Westchester Foreign Autos, Inc.

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11 Civ. 6091 (ER) (S.D.N.Y. Feb. 28, 2013)

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11 Civ. 6091 (ER)


MANUEL PEREZ, FAUSTO GONZALEZ, EDDY PEÑA, LUIS OLIVIER, and HERMIS JIMENEZ, individually and on behalf of all other employees similarly situated, Plaintiffs, v. WESTCHESTER FOREIGN AUTOS, INC. d/b/a WESTCHESTER TOYOTA, BAY RIDGE AUTOMOTIVE MANAGEMENT CORP., CARMELO GIUFFRE, JOHN GIUFFRE, JR., RICHARD PRAGER and JOHN DOES #1-10, jointly and severally, Defendants.

Appearances: Brent E. Pelton Taylor B. Graham Pelton & Associates PC New York, New York Attorneys for Plaintiffs John Schuyler Brooks Marc B. Zimmerman Denise J. D'Ambrosio Chryssa V. Valletta Phillips Nizer LLP New York, New York Attorneys for Defendants



Brent E. Pelton
Taylor B. Graham
Pelton & Associates PC
New York, New York
Attorneys for Plaintiffs
John Schuyler Brooks
Marc B. Zimmerman
Denise J. D'Ambrosio
Chryssa V. Valletta
Phillips Nizer LLP
New York, New York
Attorneys for Defendants
Ramos, D.J. :

Plaintiffs Manuel Perez ("Perez"), Fausto Gonzalez ("Gonzalez"), Eddy Peña ("Peña"), Luis Olivier ("Olivier"), and Hermis Jimenez ("Jimenez," and collectively, "Plaintiffs") bring this suit individually and on behalf of all other employees similarly situated against Defendants Westchester Foreign Autos, Inc. d/b/a Westchester Toyota ("Westchester Toyota"), Bay Ridge Automotive Management Corp. ("BRAM"), Carmelo Guiffre ("Guiffre"), John Guiffre, Jr. ("Guiffre Jr."), Richard Prager ("Prager"), and John Does #1-10 ("Doe Defendants," and collectively, "Defendants") pursuant to the Fair Labor Standards Act ("FLSA") and New York Labor Law. Pending before this Court is Defendants' motion to dismiss Plaintiffs' Amended Complaint. For the reasons set forth below, Defendants' motion is DENIED.

I. Factual Background

The following facts have been taken from the allegations in the Amended Complaint, which the Court accepts as true for purposes of this motion. Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010). They do not constitute findings of the Court.

At all times relevant to the Amended Complaint, Plaintiffs were sales consultants and sales managers at Defendants' automobile dealership, Westchester Toyota, located in Yonkers, New York. Am. Compl. ¶ 1. Plaintiffs Perez, Olivier and Jimenez were sales consultants. Id. ¶ 17. Perez worked at Westchester Toyota from May 2010 through June 2011, id. ¶¶ 47, 48, Olivier worked at Westchester Toyota from February 2009 to December 2011, id. ¶ 73, and Jimenez worked at Westchester Toyota from February 2009 to November 2011. Id. ¶ 80.

Plaintiffs Gonzalez and Peña began their employment at Westchester Toyota as sales consultants and eventually were promoted to sales managers. Id. ¶¶ 18, 57, 67. Gonzalez began working for Defendants in 1999. Id. ¶ 57. He was a sales consultant from September 2005 to October 2006, and a sales manager from that point until he left Westchester Toyota in 2009. Id. ¶ 57. Peña worked at Westchester Toyota from October 2003 to September 2010 and again from January 2011 to May 2011. Id. ¶ 66. He worked as a sales manager from the end of 2007 until September 2010. ¶ 67. Upon information and belief, there were hundreds of other individuals employed by Defendants during the relevant time period as sales consultants and sales managers. Id. ¶ 95.

BRAM is alleged, upon information and belief, to operate at least twenty automotive dealerships in the New York City area, including Westchester Toyota. Id. ¶¶ 11, 39. Guiffre, Guiffre Jr., Prager and the Doe Defendants are alleged, upon information and belief, to be officers, directors and/or managing agents of Westchester Toyota and BRAM. Id. ¶¶ 12-15.

A. Sales Consultants' Allegations

As sales consultants, Plaintiffs were required to work at least five or six days per week, totaling between forty-five to sixty hours per week. Id. ¶¶ 49, 59, 68, 75, 82. They performed various automobile sales and leasing duties, id. ¶¶ 48, 58, 74, 81, and frequently worked in excess of their scheduled work hours in order to complete sales, assist with deliveries, or "simply attempt to sell enough cars." Id. ¶¶ 50, 59, 69, 76, 83. If, towards the end of a month, their sales were low, Perez, Olivier and Jimenez would work "many additional hours to make the minimum number of sales expected of [them]." Id. ¶¶ 50, 76, 83.

