Employment Law Daily Company president title alone does not equate to employer status
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Monday, August 8, 2016

Company president title alone does not equate to employer status

By Brandi O. Brown, J.D. Wireless service salespeople who filed suit against multiple defendants, including the president of one of the named corporations, for misclassification and wage and hour violations saw their claims against the company president dismissed by a federal district court in New York. Allegations in the employees’ complaints failed to even "come close" to adequately pleading that the president was their "employer" under the FLSA or state law, the court explained, and the plaintiffs had already declined the court’s invitation to amend their complaint. Consequently, the defendant’s motion was granted and the claims against the president were dismissed with prejudice (Vasto v. Credico (USA) LLC, August 3, 2016, Engelmayer, P.). Credico dictated training. In their complaint the plaintiffs named several defendants, including Credico, a corporation providing sales and marketing services to various industries, by way of independent sales offices (ISO), as well as its president. Also named as a defendant was the ISO for which the plaintiffs worked as well as its owner and manager. According to the plaintiffs they were hired as agents and trained under Credico’s "Management Training Program." They alleged that that program dictated the manner in which they were trained, the manner in which they were allowed to approach possible customers, the number of hours that they were required to work each week, and the manner in which they were paid and classified. Worked 72 hours per week. As alleged in their complaint, the salespeople were classified as independent contractors and paid on a commission basis. They received $10 for each qualified customer they signed up or services. They alleged that they were made to work 12 hours per day, six days per week, and that they were required to follow a strict daily schedule and meet weekly sales targets. As a result of the "extensive control" exercised over them, the plaintiffs alleged, they were employees who were "jointly employed" by the defendants. As a result of the long hours they were required to work, they alleged that they routinely earned less than the federal or state minimum wage and they were never paid overtime. Moreover, according to two of the plaintiffs, they complained that the way they were required to approach sales took away their ability to choose their own method and made them feel that they were not properly classified. They alleged that they were reprimanded and later fired in retaliation for their complaints. Although three of the defendants answered the complaint, the fourth, the president of Credico, filed a motion to dismiss, arguing that he was not an "employer" under the FLSA and state laws. Subsequently the court granted the plaintiffs’ motion for conditional certification. "Elevated title" insufficient. Resolving the president’s motion to dismiss in his favor, the court concluded that the complaint did not "come close" to adequately pleading that he was an "employer" under the FLSA, New York, and Arizona laws, all of which were analyzed the same way. Although it contained multiple allegations about the "defendants" collectively, with respect to the president the only specific allegations were that he was a resident of the state of New York and that he was the president of Credico. That allegation, the court explained, failed to "approach the level of specificity required to plead employer status under the relevant statutes." As explained in the Second Circuit’s decision in Irizarry v. Catsimatidis, an "elevated title" was not sufficient to show employer status. Other allegations of involvement were necessary. No other allegations. In this case, the court explained, the plaintiffs failed to plead any facts that would allow the court to infer the required level of involvement. They did not allege that he had the power to hire or fire agents, that he supervised or controlled their work schedules or the conditions of their employment, that he determined the method and rate of payment, or that he maintained employment records. There were no allegations of supervision of the work done by the plaintiffs. Moreover, no facts were pleaded that would allow the court to infer he had "operational control" over such factors. The complaint did not allege that he financially controlled Credico or the ISOs or that he controlled managerial staff and instructed them on employment practices. There was simply no basis for inferring that he "played any role in devising or implementing" the policies about which the workers complained. In the absence of such allegations, the court refused to infer that the executive had authority based solely on his status as the company’s president. This refusal was particularly appropriate, it explained, in light of structural considerations that could cast doubt on his authority, such as the fact that it involved a network of more than 100 ISOs. In fact, the court added, the facts that were pleaded in the complaint indicated that "key employment decisions were made at multiple levels of management within the Credico network." The cases cited by the workers did not indicate a contrary result. In fact, the court noted, other courts faced with similarly sparse factual allegations have likewise disallowed claims of individual liability. Dismissed with prejudice. Although leave to amend should be freely given, the court added, not only did the plaintiffs not request such leave, but they also declined the court’s express invitation to amend their complaint in response to the motion. Therefore the court dismissed the claims against the individual defendant with prejudice.

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