Opinion
Case No. 2:10-cv-00032.
August 5, 2010
MEMORANDUM AND ORDER
Each of the seventy-two Plaintiffs is a current or former employee of the State of Vermont ("The State"). Pursuant to 29 U.S.C. § 216(b), Plaintiffs seek to certify a collective action against the State and its Secretary of the Agency of Administration, Neale Lunderville, for violations of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201- 219 (Supp. 2009) ("FLSA"). The Complaint alleges that for approximately the past three years, the State willfully violated the overtime provision of the FLSA by failing to pay the Plaintiffs time and one half their hourly rate for weekly hours worked beyond forty hours. See 29 U.S.C. § 207(a)(1). Plaintiffs seek declaratory and injunctive relief, liquidated damages for backpay overtime, costs and attorneys fees. Lunderville and the State now move to dismiss the Complaint for failure to state a claim upon which relief may be granted. For the reasons stated below, the Motion to Dismiss is DENIED.
I. Factual Background
Plaintiffs are or were employed in the judiciary, supervisory, non-management and corrections bargaining units represented by the Vermont State Employees Association ("VSEA"). Pursuant to a collective bargaining agreement between the State and the VSEA, each employee of the State is compensated based on a grid system ranging from Pay Grade Level 1 to Pay Grade Level 28. Plaintiffs allege that employees of the State who are at a Pay Grade of 23 or higher are subject to the practice of paying straight time for overtime worked, while those at a Pay Grade of 22 or lower are given time and one half. (Compl. ¶ 1.) Plaintiffs argue that the State's practice of 'arbitrarily' exempting from the Act employees who are above level 22 on the grid system is unlawful. (Pls.' Resp. Br. at 4.) It is undisputed that all of the Plaintiffs fall into a Pay Grade of 23 or higher, and are subject to straight hourly pay for overtime worked exceeding forty weekly hours.
While Plaintiffs have bargained for the current payment system through the VSEA, their right to liquidated damages under the FLSA overtime provision may not be waived. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945).
However, the State challenges the allegation that it formulates the method of overtime payment for each state employee based on his or her pay grade. Rather, it claims to evaluate each individual employee's actual work duties before exempting him or her from the FLSA. The State maintains that each employee's overtime compensation is determined by a committee within the State's Administration Agency which decides whether to pay straight overtime or time and one half based on the employee's position, job title and employment duties. According to the State, the analysis of each employee's status under the FLSA is entirely independent of the contract between the VSEA and the State.
With respect to the State's method of payment, Plaintiffs claim that their weekly compensation fluctuates based on hourly variations in work performed each week. (Compl. ¶ 3.) However, the State disputes the Plaintiffs' assertion that they are paid on an hourly, as opposed to a salaried basis. The State contends, rather, that the Plaintiffs' weekly compensation is never subject to reduction and has not vacillated below a minimum amount per week at any point during the last three years.
Plaintiffs purport to state a prima facie case for recovery under the FLSA. They argue that the Complaint provides sufficient factual grounds supporting their claim by stating the approximate number of overtime hours owed to each Plaintiff by the State. Furthermore, direct reference to the FLSA's overtime provisions supposedly puts the Defendants on notice of why they are being sued. Plaintiffs deny that they have a duty to plead facts in anticipation of an affirmative defense that they are exempt from the FLSA's overtime provision.
II. Discussion
On April 14, 2010, Plaintiffs filed a Second Amended Complaint with their Memorandum in Opposition to the Motion to Dismiss. In their Reply Brief dated May 4, 2010, Defendants do not object to the Second Amended Complaint having been filed without leave of the Court. The Second Circuit has observed that "an amended complaint ordinarily supersedes the original, and renders it of no legal effect." Int. Controls Corp. v. Vesco, 556 F.2d 665, 668 (2d Cir. 1977). The Motion to Dismiss is therefore addressed to the Second Amended Complaint.