Prior to August 2010, while employed by Defendants as sales consultants, Plaintiffs were paid on a "salary plus commission" basis. Id. ¶¶ 51, 63, 70, 77, 84. Specifically, they were paid $150 in salary per week, plus commissions, notwithstanding the number of hours worked. Id. Thus, if Plaintiffs did not make any sales in a given week, they would only receive the base salary of $150 for that week. Id. In the event that Perez, Peña, and Gonzalez, specifically, did not sell at least ten cars per month, "the base salary of $150 would become a 'draw,'" which would then be deducted from their pay in the following month. Id. ¶¶ 53, 64, 70.

In or around August 2010, Defendants implemented a new draw system through which sales consultants would receive their base salaries of $150, plus a draw of up to $150 against future commissions. Id. ¶¶ 54, 79, 86. In the event that a sales consultant was paid a $150 draw during a week for which their sales were under $150, that draw would later be deducted from their commissions in the next week they made commissions of $150 or more. Id. ¶ 54. Plaintiffs aver that sales consultants were thus paid only $150 "free and clear" weekly, as the "draw of up to $150 was simply an advance that had to be paid back to Defendants." Id.

To illustrate, Plaintiffs allege that for the pay period ending on December 19, 2010, Perez was paid $150 in salary, plus $61.54 in commissions, plus $88.46 as a draw, totaling the weekly minimum of $300. Id. ¶ 54. The following week, for the pay period ending on December 26, 2010, Perez was paid $150 in salary, plus $934 in commission, less the $88.46 paid to Perez as a draw in the previous pay period, totaling $995.54 in gross wages. Id. Plaintiffs allege that because sales consultants were required to work between forty-five and sixty hours per week, in the weeks in which sales consultants made minimal commissions or no commissions at all, Defendants failed to compensate them for all hours worked at minimum wage. Id. ¶ 55.

Moreover, Plaintiffs allege that they regularly worked in excess of ten hours per day, but never received an additional hours' pay at the minimum wage for spread-of-hours shifts. Id. ¶¶ 56, 78, 85. They also allege that deductions were taken from their earned wages for reasons such as, inter alia, customer ratings below "excellent," "for not meeting the sales quota of selling at least ten cars each month," for reporting late to work, and for receiving a negative report from a "secret shopper." Id. ¶ 88. Such deductions came at random times and in various dollar amounts throughout Plaintiffs' employment, after their commissions had been earned, and without regard to whether they brought Plaintiffs' wages below minimum wage for all hours worked. Id.

B. Sales Managers' Allegations

As sales managers, Plaintiffs Gonzalez and Peña were paid on a salary plus commission basis and were required to work, at minimum, forty-five hours per week. Am. Compl. ¶¶ 59, 65, 69, 71. Their weekly salaries were $300 plus commission or a draw against future commissions. Id. Their commissions were based on the gross profits of their sales teams on a monthly basis. Id. ¶¶ 65, 71. Accordingly, Gonzalez and Peña, as sales managers, received commissions on a monthly basis. Id.

As a result, there were many weeks in which, for example, Gonzalez was only paid $300 in salary plus a draw against his future commissions. Id. ¶ 65. Therefore, in those weeks Gonzalez was only paid $300 "free and clear." Id. Peña was paid $300 weekly in salary, plus commissions or a draw of $500 against future commissions. Id. ¶ 71. He also earned commissions on a monthly basis based on the gross profits of his sales team. Id. There were many weeks in which he was only paid $300 plus a draw of $500 because he did not receive commissions until the gross sales of the month were calculated. Id. In those weeks, he was thus paid only $300 free and clear because the $500 was deducted from his wages at the end of any given month. Id.

Both Gonzalez and Peña allege that they regularly worked in excess of ten hours per day, but did not receive an additional hour's pay at the minimum wage for spread of hours shifts, which was a corporate policy of the Defendants. Id. ¶¶ 62, 72. Additionally, Gonzalez and Peña allege that as sales managers, they were subjected to unlawful deductions from their earned wages, including, inter alia, deductions for customer ratings below "excellent," to pay for floor mats missing or unaccounted for at the end of each month, or for the failure of a member of their sales teams to provide a customer with a "customer guest sheet." Id. ¶ 89. They further allege they were not provided any sort of breakdown as to the calculation of their commissions or wages. Id. ¶ 90. At times, they would receive paychecks that reflected that deductions had been taken but provided no explanation for the deductions. Id.

C. Additional Allegations as to All Plaintiffs

All Plaintiffs were provided "commission sheets" every Monday, which showed the breakdown of commissions made prior to the Thursday of the previous week. Am. Compl. ¶ 87. The commission sheets showed all sales consultants' commission amounts plus "bonuses, deductions, and chargebacks." Id. The "chargebacks" included a variety of categories, such as, inter alia, "ACV CHRGBACK," "ELITE DETAIL," "CERTIFICATION CHRGBACK," "AS PER RICH P. DO NOT PAY" and "CHRGBACK FOR CUST REIMBURSTMENT [sic]." Id. The amounts of these chargebacks varied in amount, and the reasons for which they were charged were never fully explained to the Plaintiffs. Id. Plaintiffs never agreed to such charges, which were allegedly taken at Defendants' discretion. Id.

