant to 12(b)(1) on the ground that he is not-an “employer” under the FLSA and (ii) failure to state a claim on the ground that the complaint’s allegations do not warrant a plausible inference that he is’ an FLSA “employer.”
II.
Hoyung Ju’s jurisdiction argument—that he is not an “employer” under the FLSA—is a challenge to subject matter jurisdiction under Rule 12(b)(1), and is therefore appropriately considered first. An objection to subject matter jurisdiction may be raised by the parties or by the court at any stage in the litigation and the plaintiff .bears the burden of proving the existence of such jurisdiction by a preponderance of the evidence. Ellenburg v. Spartan Motors Chassis Inc., 519 F.3d 192, 196 (4th Cir. 2008).
■ Hoyung Ju’s argument in support of a jurisdictional challenge is a non-starter;
Notably, it is not uncommon for such a dispute to be confused with the existence or non-existence of jurisdiction. As the Supreme Court has noted in Arbaugh v. Y & H Corp., 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), “[sjubject matter jurisdiction in federal-question cases is sometimes erroneously conflated with a plaintiffs need and ability to prove the defendant bound by the federal law asserted as the predicate for relief—a merits-related .determination,”
Hoyung Ju’s reliance on Maravilla v. Ngoc Anh Restaurant Ltd., No. 1:16-cv-427 (LMB/MSN), 2016 WL 6821090 (E.D. Va., Nov. 17, 2016), is misplaced. That case, far , from supporting Hoyung Ju, in fact makes clear that his jurisdictional argument lacks merit. There the court held that “ ‘whether a defendant is an employer as defined in the FLSA is an element of the plaintiffs meritorious FLSA claim’ and... ‘does not implicate subject matter jurisdiction.’” Id. at *3 (citing Gilbert v. Freshbikes, LLC, 32 F.Supp.3d 594, 600 (D. Md. 2014)). Applying Arbaugh!s reasoning, the court in Maravilla found that “the FLSA provides no indication that Congress intended the coverage requirements to operate as a jurisdictional bar.” Id. at 3. To the contrary, that court, noted that because the “FLSA’s definition of employer is found in the definitions section of the Act, [ ] the term is not jurisdictional.” Id.
Based on the language and structure of the FLSA and relevant precedents, it.is clear that whether an individual is an “employer” under the FLSA is a factual question, not a jurisdictional one. Thus, whether the complaint alleges sufficient facts to warrant a plausible inference that Hoyung Ju is an FLSA “employer” is a question appropriately raised in his 12(b)(6) motion to dismiss for failure to state a claim.
III.
Hoyung Ju’s Rule 12(b)(6) argument—that the complaint fails to allege facts sufficient to warrant an inference that he is an “employer” within the meaning of the FLSA—is governed by a. legal standard too well settled to be disputed. A district court should dismiss a complaint if, accepting all well-pleaded allegations in the complaint as true and drawing all reasonable factual inferences in the plaintiffs favor, the complaint does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The factual allegations cannot merely amount to speculations, and must amount to more than “a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Recitation of the. elements of a cause of action is insufficient to survive a Rule 12(b)(6) motion to dismiss. Twombly, 550 U.S. at 555, 127 S.Ct. 1955; Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937.
The parties agree that thé FLSA permits suits against an “employer” or an “enterprise,”
To accommodate the absence of a more precise statutory definition, the Fourth Circuit has announced and applies an “economic reality test” to identify whether an individual is an FLSA “employer.” Kerr v. Marshall Univ. Bd. of Governors, 824 F.3d 62, 83 (4th Cir. 2016). The purpose of this test is to focus on considerations or facts that serve to identify individuals who would qualify as FLSA “employers,” including whether the individual “(1) has the power to hire and fee the employees, (2) superviséis] and controls] employee work schedules or conditions of employment, (3) determine^] the rate or method of payment, and (4) main-taints] employment records.” Id. at 83 (citing Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999)). No one factor is dispositive. Id.