The gravamen of the State's argument for dismissal is that the Plaintiffs are exempt from the overtime requirements of the FLSA because they fall into the "administrative and executive" exemption of the statute. See 29 U.S.C. § 213(a)(1). The Motion to Dismiss relies on two pertinent observations concerning the Plaintiffs' employment as it relates to the FLSA. First, the State alleges that nature of the Plaintiffs' job duties exempts them from the FLSA overtime provision under § 213(a)(1). Second, the State claims that the Plaintiffs do not have a plausible claim because they are salaried employees.
A. The Pleading Standard
According to Fed.R.Civ.P. 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). At the pleading stage, the plaintiff has an obligation to provide factual allegations that are "enough to raise a right to relief above the speculative level." Bell Atl. Corp. V. Twombley, 550 U.S. 544, 555 (2007). The threshold for a motion to dismiss under Fed.R.Civ.P. 12(b)(6) is high; as long as the Court can draw a reasonable inference that the defendant may be liable to the plaintiff for the misconduct alleged, the claim will survive the challenge. Ashcroft v. Iqbal, ___ U.S. ___ 129 S. Ct. 1937, 1949 (2009).
While it is true that the Court must accept all factual allegations listed in the complaint as true for purposes of a 12(b)(6) motion, mere legal conclusions create inadequate grounds for relief. A pleading that only provides a "formulaic recitation of the elements of a cause of action will not do." Twombley, 550 U.S. at 555. The Complaint must demonstrate more than the mere theoretical possibility that the Plaintiff is entitled to relief from the Defendant. Iqbal, 129 S. Ct. at 1950. Based on "judicial experience and common sense," the Court must conduct a "context-specific" analysis of whether the Complaint elicits a plausible claim. Id. However, the complaint should not be dismissed merely because the district court believes it unlikely that the plaintiff will prevail in the action on the merits. Twombley, 550 U.S. at 1965 ("[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable.")
A complaint need not anticipate or attempt to defuse potential defenses, and failure to do so is not grounds for dismissal. Gomez v. Toledo, 446 U.S. 635, 640 (1980) (overturning dismissal on grounds that plaintiffs should not have to anticipate qualified immunity defense). A motion to dismiss should be granted only where an affirmative defense clearly prevents all conceivable recovery on the underlying claim. Jones v. Bock, 549 U.S. 199, 215 (2007); see also Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 74-75 (2d Cir. 1998) (dismissing a complaint under Rule 12(b)(6) where the claim was unquestionably barred by official immunity). Dismissal is only appropriate where the affirmative defense appears on the face of the complaint, and there is no dispute that the Plaintiff's action is barred by the defense. See, e.g., United States Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 627-628 (7th Cir. 2003).
B. Discussion of the FLSA's Overtime Provision
In Twombley, the Court deemed it necessary to examine the elements of the law upon which the claim was founded before deciding whether the Complaint satisfied the minimal pleading standard. 550 U.S. at 553-554. This Court takes the same approach with the current action. Here, two intertwined provisions of the Act are central to the claim. Section 207 states the overtime pay requirements allegedly violated by the State. Section 213 establishes exemptions to the overtime pay requirement, one of which — the executive and administrative exemption — is central to this case.
The FLSA stipulates that "no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of [forty hours] . . . at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1). The substantive provisions of the FLSA are circumscribed by Section 213, which lays out a comprehensive list of exemptions to the overtime requirement. Most notably, § 213(a)(1) states that title 207 of the FLSA shall not apply to "any employee employed in a bona fide executive, administrative, or professional capacity." The FLSA explicitly provides that the U.S. Secretary of Labor has final discretion to define and delimit those employment positions that fall under the "executive and administrative" exemption. 29 U.S.C. § 213(a)(1).