In addition, all Plaintiffs allege that they received "pay plans" from Defendants when they were first hired, which Defendants periodically modified throughout the course of Plaintiffs' employment. Id. ¶ 91. Though some wage deductions were included in their "pay plans," the details were "very unclear as to when and for what reasons deductions would be made from Plaintiffs' pay." Id. Plaintiffs were required to sign the "pay plans," but Defendants rarely provided them with explanations as to the modifications they imposed. Id. All Plaintiffs signed such "pay plans," which stated they would be paid weekly. Id. ¶ 92. There was no contrary indication that they would earn their commissions on any other basis. Id.

The Amended Complaint asserts that the commissions paid to "Plaintiffs," including presumably Gonzalez and Peña who were sales managers, as well as the "Sales Consultants Collective Action" and the "Sales Consultant Class" were to be calculated on a weekly basis. Am. Comp. ¶ 92. However, other paragraphs of the Amended Complaint make clear that sales managers such as Plaintiffs Gonzalez and Peña were paid a weekly base salary and commissions that were calculated on a monthly, not weekly, basis. Id. ¶¶ 65, 71.

Plaintiffs further allege that Defendants confiscated sales bonuses that were sent from the car manufacturer, Toyota, and intended to reward Plaintiffs for meeting and exceeding sales quotas. Id. ¶ 93.

Based on the foregoing facts, Plaintiffs allege that Defendants have violated the FLSA, 29 U.S.C. §§ 201 et seq., 206, 215(a)(2), for failure to pay minimum wages; New York Labor Law §§ 663(1), 196-d, for failure to pay minimum wages, failure to pay spread of hours wages, and for taking illegal wage deductions; and New York common law for breach of contract related to the Toyota sales bonus payments.

While Defendants have moved to dismiss the Amended Complaint in its entirety, Doc. 51, their memorandum of law in support of the motion does not challenge the unpaid spread-of-hours counts (Counts 3 and 8), or the breach of contract counts relating to the Toyota bonus payments (Counts 5 and 10). Their sole argument as relates to these four Counts appears to be that the Court should decline to exercise jurisdiction over them in the event it dismisses the sole federal claims in the Amended Complaint—Counts One and Six—which allege FLSA violations for failure to pay minimum wage to the sales consultants and sales managers, respectively. See Defs.' Mem. L. Supp. Mot. Dismiss ("Defs.' Mem.") 11, Doc. 54.

II. Procedural History

Plaintiffs commenced the instant action on August 31, 2011. The parties appeared for an initial conference on February 17, 2012 before the Honorable Colleen McMahon, and on February 24, 2012, the case was reassigned to the undersigned. Plaintiffs filed an Amended Class and Collective Action Complaint on March 19, 2012. On April 6, 2012, the parties appeared before this Court for a pre-motion conference, at which the Court granted Defendants leave to file the instant motion.

Additionally, on May 29, 2012, the Court granted Plaintiffs leave to file a motion to conditionally certify the collective action pursuant to the FLSA, 29 U.S.C. §216(b). On July 30, 2012, the Court received notification from Defendants that they would not oppose Plaintiffs' motion, and on August 3, 2012, the Court granted Plaintiffs' motion.

III. Legal Standard

A. Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6)

When ruling on a motion to dismiss pursuant to Rule 12(b)(6), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Famous Horse Inc., 624 F.3d at 108. However, the court is not required to credit "mere conclusory statements" or "[t]hreadbare recitals of the elements of a cause of action." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). More specifically, the plaintiff must allege sufficient facts to show "more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556). Federal Rule of Civil Procedure 8 "marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 678-79. If the plaintiff has not "nudged [his] claims across the line from conceivable to plausible, [the] complaint must be dismissed." Twombly, 550 U.S. at 570; see also Iqbal, 556 U.S. at 680.

"[T]he purpose of Federal Rule of Civil Procedure 12(b)(6) 'is to test, in a streamlined fashion, the formal sufficiency of the plaintiff's statement of a claim for relief without resolving a contest regarding its substantive merits,'" and without regard for the weight of the evidence that might be offered in support of Plaintiff's claims. Halebian v. Berv, 644 F.3d 122, 130 (2d Cir. 2011) (quoting Global Network Commc'ns, Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir. 2006)).