The economic reality test, applied here, points persuasively to the conclusion that the complaint fails to state sufficient specific facts warranting the plausible inference that Hoyung Ju is an “employer” under the FLSA. With respect to the first faetor, whether the alleged employer has the power to hire and fee, the complaint alleges that Hoyung Ju was “involved in interviewing and hiring employees[,]” Doc. 1 at ¶ 3. Mere involvement in the hiring process, by itself, is not enough to make an employee an FLSA “employer.” Significantly, the complaint contains no allegation that Hoyung Ju had any authority to make decisions about hiring, nor does the complaint allege that he had any power to fee or discipline employees. As other courts have explained, “[b]eing involved in the hiring process, by interviewing and making recommendations, does not make someone an employer.” Arencibia v. 2401 Restaurant Corp., 831 F.Supp.2d 164, 176 (D.D.C. 2011) (finding that a maitre d’ who “interviewed applicants and made recommendations” was not an employer under the FLSA because the employer’s “approval was required and obtained before informing any employee he was actually hired”).
The second factor of the economic reality test asks whether an individual “controls] work schedules or conditions of employment.” Kerr, 824 F.3d at 83. While the complaint alleges that Hoyung'Ju “supervises and directs the work of employees[,]” including giving specific instruction on how to prepare food, these allegations fall short of stating that he exercised control over
The third factor, whether the defendant is involved in setting payment rates, amounts, or methods, is perhaps the most important. As courts have sensibly noted, “power over the employment relationship by virtue of control over the purse strings is a substantial factor to identifying an employee-employer relationship.” Baird v. Kessler, 172 F.Supp.2d 1305 311 (E.D. Cal. 2001), aff'd, 81 Fed.Appx. 249 (9th Cir. 2003) (citing Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983)),
The complaint also fails to allege facts demonstrating that Hoyung Ju was involved in the maintenance of employment records, the fourth factor of the economic reality test. The complaint states that he was “the point-of-contact” during the Department of Labor’s investigation into FLSA violations at the two restaurants.
In sum, the economic reality test applied here makes clear that the complaint fails to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
■ Seeking to avoid this result, the Secretary relies chiefly on language from Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947), stating that in light of the FLSA's remedial purposes, courts' should engage' in a “flexible inquiry” and account for circumstances of the “whole activity” to decide whether an -individual is an “employer” within the meaning of the Act. This argument fails; it stretches the language in Rutherford well beyond the breaking point. It is' perhaps understandable that the Secretary would urge a broad reading of “employer” to include low and middle level managers such as maitre ds or foremen. at a construction site,
The Secretary’s argument is also question begging. The Secretary is correct that the Supreme Court in. Rutherford stated that the statute should be broadly construed and was remedial in nature. But significantly, the Supreme Court also noted its concern that “there is in the Fair Labor Standards Act no definition that solves problems as to the limits of the employer-employee relationship under the Act.” 331 U.S. at 728, 67 S.Ct. 1473. The statute, by its terms, does not specifically instruct courts what limits should be placed on the FLSA’s flexible definition- of “employer.” The. economic reality test employed by the Fourth Circuit and other circuits,
Perhaps,-the Secretary may be able to allege facts supporting the plausible inference that Hoyung Ju did act as an FLSA “employer” and was responsible for the manner and amount employees were paid, the hours they worked, and the amount they were paid for overtime. If the Secretary is able to do so, he may amend his complaint.
For the foregoing reasons, Hoyung Ju’s motion to dismiss for pursuant to 12(b)(1) must be denied. His .motion for. dismissal pursuant to Rule 12(b)(6), however, must be granted, with leave for the Secretary to amend.
An appropriate Order will issue.
. 29 U.S.C, § 216.
. Neither the complaint nor the answer specifies the number of employees affected by the non-payment scheme but refer to "certain present and former-employee(s)[,]” Doc. 1 at ¶ 4. At argument, the Secretary stated that the action was being brought on behalf of approximately 58 employees.
