McFeeley et al v. Jackson Street Entertainment, LLC et al
Filing
56
MEMORANDUM OPINION (c/m to Clementina Ibe for Plaintiff Scharlene Alugbuo 9/15/14 sat). Signed by Chief Judge Deborah K. Chasanow on 9/15/14. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
LAURA MCFEELEY, ET AL
:
v.
:
Civil Action No. DKC 12-1019
:
JACKSON STREET ENTERTAINMENT,
LLC, ET AL
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this Fair
Labor Standards Act collective action are Plaintiffs’ motion for
partial summary judgment (ECF No. 45), and Defendants’ cross
motion for partial summary judgment (ECF No. 46). The issues
have been briefed, and the court now rules, no hearing being
deemed necessary.
Local Rule 105.6.
For the following reasons,
Plaintiffs’ motion for partial summary judgment will be granted
in part and denied in part.
Defendants’ motion for partial
summary judgment will be denied.
I.
Background
Plaintiffs
Laura
McFeeley,
Danielle
Everett,
Crystal
Nelson, Dannielle Arlean McKay, Jenny Garcia, Patrice Howell,
and Tarshea Jackson (collectively, “Plaintiffs”), on behalf of
themselves
and
all
others
similarly
situated,
filed
this
collective action against the exotic dance clubs, Fuego’s Exotic
Dance Club (“Fuego”) and Extasy Exotic Dance Club (“Extasy”),
and the individuals and entities that operate both of them:
Defendants
Jackson
Street
Entertainment,
LLC;
Risque,
LLC;
Quantum Entertainment Group, LLC; Nico Enterprises, Inc.; XTC
Entertainment
Group,
LLC;
and
Uwa
Offiah
(collectively,
“Defendants”) for violations of the minimum wage and overtime
provisions of the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§§ 201, et seq., the Maryland Wage and Hour Law (“MWHL”), Md.
Code, Lab. & Empl. §§ 3-401, et seq., and the Maryland Wage
Payment and Wage Collection Law (“MWPWC”), Md. Code Ann., Lab. &
Empl.
§§
3-501
counterclaims
et
seq.
against
unjust enrichment.1
(ECF
No.
Plaintiffs
31).
for
Defendants
breach
of
filed
contract
and
(ECF No. 32).
Defendants own and operate Fuego and Extasy exotic dance
clubs, located in Prince George’s County, Maryland.
45-1, at 3-4).
(ECF No.
Defendants have operated Fuego since 2008 and
Extasy since mid to late 2010.
(ECF No. 46-1, at 6).
Defendant
Uwa Offiah (“Mr. Offiah”) is the sole owner of both Fuego and
Extasy and holds the only financial interest in the clubs.
No.
45-10,
at
6-7).
Defendants
have
always
classified
(ECF
the
dancers at both Fuego and Extasy by contract as independent
contractors. (ECF No. 45-10, at 8, 17).
Plaintiffs are current
or former exotic dancers who danced between April 2009 and the
1
Defendants also filed a claim for quantum meruit.
parties’ motions, however, they only discuss the
enrichment and breach of contract claims.
2
In the
unjust
present at either one or both of Defendants’ clubs.
45-1, at 3).
(ECF No.
There is no dispute that, during their time as
exotic dancers at Fuego and Extasy, Plaintiffs did not receive
compensation in the form of hourly wages.
Plaintiffs signed
“lease agreements”2 wherein they were classified as independent
contractors of Fuego and Extasy (“the clubs”).
compensation
received
arrangement
money
from
under
these
customers,
agreements,
including
performance fees and customer tips.
As a part of the
in
Plaintiffs
the
form
of
(ECF No. 45-10, at 8).
On April 3, 2012, Plaintiff Laura McFeeley filed an initial
complaint.
(ECF
No.
1).
On
April
18,
2012,
an
amended
complaint was filed adding Danielle Everett as plaintiff.
No.
3).
Defendants
answered
on
May
21,
2013,
and
counterclaim against Plaintiffs McFeeley and Everett.
(ECF
filed
a
On August
24, 2012, Plaintiffs moved to facilitate identification of other
similarly situated individuals.