Though a plaintiff may plead facts alleged upon information and belief, "where the belief is based on factual information that makes the inference of culpability plausible," Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010), such allegations must be "'accompanied by a statement of the facts upon which the belief is founded.'" Navarra v. Marlborough Gallery, Inc., 820 F. Supp. 2d 477, 485 (S.D.N.Y. 2011) (quoting Prince v. Madison Square Garden, 427 F. Supp. 2d 372, 385 (S.D.N.Y. 2006)); see also Williams v. Calderoni, No. 11 Civ. 3020 (CM), 2012 WL 691832, at *7 (S.D.N.Y. Mar. 1, 2012) (finding pleadings on information and belief insufficient where plaintiff pointed to no information that would render his statements anything more than speculative claims or conclusory assertions). A complaint that "tenders naked assertions devoid of further factual enhancement" will not survive a motion to dismiss under Rule 12(b)(6). Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557) (internal quotation marks omitted) (brackets omitted).

B. Extrinsic Materials

In ruling on a motion to dismiss pursuant to Rule 12(b)(6), a district court generally must confine itself to the four corners of the complaint and look only to the allegations contained therein. Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). The court, however, may consider a document that is attached to the complaint, incorporated by reference or integral to the complaint, provided there is no dispute regarding its authenticity, accuracy or relevance. DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (citations omitted). Where other extrinsic materials are submitted to the court for consideration in connection with a 12(b)(6) motion, the additional materials must either be excluded, or the motion must be converted to one for summary judgment under Fed. R. Civ. P. 56 after affording the parties the opportunity to conduct appropriate discovery and submit additional supporting materials. Fed. R. Civ. P. 12(d); Friedl v. City of New York, 210 F.3d 79, 83 (2d Cir. 2000).

Here, Plaintiffs have attached several of their pay stubs to the Complaint, which are therefore properly before the Court on the instant motion. Defendants have submitted several extrinsic documents and argue that the Court should consider them on their motion to dismiss, as well. Specifically, Defendants have submitted a declaration by Defendant Prager—with certain of Plaintiffs' W-2 Forms and executed "pay plans" appended thereto—and a declaration by John Coscia, Chief Financial Officer of BRAM, both of which attempt to refute the facts as pleaded in the Amended Complaint. Docs. 52, 53. However, since the purpose of a Rule 12(b)(6) motion is to test the legal sufficiency of the pleadings without considering the substantive merits of the case, Global Network Commc'ns, Inc., 458 F.3d at 155, the Court has not considered any of the declarations or exhibits submitted by Defendants in ruling on the instant motion.

IV. Discussion

A. Plaintiffs' Claims Against BRAM and the Guiffre Defendants

Defendants BRAM Guiffre and Guiffre Jr. move to dismiss the Amended Complaint as against them because they assert that they were not Plaintiffs' "employer" as that term is defined by the FLSA. Defs.' Mem. 5-9. The FLSA imposes liability on the employer—defined as an entity "acting directly or indirectly in the interest of an employer in relation to an employee," 29 U.S.C. § 203(d)—of any employee who is subjected to violations. Paz v. Piedra, 09 Civ. 3977 (LAK) (GWG), 2012 WL 121103, at *4 (S.D.N.Y. Jan. 12, 2012) (citing 29 U.S.C. §§ 216(b), (e)(2)). The FLSA's definition of "employer" may apply to "an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons," 29 U.S.C. §§ 203(a), (d), and the Department of Labor regulations promulgated under the FLSA state that an individual may be employed by more than one entity. Chen, 364 F Supp. 2d at 277-78 (citing 29 C.F.R. § 791.2(a)).

Courts in this Circuit "hold that the New York Labor Law embodies the same standards for joint employment as the FLSA." Chen v. St. Beat Sportswear, Inc., 364 F. Supp. 2d 269, 278 (E.D.N.Y. 2005) (citing cases).

The regulations promulgated under the FLSA expressly recognize that a worker may be employed by more than one entity at the same time. 29 C.F.R. § 791.2(a); see also Zheng v. Liberty Apparel Co., 355 F.3d 61, 66 (2d Cir. 2003); Torres-Lopez v. May, 111 F.3d 633, 639-45 (9th Cir. 1997) (permitting claims against joint employers under FLSA). Thus, an entity may be held liable under the FLSA as an employer if, as a matter of "economic reality," the entity functions as an individual's employer. Zheng, 355 F.3d at 66 (quoting Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33, (1961) (explaining that "'economic reality' rather than 'technical concepts' is ... the test of employment' under the statute")); see also Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999) ("[T]he overarching concern is whether the alleged employer possessed the power to control the workers in question.").

