No. 99 Civ. 12482 (JSM).
May 16, 2001
For Plaintiff: Bernard Weinreb.
For Defendants: Sandra D. Parker Winston Parker LLP.
MEMORANDUM OPINION AND ORDER
Robert M. Lamont ("Plaintiff") brings this action pursuant to the Fair Labor Standards Act ("FLSA" or the "Act"), 29 U.S.C. § 207, 215(a)(3), 216(b), 260, and the New York Labor Law §§ 190-99, 215, 652 653, alleging that Frank Soup Bowl, Inc. ("Defendant" or "Frank's") failed to pay him overtime wages and then retaliated against him for filing a complaint with the New York State Department of Labor. Defendant moves for summary judgment on the grounds that Plaintiff is not covered by the wage and hour provisions of the FLSA and that therefore the complaint should be dismissed for lack of subject matter jurisdiction. Plaintiff moves to amend the complaint to include specific allegations that Plaintiff is covered by the FLSA. For the reasons set forth below, Defendant's motion is granted and the complaint is dismissed. Plaintiff's motion to amend the complaint is denied.
The complaint and caption incorrectly name Frank's Soup Bowl, Inc. as Frank Soup Bowl, Inc.
Frank's is a small family-owned eatery located in the Bronx. It was incorporated in the State of New York in or about 1986 and has only one location. Frank's sells cooked food, such as oxtail and curried goat, which is prepared on the premises. Customers either place take-out orders or eat at one of the small tables in the restaurant. Take-out orders placed over the telephone are usually picked up by the customer, but some orders are hand-delivered to local residents. Frank's does not deliver food or operate its business outside of New York. Most of the restaurant's supplies are purchased at Hunt's Point Market in the Bronx, but some are purchased from other New York suppliers and manufacturers. All supplies are stored on the premises in the Bronx.
According to tax returns filed with the Internal Revenue Service, Frank's gross sales receipts did not exceed $500,000.00 per year for the years 1995 to 1998. Plaintiff has submitted evidence that at least three people who live outside of New York State have visited the restaurant and purchased food there. Although Frank's cannot declare that every customer that has purchased food in the restaurant is from New York, it does not deliver food outside of the State.
Income Tax returns from the years prior to 1995 are irrelevant under the applicable statute of limitations for Plaintiff's FLSA claims.
Plaintiff was employed by Defendant from approximately 1991 to 1998. His duties included serving food to customers, some food preparation, and accompanying the owner of the restaurant to Hunts Point Market to assist in carrying purchases of supplies. Plaintiff alleges that he usually worked fifty-six hours per week. Initially he earned $7.50 per hour, but his wages were increased in 1994 to $8.00 per hour. Plaintiff's central complaint is that he never received overtime wages for the hours he worked in excess of forty hours per week. Plaintiff alleges that he complained to his employer about the situation without relief.
In August 1998, Plaintiff filed a complaint with the New York Department of Labor. According to Plaintiff, his hours were reduced after he filed the complaint, and he experienced instances of harassment from his employer such as late paychecks, reduced pay, verbal harassment and threats. On October 27, 1998, Plaintiff returned to the New York Department of Labor to lodge a complaint about the harassment. An employee of the Department assisted him in preparing a written response to the owner of Frank's regarding a warning that Plaintiff had received. After sending the letter to his employer, Plaintiff was suspended without pay and then terminated on November 8, 1998, when his supervisor would not allow him to enter the premises.
On December 29, 1999, Plaintiff commenced this action. Plaintiff invokes federal jurisdiction pursuant to 29 U.S.C. § 1331 based on alleged violations of the FLSA. Because Plaintiff is not covered by the provisions of the FLSA, this court lacks subject matter jurisdiction over the action and the Complaint must be dismissed.
Plaintiff brings a claim for violation of the FLSA for failure to pay overtime wages pursuant to Section 207, which provides:
Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified 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 FLSA defines commerce as "trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof." Id. § 203(b).
