Jones v. SCO Family of Services

Citations: 202 F. Supp. 3d 345; 2016 U.S. Dist. LEXIS 107868; 2016 WL 4257523Docket: 15 Civ. 8733 (GBD)

Court: District Court, S.D. New York; August 10, 2016; Federal District Court

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Doreen Jones filed a class action lawsuit against SCO Family of Services and several management defendants for unpaid overtime wages under the Fair Labor Standards Act (FLSA) and New York State Labor Law (NYLL). The case was initially brought in New York State Supreme Court but was removed to federal court, where jurisdiction was established based on the FLSA claim. Jones claims that despite her employment as a case worker since December 2008, she and others were not compensated for overtime, resulting in economic losses, including unpaid wages, liquidated damages, and prejudgment interest. She seeks class certification, declaratory and injunctive relief, and attorney fees.

Defendants moved to dismiss the complaint, arguing that Jones did not sufficiently allege that SCO is an enterprise engaged in commerce under the FLSA, nor did she demonstrate that she is covered by the FLSA or establish individual liability for the management defendants. The court agreed with the defendants, granting the motion to dismiss the FLSA claim, and declined to exercise supplemental jurisdiction over the NYLL claim.

Jones alleges that SCO is a not-for-profit organization with significant revenue and operations in New York, claiming it engages in interstate commerce through soliciting contributions and ordering supplies. She states that her salary increased slightly over her tenure, yet she received no additional pay for hours worked beyond forty per week, claiming she regularly worked between fifty-five and seventy hours weekly.

Plaintiff and potential class members assert that they do not have an automated system for tracking hours and instead use bi-weekly written time sheets. The Plaintiff claims management has discouraged the reporting of overtime hours, threatening termination if deadlines are not met. She contends that Defendants have intentionally misclassified her and the class as exempt employees, despite regularly recording more than forty hours worked per week.

To survive a motion to dismiss, a complaint must present sufficient factual allegations that are accepted as true, allowing for a plausible claim for relief, as established in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly. Mere legal conclusions without factual support are inadequate to proceed to discovery. The court must differentiate between conclusory allegations and those that provide a basis for entitlement to relief, accepting well-pleaded facts as true and drawing reasonable inferences in favor of the non-moving party.

The Plaintiff claims jurisdiction under the Fair Labor Standards Act (FLSA), asserting that SCO qualifies as an "enterprise" and argues it will be classified as an institution listed under 29 U.S.C. § 203(r)(2)(A). Additionally, she claims individual coverage under the FLSA due to regular interstate communication in her role. The FLSA aims to safeguard workers from inadequate wages and detrimental labor conditions that affect their standard of living.

The Fair Labor Standards Act (FLSA) mandates that employers must pay overtime wages for hours worked over forty in a workweek if the employee is engaged in commerce or in the production of goods for commerce. Employers claiming an exemption under the FLSA bear the burden of proof. Coverage under section 207(a) can be established if the employer is engaged in commerce or if the employee is individually engaged in commerce. Determining FLSA enterprise coverage involves a two-step analysis: confirming that the employer qualifies as an "enterprise" under 29 U.S.C. § 203(r)(1) and that it engages in commerce. Nonprofit organizations typically do not qualify as enterprises unless they conduct ordinary commercial activities or compete with commercial entities. However, certain nonprofit organizations may still be covered if they operate in connection with specific activities outlined in 29 U.S.C. § 203(r)(2)(A-C), such as hospitals or schools. In the current case, the focus is on whether the plaintiff has adequately alleged that the defendant, SCO, is engaged in activities related to a hospital or educational institution under 203(r)(2)(A). Neither party contends that SCO falls under 203(r)(2)(B) or (C).

Providing foster care services alone does not establish a business purpose sufficient for enterprise coverage under the Fair Labor Standards Act (FLSA). Relevant case law, including Jacobs and Bowrin, indicates that activities performed without a business purpose, such as foster care, are not part of an enterprise associated with business activities. Non-profit organizations that do not engage in commercial competition are not considered to have a business purpose under the Act unless they fall within specific categories outlined in 29 U.S.C. § 203(r)(2). The complaint in this case lacks factual allegations to support the plaintiff's claim that the defendant, SCO, qualifies as an institution under those categories. 

The plaintiff's assertion that "discovery will reveal" SCO's status does not meet the legal standard required to survive a motion to dismiss. The information presented in the plaintiff's opposition, relating to SCO's programs, was not referenced in the original complaint and does not substantiate a reasonable belief that SCO meets the criteria for enterprise coverage. Furthermore, the complaint only identifies SCO as a not-for-profit organization with a social mission, without providing necessary details to establish coverage under § 203(r)(2)(A). 

The plaintiff also claims to engage in commerce personally, suggesting her work involves significant use of interstate commerce mechanisms, such as telecommunications and sourcing supplies from out-of-state companies. However, these allegations alone do not compensate for the deficiencies in establishing enterprise coverage.

A plaintiff must demonstrate that she is "engaged in commerce or in the production of goods for commerce" to qualify for individual coverage under the Act, irrespective of her employer's status as an enterprise. The Second Circuit defines engaging in commerce as having "a substantial part" of work related to interstate commerce. Merely affecting or having an indirect relation to interstate commerce does not meet the threshold for individual coverage. In this case, it is uncontested that the plaintiff was not involved in producing goods for commerce. The plaintiff's claims regarding individual coverage lack merit, paralleling deficiencies in enterprise coverage, as they merely restate statutory language without providing factual support. Surviving a motion to dismiss requires more than just repeating legal terms; it necessitates specific factual allegations. The plaintiff's assertions about her duties and contacts with out-of-state entities are vague and insufficiently detailed to establish a significant relationship to interstate commerce. Consequently, the court finds that the plaintiff has not adequately alleged a claim for FLSA overtime violations under either individual or enterprise coverage, leading to the granting of the defendants' motion to dismiss. The case is ordered closed.

Defendants contend that Plaintiff's state claim is invalid because SCO, as a non-profit organization, has properly opted out of the New York Labor Law (NYLL) coverage related to overtime wage payments, as permitted under N.Y. Labor Law § 652(3)(b). They do not address Plaintiff's collective action and class allegations, leading the Court to refrain from making findings on those matters. The Court references case law indicating that determinations on class allegations typically require more information than what is available in the complaint. Although Plaintiff acknowledges that the current motion is under Rule 12(b)(6) and not for summary judgment, they provide additional materials, including SCO website printouts, which were not part of the original Complaint. The Court will review these materials solely to assess whether to grant Plaintiff leave to amend the complaint. Since Plaintiff's claims regarding enterprise and individual coverage are deemed unsuccessful, the liability claims against the Management Defendants are also dismissed. After dismissing all claims under its original jurisdiction, the Court opts not to exercise supplemental jurisdiction over the remaining state law claim, as allowed by 28 U.S.C. § 1367(c)(3). The decision to exercise supplemental jurisdiction is at the district court's discretion, and the Court may consider a request for amendment if it wouldn't be futile.