The Second Circuit has articulated that if a purported employer: "(1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records," then such an individual or entity may be held liable under the FLSA. Carter v. Dutchess Cmty. Coll., 735 F.2d 8, 12 (2d Cir. 1984). However, the Second Circuit subsequently held that the Carter test for "formal control" over employees was

sufficient but not necessary to establish joint employment because an entity that lacks formal control may nevertheless exercise "functional control," as reflected by six non-exclusive factors: (1) whether the purported joint employer's premises and equipment were used for plaintiffs' work; (2) whether plaintiffs belonged to an organization that could or did shift as a unit from one putative joint employer to another; (3) the extent to which plaintiffs performed a discrete line job that was

integral to the purported joint employer's process of production; (4) whether responsibility under the contracts could pass from one vendor to another without material changes; (5) the degree to which the purported joint employer supervised plaintiffs' work; and (6) whether plaintiffs worked exclusively or predominantly for the purported joint employer.

Godlewska v
. HDA, CV-03-3985 (RJD) (JMA), 2013 WL 25649, at *8 (E.D.N.Y. Jan. 2, 2013) (quoting Zheng, 355 F.3d at 72. Thus, district courts are required to examine "the circumstances of the whole activity . . . viewed in light of economic reality." Zheng, 355 F.3d at 71 (internal citations and quotation marks omitted). A district court is also "free to consider any other factors it deems relevant to its assessment of the economic realities." Id. at 71-72.

Plaintiffs assert that on the facts presented, a cause of action under the FLSA may be made out against BRAM pursuant to the "single integrated enterprise" theory, and against Guiffre and Guiffre Jr. pursuant to the "joint employer" theory. Pls.' Mem. L. Op. to Defs.' Mot. Dismiss ("Pls.' Mem.") 8. Accepting Plaintiffs' allegations as true, Famous Horse Inc., 624 F.3d at 108, the Court finds that at this stage of the litigation, Plaintiffs have offered sufficient factual matter to be "entitled to offer evidence to support [their] claims." Sikhs for Justice v. Nath, No. 10 Civ. 2940 (RWS), 2012 WL 4328329, at *15 (S.D.N.Y. Sept. 21, 2012).

1. Defendant BRAM

A "single employer" situation exists where two nominally separate entities are actually part of a single integrated enterprise. Clinton's Ditch Coop. Co. v. NLRB, 778 F.2d 132, 137 (2d Cir. 1985) (citing NLRB v. Browning-Ferris Indus. of Pa., Inc., 691 F.2d 1117, 1122 (3d Cir. 1982)). In such circumstances, of which examples may be parent and wholly-owned subsidiary corporations, or separate corporations under common ownership and management, the nominally distinct entities can be deemed to constitute a single enterprise. Arculeo v. On-Site Sales & Mktg., LLC, 425 F.3d 193, 198 (2d Cir. 2005) (citing Cook v. Arrowsmith Shelburne, Inc., 69 F.3d 1235, 1240-41 (2d Cir.1995)). "There is well-established authority under this theory that, in appropriate circumstances, an employee, who is technically employed on the books of one entity, which is deemed to be part of a larger 'single-employer' entity, may impose liability for certain violations of employment law not only on the nominal employer but also on another entity comprising part of the single integrated employer." Id.

In determining whether multiple defendants constitute a single employer, courts consider the following factors: (1) interrelation of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership or financial control. See Cook, 69 F.3d at 1240; see also Bricklayers & Allied Craftworkers Local 2 v. C.G. Yantch, Inc., 316 F. Supp. 2d 130, 143 (N.D.N.Y. 2003). However, whether a particular defendant can be considered a plaintiff's "employer" is a fact-specific inquiry. Thus, on a motion to dismiss, the relevant inquiry is whether a defendant has been put "on notice of the theory of employer liability." See Addison v. Reitman Blacktop, Inc., 283 F.R.D. 74, 84 (E.D.N.Y. 2011) (quoting Fowler v. Scores Holding Co., Inc., 677 F. Supp. 2d 673, 681 (S.D.N.Y. 2009)); see also Zhong v. August August Corp., 498 F. Supp. 2d 625, 628-29 (S.D.N.Y. 2007) (holding that an FLSA complaint is sufficient under the liberal pleading requirements of Rule 8(a) if the pleading enables the defendant to conclude that the "plaintiff is asserting that an employee-employer relationship existed between the parties" and alleges that the defendant meets the FLSA definition of an enterprise engaged in commerce).