The threshold inquiry for wage and hour claims under the FLSA is whether the employer is "engaged in commerce or in the production of goods for commerce". A party is engaged in interstate commerce if it is in the "channels of interstate commerce as distinguished from [someone] who merely affect[s] that commerce." McLeod v. Threlkeld, 319 U.S. 491, 494, 63 S.Ct. 1248, 1250 (1943) (citation omitted). In McLeod, the Supreme Court noted that in drafting the FLSA, Congress indicated its intention that the Act not be coextensive with the power to regulate commerce when it rejected a proposal to extend the FLSA's coverage to all employees "engaged in commerce in any industry affecting commerce." Id. at 492, 63 S.Ct. at 1249 (citation omitted). Although the Court later recognized that the FLSA should be construed liberally, it also directed that the application of the FLSA be consistent with the congressional intention to limit the scope of the Act. See Mitchell v. Lublin, McGaughy Assoc., 358 U.S. 207, 211, 79 S.Ct. 260, 264 (1959).
It is clear that Frank's was not in the channels of interstate commerce when it cooked meals for patrons and sold take-out orders from a single location in the Bronx. However, relying on statements from three people living outside of New York that they purchased food from Frank's and arguing that Frank's cannot confirm that all of its customers live in New York, Plaintiff contends that Frank's was involved in the production of food for interstate commerce. The Second Circuit has held that sporadic or occasional shipments of insubstantial amounts of goods are insufficient to bring a party within the coverage of the FLSA. See Remmers v. Egor, 332 F.2d 103, 104 (2d Cir. 1964). Here, there is no allegation that Frank's delivered food anywhere outside of New York or even advertised its food outside of New York. There is also no evidence that Frank's received any direct shipments of supplies from outside the State of New York. While it is true that people who live outside of New York may have eaten food prepared at Frank's, that fact alone cannot serve as evidence that Frank's prepares the food for interstate commerce. If that were true, every hot dog vendor in New York would be engaged in producing goods for interstate commerce.
Plaintiff cites Wooten v. Moore, 400 F.2d 239 (4th Cir. 1968), for the proposition that Frank's should be considered to be engaged in interstate commerce because the owners cannot allege that every patron lives in New York. However, Wooten involved the reach of the Civil Rights Act of 1964, a statute that covers establishments that affect commerce. As stated above, the FLSA's coverage does not extend to every business that affects commerce. Even drawing all inferences in favor of Plaintiff, the preparation of food that may have subsequently been sold to a few customers who live outside of New York does not amount to the production of goods for interstate commerce under the FLSA.
Even if it were assumed that Frank's was somehow engaged in commerce, i.e., "trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof," Plaintiff's claim would still not come within the FLSA. Prior to 1961, the Act covered only those employees who were themselves engaged directly in interstate commerce or in the production of goods for interstate commerce. In 1961, the Act was substantially broadened "to include any employee of an enterprise engaged in interstate commerce, as defined by the Act." Tony Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 295 n. 8, 105 S.Ct. 1953, 1958 (1985). However, an enterprise engaged in interstate commerce is defined by the Act as a business that has an annual dollar volume of sales made or business done of not less than $500,000.00. See 29 U.S.C. § 203 (s)(1)(A)(ii). The enterprise theory is not applicable to this case because Frank's did not have an annual gross volume of sales of at least $500,000.00 during the relevant time period.
While there is clearly no federal jurisdiction over Plaintiff's claims for overtime wages because neither he nor his employer engaged in conduct over which Congress chose to exercise jurisdiction, Plaintiff's retaliation claim presents a closer case for the exercise of federal jurisdiction. Indeed, two Circuits have held that there is federal jurisdiction over a retaliation claim, even though the employer was not subject to the FLSA's wage and hour requirements. See Sapperstein v. Hager, 188 F.3d 852 (7th Cir. 1999); Wirtz v. Ross Packaging Co., 367 F.2d 549, 550-51 (5th Cir. 1966). As will be developed below, both of those cases are distinguishable on their facts. Moreover, neither of those cases considered the clear intent of Congress to limit the reach of the FLSA or the constitutional issues that arise from extending jurisdiction beyond the area in which Congress chose to legislate.
To say that Congress chose not to exercise the full reach of its Commerce Clause power to extend the wage and hour provisions to businesses such as Frank's, does not mean that it lacked the power to do so. Since even a modest restaurant uses produce and supplies that no doubt traveled in interstate commerce, its operation "affects commerce" and, therefore, Congress could have adopted a remedy for retaliation even though it chose not to apply the wage and hour provisions to such an entity. The question is: Did Congress intend to do so?.