(ECF No. 8).
On November 26,
2012,
in
denied
the
undersigned
granted
part
and
in
Plaintiffs’ motion to dismiss Defendants’ counterclaims.
Nos. 13 and 14).
certified
part
(ECF
The same day, the undersigned conditionally
an
FLSA
collective
class.
Subsequently,
the
remaining
Plaintiffs
2
(ECF
—
No.
15,
Crystal
at
1).
Nelson,
Mr. Offiah, on behalf of Fuego and Extasy, had Plaintiffs
sign
agreements
regarding
the
terms
of
their
working
relationship that are titled “Space/Lease Rental Agreement of
Business Space” (“lease agreement”). (See, e.g., ECF Nos. 46-2
& 46-3).
3
Dannielle
Tarshea
Arlean
Jackson
McKay,
—
joined
Jenny
the
Garcia,
action
Patrice
as
“opt-in”
Howell,
and
plaintiffs.
(ECF Nos. 18, 20, 26, 28, and 33).
On
May
complaint.
6,
2013,
(ECF No. 31).
Plaintiffs
filed
a
second
amended
Defendants answered on May 9, 2013,
and simultaneously filed counterclaims against all Plaintiffs.
(ECF No. 32).
Plaintiffs answered on May 15, 2013.3
(ECF No.
34). On January 3, 2014, Plaintiffs moved for partial summary
judgment.
(ECF No. 45).
Plaintiffs ask the court to find in
their favor on several issues:
(1)
That, at all times relevant, each Plaintiff
was an employee of Defendants under the FLSA
and MWHL and was never an independent
contractor;
(2)
That Defendants violated the FLSA and MWHL
by compensating Plaintiffs at an hourly rate
less than the FLSA and MWHL required minimum
wage and overtime rate;
(3)
That Plaintiffs are entitled to recover
unpaid wage damages and that Plaintiffs’
unpaid wage damages should be calculated at
an hourly rate not less than the FLSA and
MWHL minimum wage, free and clear of any
kickbacks, fees, fines, or charges paid by
Plaintiffs to Defendants;
(4)
That Uwa Offiah was at all times Plaintiffs’
employer under the FLSA and MWHL, and as
such is jointly and severally liable to
Plaintiffs
along
with
the
corporate
Defendants;
3
Plaintiffs submitted an amended
counter-complaint on May 28, 2013.
4
answer
to
Defendants’
(5)
That Plaintiffs are entitled to recover
liquidated damages in an equal amount to
Plaintiffs’ to-be-determined unpaid wages
under the FLSA; and
(6)
That Defendants’ service fee “offset” or
“set off” fails as a matter of law and may
not be applied to mitigate or negate any to
be-determined damages owed by Defendants to
Plaintiffs.
(ECF No. 45-1, at 1-2).
Defendants filed their opposition to Plaintiffs’ motion for
partial summary judgment and cross moved for partial summary
judgment on their counterclaims on January 21, 2014.
46).
Plaintiffs opposed Defendants’ cross motion on February 7,
2014.4
II.
(ECF No.
(ECF No. 48).
Standard of Review
Rule 56(a) of the Federal Rules of Civil Procedure, permits
a party to move for summary judgment or partial summary judgment
by identifying “each claim or defense — or the part of each
claim
or
defense
(emphasis
added).
pretrial
—
on
which
“[P]artial
adjudication
that
summary
summary
certain
established for the trial of the case.
judgment
judgment
issues
is
is
shall
sought.”
merely
be
a
deemed
This adjudication . . .
serves the purpose of speeding up litigation by” narrowing the
issues for trial to those over which there is a genuine dispute
of material fact.
4
Rotorex Co. v. Kingsbury Corp., 42 F.Supp.2d
Defendants did not file a reply to Plaintiffs’ opposition.
5
563,
570-71
(noting
that
motions
for
(D.Md.
1999)
“numerous
partial
(internal
courts
summary
quotation
have
marks
entertained
judgment
omitted)
and
addressing
decided
particular
issues”).