In their Amended Complaint, Plaintiffs "do not simply state that [BRAM is] Plaintiffs' joint employer[] or offer only a rote recital of recognized factors." Flemming v. REM Conn. Cmty. Servs., Inc., No. 11 Civ. 689 (JBA), 2012 WL 6681862, at *3 (D. Conn. Dec. 21, 2012). Rather, they have alleged that BRAM is a domestic corporation operating at least twenty automotive dealerships in the New York City area, including Westchester Toyota, Am. Compl. ¶ 11, all twenty automotive dealerships owned by BRAM are operated together as a single business enterprise, id., that BRAM is a parent company of Westchester Toyota, id. ¶ 39, and defines itself as one of the largest family-owned group of automotive dealerships in the United States, id. ¶ 40, and that Plaintiffs were issued an employee handbook that was provided to all BRAM affiliate dealership employees, which contained "Company" policies regarding timekeeping, paydays, advances, employee loans, work schedules, pay deductions, and setoffs. Id. ¶ 45. While these allegations are made upon information and belief, they are "'accompanied by a statement of the facts upon which the belief is founded.'" Navarra, 820 F. Supp. 2d at 485. Specifically, the Amended Complaint refers to Defendant Westchester Toyota's website, which asserts that Defendants operate "one of the largest family-owned group of automobile dealerships in the United States." Am. Compl. ¶ 40. Plaintiffs also cite to the employee handbook titled "Bay Ridge Automotive Management Corp. and All Affiliated Dealerships Employee Handbook," which is provided to all new employees and includes a letter from Defendant Guiffre as Chairman and President of BRAM Corp. Id. ¶ 45. The letter defines the "Company" as BRAM and its affiliated dealerships, and, among other things, provides policies regarding timekeeping, paydays, advances and employee loans, work schedules, and pay deductions and setoffs. Id.

"Taken as a whole, these allegations raise a reasonable expectation that discovery will reveal evidence that [BRAM] is an employer of the plaintiffs and the members of the putative class within the meaning of the FLSA" pursuant to both the formal and functional control tests as outlined above. Hart v. Rick's Cabaret Int'l, Inc., No. 09 Civ. 3043 (JGK), 2010 WL 5297221, at *3 (Dec. 20, 2010) (citing Twombly, 550 U.S at 556) (internal quotation marks omitted). Accordingly, Defendants' motion to dismiss BRAM from the action is DENIED.

2. The Guiffre Defendants

Defendants make no arguments as to Defendant Prager or the Doe Defendants in their motion papers. Accordingly, the Court does not consider the viability of any claims against those Defendants.

Officers and owners of corporations may be deemed employers under the FLSA where "the individual has overall operational control of the corporation, possesses an ownership interest in it, controls significant functions of the business, or determines the employees' salaries and makes hiring decisions." Ansoumana v. Gristede's Operating Corp., 255 F. Supp. 2d 184, 192 (S.D.N.Y. 2003) (citation omitted); see also Nichols v. Mahoney, 608 F. Supp. 2d 526, 548 (S.D.N.Y. 2009) ("Individuals with significant decision-making authority over a company may be liable as employers under the FLSA.") (citation omitted). Plaintiffs have alleged, inter alia, that Guiffre is the president and chairperson of BRAM, that Guiffre Jr. is a vice president of BRAM, and that both have, at all relevant times, owned and operated all BRAM automotive dealerships. Am. Compl. ¶¶ 42-44. Plaintiffs have additionally alleged that the Guiffres have input and control over the policies and practices of BRAM and Westchester Toyota, id. ¶¶ 44-45, maintained operational control over all of BRAM's automotive dealerships, id. ¶¶ 42-44, and knew of the allegedly unlawful practices that violated the FLSA and the New York Labor Law, but failed to act to correct such action. Id. ¶¶ 42-43. Moreover, the Guiffres are alleged, upon information and belief, to have the power to hire and fire employees, and to determine the manner in which Plaintiffs were compensated. Id. These allegations are alone sufficient to establish that the Guiffres may be considered "employers" under the FLSA, and as discussed in connection with BRAM's status above, are supported by references to BRAM's employee handbook and the Westchester Toyota website. Id. ¶¶ 40, 45. Accordingly, Defendants' motion to dismiss as to Guiffre and Guiffre Jr. is DENIED.

A. Plaintiffs' Compensation Claims

1. Minimum Wage Violations Pursuant to the FLSA

The FLSA mandates that "[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce" a statutory minimum wage—currently of $7.25 an hour. 29 U.S.C. § 206(a). In order to sufficiently plead a claim under the minimum wage provision of the FLSA, a Plaintiff must allege: (1) that there existed between the plaintiff and defendant an "employee-employer relationship;" (2) that the employee's work involved interstate activity; (3) the amount of hours worked for which wages were not received; and (4) where a plaintiff brings an FLSA claim for and on behalf of himself and other employees similarly situated, who those other employees are, and facts that would entitle them to relief. Zhong, 498 F. Supp. 2d at 628 (quoting 29 U.S.C. §§ 206(a), 207(a)(1), 216(b)). Here, Defendants dispute the claim that Plaintiffs were not paid minimum wage for all hours worked. Defs.' Mem. 11-16. In support of their argument, Defendants assert that the weekly draws Plaintiffs received should be considered when calculating whether Plaintiffs were paid minimum wage. Accounting for the draws, Defendants conclude that Plaintiffs were paid at least enough to meet the FLSA minimum wage requirements.