Here there is nothing to indicate that Congress had such an intent. Neither Plaintiff nor his employer engaged in the type of commercial activity Congress chose to regulate. Not only were Plaintiff and his employer not engaged in "trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof," but even when Congress extended the Act's coverage to employees of an enterprise that was engaged in such commerce, it excluded small businesses, like Frank's that had less than $500,000.00 in sales.
Given Congress' clear intent to exclude employers such as Frank's from the Act's wage and hour coverage, there is little reason to believe that Congress intended the Act's anti-retaliation provision to extend to such employers.
The anti-retaliation clause must be read within the context of the entire Act and interpreted in a manner that is consistent with the purpose of the Act. As the Supreme Court stated in Kokoszka v. Belford, 417 U.S. 642, 650, 94 S.Ct. 2431, 2436 (1974)
When interpreting a statute, the court will not look merely to a particular clause in which general words may be used, but will take in connection with it the whole statute. . . and the objects and policy of the law, as indicated by its various provisions, and give to it such a construction as will carry into execution the will of the Legislature.
Section 202 of the FLSA sets forth the policy and purpose of the Act:
(a) The Congress finds that the existence, in industries engaged in commerce or in the production of goods for commerce, of labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers (1) causes commerce and the channels and instrumentalities of commerce to be used to spread and perpetuate such labor conditions among the workers of the several States; (2) burdens commerce and the free flow of goods in commerce; (3) constitutes an unfair method of competition in commerce; (4) leads to labor disputes burdening and obstructing commerce and the free flow of goods in commerce; and (5) interferes with the orderly and fair marketing of goods in commerce. . .
(b) It is declared to be the policy of this chapter, through the exercise by Congress of its power to regulate commerce among the several States and with foreign nations, to correct and as rapidly as practicable to eliminate the conditions above referred to in such industries without substantially curtailing employment or earning power.29 U.S.C. § 202. This policy statement indicates that Congress did not intend to extend the coverage of the Act to any employee regardless of the employee's connection to interstate commerce. Reading the Act as a whole, it is clear that the FLSA only regulates the working conditions of employees engaged in commerce, engaged in the production of goods for commerce, or employed by an enterprise engaged in commerce. Therefore, the anti-retaliation provision should be construed to apply only to those employees that Congress intended to regulate under the Act.
The courts which have extended the Act's jurisdiction to retaliation claims of employees whose employment was not regulated by the Act base their reasoning on the language of Section 215(a)(3), which states:
it shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on any industry committee.29 U.S.C. § 215(a)(3) (emphasis added). These courts reason that in using the term "any person" rather than "employer," and the term "any employee" rather than employee engaged in interstate commerce or the production of goods for interstate commerce, as used elsewhere in the Act, Congress intended to extend the coverage of the anti-retaliation provision to individuals who are not actually covered by the wage and hour provisions of the Act. The primary problem with this reasoning is that it divorces the anti-retaliation provision from any basis for the exercise of regulatory power under the Commerce Clause and would therefore extend the reach of the statute to purely intrastate employment which has no affect on interstate commerce. As the Supreme Court has recently noted, "the grant of authority to Congress under the Commerce Clause, though broad, is not unlimited." Solid Waste Agency v. United States Army Corps of Eng'rs, 121 S.Ct. 675, 683 (2001) (citing United States v. Morrison, 529 U.S. 598, 120 5. Ct. 1740 (2000); United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624 (1995)).
Although the FLSA was amended in 1974 to include coverage of certain employees in domestic service positions, the fact that in this one instance it chose to exercise the full extent of its Commerce Clause power does not indicate that it exercised that power in the earlier legislation.
Since Plaintiff's interpretation of the anti-retaliation provision would extend the reach of that provision far beyond the reach of Congress' Commerce Clause power it must be rejected. "Where an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly contrary to the intent of Congress."Solid Waste, 121 5. Ct. at 683 (citation omitted). The Congressional findings and statement of policy of the FLSA illustrate that Congress intended to reach only those employees engaged in interstate commerce or the production of goods for interstate commerce, or who work for an enterprise engaged in interstate commerce and not to businesses like Frank's.