The Supreme Court has recognized Congress' power to delegate authority to the Secretary of Labor to define occupations fitting the exemptions of Section 213. Auer v. Robbins, 519 U.S. 452, 456 (1997). In 2008, the Secretary of Labor stated what it means to be employed in an executive or administrative capacity with reference to two tests. 29 C.F.R. § 541.2 (2008); see also Havey v. Homebound Mortgage, Inc., 547 F.3d 158, 160 (2d Cir. 2008). The Labor Regulation provides that the term "employee employed in a bona fide executive capacity" shall mean an employee who (1) is compensated on a salary basis at a rate of not less than $455 per week and; (2) whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof. 29 C.F.R. § 541.100.
Generally speaking, the Act is a liberally construed, remedial measure that creates a disincentive to overwork employees. Walling v. Youngerman-Reynolds Hardware Co., 325 U.S. 419, 423-24 (1945). Although Plaintiffs have the burden of proving that they performed work for which they were not properly compensated, "the great public policy which [the FLSA] embodies . . . militate[s] against making that burden [of proof] an impossible hurdle for the employee." Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
Cases within the Second Circuit have elaborated upon the pleading standard for claims under the FLSA. In Nichols v. Mahoney, a New York District Court denied a 12(b)(6) motion to dismiss an overtime wages claim. 608 F. Supp. 2d 526, 547-548 (S.D.N.Y. 2009). In Mahoney, the Court held that a complaint under the FLSA adequately meets the minimal pleading standard if it: (1) denotes an employer-employee relationship; (2) establishes that employees were "engaged in commerce;" and (3) approximately alleges the hours worked, for which wages were not received. Id; see also Zhong v. August August Corp., 498 F. Supp. 2d 625, 628 (S.D.N.Y. 2007) ("[W]here a plaintiff alleges violations of the FLSA's minimum and overtime wage provisions, the complaint should, at least approximately, allege the hours worked, for which wages were not received.")
The Second Circuit has elucidated that to defeat a 12(b)(6) motion on a claim for overtime wages under the FLSA, a plaintiff "must produce sufficient evidence to establish that the employee ha[s] in fact performed work for which [she was] improperly compensated and produce sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference." Reich v. New England Telecomms. Corp., 121 F.3d 58, 67 (2d Cir. 1997) ( citing Mt. Clemens Pottery Co., 328 U.S. at 687). In Connolly v. Smugglers Notch Mgmt. Co., this Court adopted the Reich Court's construction of the pleading standard for FLSA claims. 2009 WL 3734123, at *3 (D. Vt. Nov. 5, 2009) (Sessions, J.). In that case, the Court also recognized that at the preliminary motions stage, it is unreasonable to expect a plaintiff in a FLSA case to allege with specificity the exact overtime hours worked, especially when she has not had a chance to undertake discovery. Id.
C. Analysis of the Motion to Dismiss
The Plaintiffs have met the minimal pleading standards outlined by prior FLSA cases like Zhong and Nichols. The first sentence of the Complaint identifies the Plaintiffs as "current and former employees of the State of Vermont." (Compl. ¶ 1.) The Complaint also establishes, albeit vaguely, the time period of alleged violations as being "the last three years and earlier." ( Id.) The Complaint also lists each Plaintiff's occupation, department and pay grade as a state employee. ( Id. ¶¶ 12-49.) Hence, the Plaintiffs clearly pleaded an employment relationship.
The FLSA was amended in 1974 so as to extend its maximum hour provisions to almost all employees of the States and their political subdivisions. 29 U.S.C. § 203(d) (1970 ed. Supp. IV). The definitional section of the FLSA now states,
[T]he employees of an enterprise which is a public agency shall for purposes of this subsection be deemed to be employees engaged in commerce, or in the production of goods for commerce, or employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce."Id. The Plaintiffs, all state employees, are part of an enterprise that is a public agency, and were therefore engaged in commerce during their tenure working for the state.