The hourly minimum wage under the FLSA has changed throughout the period of Plaintiffs' employment at Westchester Toyota. Employers have been required to pay employees "$.5.85 an hour, beginning on the 60th day after May 25, 2007; $6.55 an hour, beginning 12 months after that 60th day; and $7.25 an hour, beginning 24 months after that 60th day." 29 U.S.C. § 206(a)(1)(A)-(C). Prior to the enactment of the current version of § 206, the FLSA mandated a minimum wage of "not less than $5.15 an hour beginning September 1, 1997." 29. U.S.C. § 206 (1996), amended by 29 U.S.C. § 206 (2007). Because Plaintiffs were employed by Westchester Toyota at varying times between 1999 and 2011, they were entitled to several different minimum wage requirements depending on the time of their employment.

However, Defendants fail to acknowledge that a "minimum wage must be paid free and clear of any deductions or kickbacks to the employer." Morangelli v. Chemed Corp., 10 Civ. 0876 (BMC), 2013 WL 432571, at *14 (E.D.N.Y. Feb. 4, 2013) (quoting Teoba v. Trugreen Landcare LLC, 769 F. Supp. 2d 175, 180 (W.D.N.Y. 2011) (quotation marks omitted); Ramos-Barrientos v. Bland, 661 F.3d 587, 594 (11th Cir. 2011). Regulations adopted under the FLSA state that:

Whether in cash or in facilities, "wages" cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or "free and clear." The wage requirements of the Act will not be met where the employee "kicks-back" directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee. This is true whether the "kick-back" is made in cash or in other than cash.

29 C.F.R. § 531.35 (emphasis added). Thus, "employers may not require that their employees give any money back to them, such that an employees' resulting compensation falls below the minimum wage," Jin M. Cao v. Wu Liang Ye Lexington Rest., Inc., 08 Civ. 3725 (DC), 2010 WL 4159391, at *3 (S.D.N.Y. Sept. 30, 2010), and accordingly, "any money an employee kicks back directly or indirectly to the employer or another person for the employer's benefit must be excluded from calculating the employee's actual wages." Teoba, 769 F. Supp. 2d at 184 n.4 (quotation marks and citations omitted); see also Yu G. Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240, 256 (S.D.N.Y. 2008) ("Wages that the employee is required to return directly or indirectly to the employer . . . must be subtracted for purposes of calculation of wages.") (quotation marks and citation omitted).

Defendants further urge the Court to assess the wages Plaintiff earned as based on yearly earnings divided by the amount of hours worked. Defs.' Mem. 15. However, the "Supreme Court has emphasized the importance of paying an employee's minimum wage on a weekly basis." Marshall v. Sam Dell's Dodge Corp., 451 F. Supp. 294, 302 (N.D.N.Y. 1978) (citing Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 707-08 (1945)). "The Second Circuit has, likewise, in United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487 (2d Cir. 1960), indicated that the workweek is the applicable time period for calculating the minimum wage." Id. In Marshall, the defendant car dealership paid its salespeople a minimal weekly base salary, which was augmented by commissions and bonuses, causing employees to receive less than minimum wage for the weeks in which they only received base pay. There, the court found that the weekly payments that exceeded minimum wage requirements did not offset other weekly payments that did not meet minimum wage requirements. Accordingly, the defendant remained liable for such deficiencies, which were assessed on a weekly basis. Id.

In the instant matter, Plaintiffs have sufficiently alleged that sales consultants were paid less than minimum wage in weeks that they worked at least forty-five hours and were paid $150—a rate of $3.33 an hour, at most—regardless of whether they made in excess of minimum wage in other weeks. Additionally, Plaintiffs have sufficiently alleged that sales managers employed by Defendants worked, at minimum, forty-five hours per week and, in some weeks, were paid $300—an hourly rate of $6.67, at most. Because the minimum wage under the FLSA exceeded $6.67 only as of July 24, 2009, 29 U.S.C. § 206(a), it would appear that sales managers were deprived of minimum wage thenceforth, but not before. Because both Gonzalez and Peña are alleged to have worked as sales managers on July 24, 2009, they have met the minimum threshold pleading requirements of Fed. R. Civ. P. 8 to state a claim for violation of minimum wage.

Even in 1999, the earliest point at which any of the named Plaintiffs worked at Westchester Toyota, the minimum hourly wage pursuant to the FLSA exceeded $3.33. See supra n.5.

Plaintiffs also adequately allege that prior to August 2010, there were some weeks in which the $150 base salary for sales consultants was deducted as a draw in future weeks, meaning that for those weeks they were paid nothing at all. Am. Compl. ¶¶ 53, 64, 70.

Defendants suggest that the Gonzalez and Peña, as sales managers, are exempt from minimum wage requirements because they were "compensated on a salary basis at a rate of not less than $455 per week." Defs.' Mem. 10 (citing 29 C.F.R. § 541.600(a)). This assertion is contrary to the facts alleged in the Amended Complaint, and—at the 12(b)(6) stage of this litigation—must be disregarded.

