By Marjorie Johnson, J.D.
Restaurant employees who successfully litigated their minimum wage and overtime claims under the FLSA and New York Labor Law (NYLL) were properly awarded only NYLL liquidated damages, the Second Circuit ruled, relying on its recent holding in Rana v. Islam that double recovery was not available under the FLSA. Concurring, Judge Guido Calabresi expressed his view that certification to New York’s highest court may be necessary to the extent Rana may be viewed as holding that the NYLL does not allow double recovery. The per curium court also affirmed the district court’s ruling that one of the restaurant’s co-owners could not be personally liable since he was not an “employer” (Tapia v. BLCH 3rd Ave. LLC dba Brick Lane Curry House, October 1, 2018, per curiam).
Won on merits. Three former employees of a Manhattan restaurant sued their employer and its two co-owners asserting violations of the FLSA and NYLL minimum and overtime pay provisions, amongst other things. After a bench trial, the district court found in their favor, but held that they were only entitled to NYLL liquidated damages and that one of the co-owners could not be held personally liable since he was not an employer.
No doubling of liquidated damages. The Second Circuit rejected the employees’ assertion that they were entitled to recovery of liquidated damages under both the NYLL and FLSA since their argument for double recovery was squarely foreclosed by Rana. In that case, the appeals court vacated a judgment under the FLSA in favor of a larger judgment under the NYLL since the FLSA does not allow duplicative liquidated damages. In affirming the denial of double damages in this case, the Second Circuit explained that though Rana contained “dicta” regarding the NYLL’s treatment of duplicative recovery, it was relying solely upon its holding with regard to the FLSA to affirm the district court’s decision not to award cumulative liquidated damages.
Co-owner not employer. The district court also properly concluded that one of the co-owners could not be held personally liable since he was not an employer. Examining the four factors outlined by the Second Circuit in Carter v Dutchess Cmty. Coll, the district court looked at whether the co-owner (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.
Hire and fire. As to the first factor, there was admittedly no direct evidence that the co-owner had the power to hire or fire employees. They also did not testify that he hired or disciplined them. In fact, he testified that the general manager was the one responsible for hiring the floor manager.
Work schedules. The second factor also favored the co-owner. Though the employees testified that he regularly visited the restaurant, tasted the food, and directed employees to clean, they did claim that he controlled work schedules or other personnel decisions. They also didn’t say that he was personally aware of their hours or other conditions of employment. Instead, he testified that the general manager managed overall operations and “ran the show completely” and the employees also confirmed that the floor manager set their work schedules.
Payment. The record also did not show that the co-owner determined employees’ rates and methods of payment or signed employees’ paychecks. Rather, the floor manager paid them in cash every week. There was also no evidencing the co-owner exercised or possessed financial control over the employer, aside from his status as a significant shareholder.
Records. Finally, while the fourth Carter factor might be construed as partially weighing in the employees’ favor since the co-owner reviewed payroll records, there was no evidence that he actively maintained the records. And in any event, this factor alone was not dispositive.
Concurrence agrees on result. In his concurring opinion on the liquidated damages issue, Judge Calabresi agreed with the per curiam opinion that Rana was controlling on the issue of whether there could not be recovery under both the FLSA and NYLL. He also agreed that Rana, since it upheld damages under the NYLL and vacated damages under the FLSA, must be read as a decision interpreting the federal law. He felt compelled to write separately, however, to make clear what Rana did not hold and to “suggest how best to handle some problems that may arise in the future in view of the plethora of language in Rana about state law.”
First, the Second Circuit has not held—in the instant action or in Rana—that the FLSA “bars a state from awarding double or treble damages for the type of labor law violations at issue here.” Rather, the instant action was limited to “reading the FLSA to vacate the federal damage award, given the existence of state labor law damages.” Second, neither Rana nor this action held that “the FLSA would bar a state labor law from awarding extra damages if, and only if, federal damages were vacated as a result of the existence of state law damages.”
Suggests future certification. However, Rana could be read as concluding that FLSA damages should—as a matter of federal law—be vacated solely because New York state law does not allow double recovery, which would be a “holding” about state law rather than “dicta.” And since this issue will “most always arise in federal court,” a state court decision on what the NYLL allows may be rare. Therefore, “if there is any new reason to doubt an early federal court’s decision as to state law, the state’s highest court should be given the opportunity to weigh in.” And while it might not oblige, “the certification can make clear that our court would continue to follow our earlier language/state law holding unless the state’s highest court accepts certification and tells us that holding and reading of state law are wrong.”
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