Plaintiff cites Sapperstein v. Hager, 188 F.3d 852 (7th Cir. 1999), in support of his argument. In Sapperstein, the Seventh Circuit found that an action for retaliatory discharge under the FLSA could be maintained even when the underlying wage or hour claim cannot be maintained because the employer is not covered by the FLSA. See Sapperstein, 188 F.3d at 856. The district court had dismissed the case for lack of subject matter jurisdiction because the defendant in that case did not have gross sales of at least $500,000.00 and therefore could not be considered an "enterprise" engaged in commerce. See 29 U.S.C. § 203(s)(1)(iii). After finding that the district court had erred in accepting an affidavit from the defendant as the only evidence that the gross annual sales of the business was about $2,500.00 under the required amount, the Seventh Circuit stated that the plaintiff's retaliation claim provided an independent basis of jurisdiction because of the use of the term "any person" rather than "employer" in the statute. The Seventh Circuit reasoned that the fact that an employer makes slightly less than $500,000.00 should not bar a legitimate retaliation claim because Congress wanted to encourage employees to file complaints of suspected violations even if the employee was not technically covered by the FLSA wage and hour provisions. See Sapperstein, 188 F.3d at 857.
Sapperstein is distinguishable from this case because there did not appear to have been a dispute that the defendant was engaged in interstate commerce in some fashion and that the plaintiff would have been covered by the FLSA under an enterprise theory if gross sales had been at least $500,000.00. Here, Plaintiff's lack of coverage under the Act is not a mere technicality; there is simply no evidence to indicate that Frank's is either engaged in interstate commerce or the production of goods for interstate commerce. Since the employer in Sapperstein was engaged in the type of commerce that Congress chose to regulate in the FLSA but merely failed to meet the minimum dollar threshold for wage and hour coverage,Sapperstein is not precedent for extending anti-retaliation coverage to employers who are not engaged in the type of commerce that Congress chose to regulate.
Although plaintiff failed to cite Wirtz v. Ross Packaging Co., 367 F.2d 549, 550-51 (5th Cir. 1966) , in support of his position, the court there also held that an employee's discharge could be a violation of the anti-retaliation provision of the FLSA even if the employee was not covered by the wage and hour provisions. Again, Wirtz can be distinguished factually from the present case. Most importantly, the action was brought by the Secretary of Labor under the FLSA after the United States Department of Labor had already conducted a Wage-Hour investigation. Thus, there was no question that subject matter jurisdiction existed. Moreover, Wirtz involved a discriminatory discharge claim brought by employees of two businesses operated on adjoining premises and managed and directed by the same individuals. The district court had found that one of the businesses was engaged in interstate commerce, but that there was no evidence that the related business was engaged in interstate commerce. Again, there was at least some interstate commerce activity involved in the case, and there was an independent basis for federal subject matter jurisdiction that does not exist in Plaintiff's case.
Moreover, it is not even clear that Plaintiff's complaint to the New York Department of Labor would constitute protected activity as a claim "under or related" to the FLSA. Although Sapperstein held that a complaint made to a State Department of Labor was protected activity under the anti-retaliation provision, see Sapperstein, 188 F.3d at 857, the Second Circuit has taken a more conservative approach to the definition of protected activity under this provision than have other Circuits. For example, in Lambert v. Genesee Hosp., 10 F.3d 46, 55 (2d Cir. 1993), the Second Circuit interpreted the FLSA anti-retaliation provision as applying only to the conduct specified in the statute, and therefore found that complaints made to employers were not protected activity under the FLSA. Although there was no complaint to a State authority in Lambert, the Second Circuit's narrow reading of the anti-retaliation provision suggests that it would be inappropriate to retain jurisdiction over this case where there is no evidence of any connection to interstate commerce and where the Plaintiff's complaint was made to the New York State Department of Labor.
Put simply, this is not a case arising out of the FLSA or any other federal statute. Rather, it is a case that arises out of possible violations of the New York Labor Law, including its provision against retaliation. Dismissing the Complaint will not deny Plaintiff a remedy for the retaliation of which he complains; it will simply require him to pursue his claim under the law of the State of New York which is the law he sought to invoke when he made the complaint that resulted in the complained of retaliation.
Since there is no federal jurisdiction over either Plaintiff's claim for overtime wages or retaliation the complaint must be dismissed. Leave to amend the complaint is denied since the proposed amendments will not cure the jurisdictional defects.
For the reasons set forth above, Defendant's motion for summary judgment is granted and the complaint is dismissed for lack of subject matter jurisdiction. Plaintiff's motion to amend the complaint is denied.