As stated in Marshall, "[r]egardless of the total pay received by an employee, the [FLSA] requires that each employee receive, each week, an amount equal to the minimum wage times the number of hours worked." 451 F. Supp. at 303. Accordingly, Defendants' motion to dismiss Plaintiffs' FLSA claims for violations of minimum wage is DENIED.

Defendants urge the Court to engage in an arithmetic calculation that they claim will establish that each of the Plaintiffs was, over the course of the calendar years in question, paid at least the minimum wage for each hour they worked. Defs. Mem. 13 n.10, 16. There are two problems with this suggestion. First, it requires the Court to rely on the Plaintiff's W-2 forms, which are extrinsic to the Amended Complaint. Second, such a calculation can only establish the average that Plaintiffs were paid in the relevant settlement period—which is alleged to be weekly in the Amended Complaint—and cannot rebut an assertion that Plaintiffs were paid less than the minimum wage in particular weeks.

2. Illegal Deductions Pursuant to the New York Labor Law

Pursuant to the New York Labor Law, an employer may deduct any amount from an employee's wages only if such deductions are either "made in accordance with the provisions of any law or any rule or regulation issued by any governmental agency," or "expressly authorized in writing by the employee and are for the benefit of the employee." N.Y. Lab. Law § 193(1); Jin M. Cao, 2010 WL 4159391, at *3. Any other form of a deduction made by an employer from an employee's final compensation may be unlawful, depending on the timing of the deduction; if an employee is paid on a commission basis, the New York Labor Law permits deductions made before—but not after—the commissions were earned. Gold v. N.Y. Life Ins. Co., 09 Civ. 3210 (WHP), 2011 WL 2421281, at *6 (S.D.N.Y. May 19, 2011) (citing Pachter v. Bernard Hodes Grp., Inc., 891 N.E.2d 279, 284 (N.Y. 2008). "An employer and employee can agree about the point in time when a commission becomes 'earned' . . . [but] [a]bsent such agreement, courts apply the New York common law rule that a commission is earned when 'a ready, willing and able purchaser of services' is produced." Id. (citing Pachter, 891 N.E.2d at 284-85). "[T]he purpose of § 193 is to prohibit employers from making unauthorized deductions from wages . . . to place the risk of loss for such things as damaged, spoiled merchandise, or lost profits on the employer." Maldonado v. La Nueva Rampa, Inc., 10 Civ. 8195 (LLS) (JLC), 2012 WL 1669341, at *8 (S.D.N.Y. May 14, 2012) (quoting Ireton-Hewitt v. Champion Home Builders Co., 501 F. Supp. 2d 341, 353 (N.D.N.Y.2007)).

Here, Plaintiffs have alleged that deductions were taken from their earned wages for reasons such as, inter alia, "custom ratings below 'excellent,'" "for not meeting the sales quota of selling at least ten cars each month," for reporting late to work, and for "receiving a negative report from a 'secret shopper,'" and that such deductions were taken at random times and in various dollar amounts, after their commissions had been earned, and without regard to whether they brought Plaintiffs' wages below minimum wage for all hours worked. Am.Compl. ¶ 88. They further allege that "chargebacks" were taken from the sales consultants' pay for reasons such as, inter alia, "ACV CHRGBACK," "ELITE DETAIL," "CERTIFICATION CHRGBACK," "AS PER RICH P. DO NOT PAY" and "CHRGBACK FOR CUST REIMBURSTMENT [sic]," id., which they allege were not included in their pay plans, and came without explanation at the discretion of Defendants. Id. ¶¶ 87. Because the deductions and chargebacks that Plaintiffs allege were not made in accordance with any law or regulation, nor were they expressly authorized by the Plaintiffs, and were alleged to have been taken after wages were earned, Plaintiffs have satisfied the standard as set forth in Fed. R. Civ. P. 8 to sufficiently plead their illegal deductions claims. Moreover, at least in part, the deductions "appear[] to have been intended to shift the 'risk of loss' from Defendants to [Plaintiffs], which the law does not allow." Maldonado, 2012 WL 1669341, at *8. Accordingly, Defendants motion to dismiss on these grounds is DENIED.

Defendants urge the Court to rely on the "pay plans" executed by each of the Plaintiffs in connection with their employment at Westchester Toyota to establish that Plaintiffs expressly consented to the various deductions. Defs.' Mem. 12. However, in addition to being extrinsic to the Amended Complaint, a cursory review of the pay plans submitted by Defendants show that some of the deductions alleged by the Plaintiffs to have been improperly taken are not explicitly listed in the plans. --------

V. Conclusion

For the reasons set forth above, Defendants' motion to dismiss is DENIED. The Clerk of the Court is respectfully directed to terminate the motion, Doc. 51.

The parties are directed to appear for an initial conference on March 19, 2013 at 10:30 a.m. SO ORDERED. Dated: February 28, 2013

White Plains, New York


Edgardo Ramos, U.S.D.J.