The critical component of a complaint alleging violations of Section 207 is an approximation of the number of unpaid weekly overtime hours worked over the employment period. See Connolly, WL 3734123 at *3; Nichols, 608 F. Supp. 2d at 547. In the present Complaint, each plaintiff has provided, to his or her best estimate, the average number of weekly overtime hours worked over the last three years. (Compl. ¶¶ 12-49.) This Court has held that a plaintiff filing under the FLSA cannot be expected to submit the precise days and hours for which he is owed overtime. Connolly, WL 3734123 at *3. The Plaintiffs have shown by a just and reasonable inference that in their capacity as employees of the State over the last three years, they worked a concrete number of hours for which they were improperly compensated. Therefore, the pleading in this case complies with the plausibility standard of Reich as taken from Iqbal and applied to FLSA claims.
Rule 8(a) requires a plaintiff to disclose sufficient information to permit the defendant to "have a fair understanding of what the plaintiff is complaining about and to know whether there is a legal basis for recovery." Ricutti v. New York Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991). The Twombley decision reaffirms that the plaintiff's principal obligation under the modern pleading rules is to provide the grounds of his entitlement to relief. 550 U.S. at 544.
The Plaintiffs have specifically identified the relevant sections of the FLSA, on which grounds they bring suit. (Compl. ¶ 5.) The Defendants have access to the number of hours worked by each Plaintiff, as Defendants are legally required to keep track of and maintain records of all hours worked by each employee. See Connolly, WL 37341234 at *3. Any doubts about the factual validity of the number of hours owed may be addressed at the Defendants' convenience. Since Defendants have notice of a plausible cause of action, the pleading satisfies Rule 8(a).
The crux of the Defendants' Motion to Dismiss is that the Complaint fails to establish that Plaintiffs are not exempted from the overtime provisions of the Act via Section 213(a)(1). This accusation is improperly presented at the pleading stage. Since the defendants in an FLSA action have the burden of pleading affirmative defenses, the absence of a detailed description of job duties in the Complaint is immaterial to the 12(b)(6) motion.
Defendants contend that Plaintiffs "do not proffer a single fact to explain why they allege their job duties entitle them to FLSA protection." (Mot. to Dismiss at 4.)
The key decisions concerning Section 213 of the FLSA clearly prescribe that the burden of proving an exemption rests with the employer. See Meacham v. Knolls Atomic Power Lab., 128 S. Ct. 2395, 2401 (2008); Corning Glass Works v. Brennan, 417 U.S. 188, 196-197 (1974) (stating the general rule that "the application of an exemption under the Fair Labor Standards Act is a matter of affirmative defense on which the employer has the burden of proof."); Walling v. Gen. Indus. Co., 330 U.S. 545, 548 (1947) (holding that employer has the burden of showing the existence of all conditions of the 'executive or administrative' exemption). The Plaintiffs are therefore not obligated to state facts demonstrating their non-exempt status in the Complaint.
Where the Complaint contains allegations that unequivocally qualify an employee as exempt from the overtime provisions, a 12(b)(6) motion will be granted. Nichols v. Mower's News Serv. Inc., 492 F. Supp. 258, 261 (D. Vt. 1980) (granting a 12(b)(6) motion where the employee was a truck driver whose employment contract was regulated by the Secretary of Transportation, and thus clearly fell within an exemption category under 29 U.S.C. § 213(b)(1)). The exemption categories delineated by the FLSA are not designed to thwart nascent claims, but rather, are available affirmative defenses to be fleshed out during the discovery process.
The Complaint in this case must survive the Motion to Dismiss because it adequately apprises the State that this is an action for violations of the Act. On its face, the Complaint essentially reproduces the same facts and legal theories as the complaint in Connolly, in which the defendant's 12(b)(6) motion was denied. In accordance with the directive of Iqbal to follow judicial experience and common sense, the Court can readily infer from the four corners of the Complaint that the elements of Section 207 have been sufficiently alleged and supported by the facts. The parties are ordered to submit a discovery schedule to the Court within thirty days of the date of this Order.