. Hoyung Ju also claims that the work he performed for the -restaurants was done through his consulting company and that the restaurants hired his consulting company and not Him personally. Because this is a 12(b)(6) motion, this factual contention is not appropriately considered here. Fayetteville Inv'rs v. Commercial Builders, Inc., 936 F.2d 1462, 1472 (4th Cir. 1991) (holding that a "district court could not act upon facts alleged or proven beyond what was stated in a complaint or amended complaint").
. Hoyung Ju argues that the failure to allege that his consulting business was a covered "enterprise” presents a jurisdictional problem for the Secretary. Yet, this argument misses the mark, As the Fourth Circuit has made clear "under the FLSA, the Government may sue the ‘employer’ who is responsible for complying with the various provisions of the Act” and the Secretary is not required bring suit against any particular business. Brock v. Hamad, 867 F.2d 804, 808, n. 6 (4th Cir. 1989).
. While Arbaugh dealt with a defendant’s status as "employer” under Title VII, courts have widely recognized that the rule announced in Arbaugh applies to a wide variety of statutes. See, e.g„ Union Pac. R.R. Co. v.
. Hoyung Ju argues that-the Secretary was required to bring suit .against his consulting company as an "enterprise," not him individually, because the restaurants, hired, him through his business and not in his individual capacity. Simply put, this argument fails. See supra n. 4. The Secretary is not required to sue Hoyung Ju in the capacity that Hoyumg
. See also Dole v. Continental Cuisine, Inc., 751 F.Supp. 799, 800 (E.D.Ark. 1990) (holding that a maitre d’ was not an employer despite involvement in hiring and firing); Saint-Jean v. D.C. Pub. Schools Div. of Transp., 815 F.Supp.2d 1, 4 (D. D.C. 2011) (finding-the power to discipline employees was insufficient to make a supervisor an employer without the power to hire and fire).
. See also Guifu Li v. A Perfect Day Franchise Inc., 281 F.R.D. 373, 399 (N.D. Ca. 2012) (finding in a summary judgment motion that lack of authority over pay weighed in favor of finding an individual was not an employer under the FLSA); Donovan v. Agnew, 712 F.2d 1509, 1513 (1st Cir. 1983) (same).
. It appears that Hoyung Ju cooperated with the Secretary during the Department of Labor’s investigation and was rewarded by being named as a defendant.
.See also Perez v. Lantern Light Corp., 2015 WL 3451268 (W.D. Wash. 2015) (“Under FLSA case law, actual control over, and not merely access to, employment records by an additional employer whose interests are served by the same employee points in the direction of joint employment’’); Moreau v. Air France, 343 F.3d 1179, 1187 (9th Cir. 2003) (finding that checking employment records to ensure company standards were met was insufficient support for a finding that a company was an employer).
. Gortat v. Capala Bros. Inc., 257 F.R.D. 353 (E.D.N.Y. 2009) (holding that foremen were not employers despite authority to direct workers and discipline them).
. See Donovan v. Agnew, 712 F.2d 1509, 1512 (1st Cir. 1983) ("In determining employer status, "economic reality” prevails over technical common law concepts of agency.”); Zheng v. Liberty Apparel Co. Inc., 355 F.3d 61, 73 (2d Cir. 2003) ("The determination [of whether an individual is án employer] is to be.. .viewed in light of economic reality.”); Haybarger v. Lawrence Cnty Adult Probation and Parole, 667 F.3d 408, 414 (3d Cir. 2012) ("In analyzing an individual supervisor's control over the employee under the FLSA and the FMLA, most courts look to the "economic reality” of the employment situation, examining whether the individual supervisor carried out the functions of an employer with respect to the employee”); Gray v. Powers, 673 F.3d 352, 355 (5th Cir. 2012) ("The Fifth Circuit uses the "economic reality" test to evaluate whether there is an employer/employee relationship”); Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1469 (9th Cir. 1983) (“The determination of whether an employer-employee relationship exists does not depend on "isolated factors but rather upon the circumstances of the 'whole activi
Reference
- Full Case Name
- R. Alexander ACOSTA, Secretary of Labor United States Department of Labor v. JM OSAKA INC.
- Cited By
- 2 cases
- Status
- Published