A motion for summary judgment shall be granted only if
there exists no genuine dispute as to any material fact and the
moving party is entitled to judgment as a matter of law.
See
Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986);
Anderson
v.
Liberty
Lobby,
Inc.,
477
U.S.
(1986).
The moving party bears the burden of showing that there
is no genuine dispute as to any material fact.
242,
250
However, no
genuine dispute of material fact exists if the nonmoving party
fails
to
exists.
make
a
sufficient
showing
that
a
genuine
dispute
Celotex, 477 U.S. at 322–23. Therefore, on those issues
on which the nonmoving party has the burden of proof, it is his
or her responsibility to confront the summary judgment motion
with an affidavit or other similar evidence showing that there
is a genuine dispute for trial.
In Anderson v. Liberty Lobby, Inc., the Supreme Court of
the United States explained that, in considering a motion for
summary judgment, the “judge’s function is not himself to weigh
the
evidence
and
determine
the
truth
of
the
matter
determine whether there is a genuine issue for trial.”
but
to
477 U.S.
at 249 (1986). A dispute about a material fact is genuine “if
6
the
evidence
is
such
that
a
reasonable
verdict for the nonmoving party.”
jury
Id. at 248.
could
return
a
Thus, “the judge
must ask himself not whether he thinks the evidence unmistakably
favors one side or the other but whether a fair-minded jury
could return a verdict for the [nonmoving party] on the evidence
presented.”
Id. at 252.
In undertaking this inquiry, a court must view the facts
and the reasonable inferences drawn therefrom “in the light most
favorable to the party opposing the motion.”
Matsushita Elec.
Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(quoting
United
States
v.
Diebold,
Inc.,
369
U.S.
654,
655
(1962)); see also E.E.O.C. v. Navy Fed. Credit Union, 424 F.3d
397, 405 (4th Cir. 2005).
The mere existence of a “scintilla” of
evidence
the
in
support
of
non-moving
party’s
case
is
sufficient to preclude an order granting summary judgment.
Anderson, 477 U.S. at 252.
not
See
A “party cannot create a genuine
dispute of material fact through mere speculation or compilation
of inferences.”
Shin v. Shalala, 166 F.Supp.2d 373, 375 (D.Md.
2001) (citation omitted).
Indeed, this court has an affirmative
obligation to prevent factually unsupported claims and defenses
from going to trial.
See Drewitt v. Pratt, 999 F.2d 774, 778–79
(4th Cir. 1993) (quoting Felty v. Graves–Humphreys Co., 818 F.2d
1126, 1128 (4th Cir. 1987)).
7
III. Analysis
A.
Plaintiffs’ Motion for Partial Summary Judgment
1.
Employee Determination Under the FLSA and MWHL
The first issue in Plaintiffs’ motion for partial summary
judgment
is
whether
the
dancers
at
Fuego
and
Extasy
employees within the meaning of the FLSA and the MWHL.5
were
The FLSA
defines “employee” as “any individual employed by an employer.”
To “employ” includes “to suffer or permit to work.”
29 U.S.C.
§§
is
203(e)(1),
203(g).
The
definition
of
employee
to
be
liberally construed and applied in accordance with the remedial
nature of the Act.
F.3d
298,
304
(4th
Schultz v. Capital Int’l Sec., Inc., 466
Cir.
2006).
To
determine
whether
an
individual is an employee or an independent contractor under the
FLSA, the court must look to the “economic realities” of the
relationship between the worker and the putative employer by
analyzing the following six factors:
(1) [T]he degree of control that the
putative employer has over the manner in
which the work is performed; (2) the
worker’s opportunities for profit or loss
dependent on his managerial skill; (3) the
worker’s
investment
in
equipment
or
material,
or
his
employment
of
other
workers; (4) the degree of skill required
for the work; (5) the permanence of the
working relationship; and (6) the degree to
which the services rendered are an integral
part of the putative employer’s business.
5
Plaintiffs have not asked for a determination of whether
they are employees under the MWPCL. (ECF No. 45, at 1-2).
8
Schultz, 466 F.3d at 304-05.
and
“courts
are
directed
circumstances[.]”
No single factor is dispositive
to
look
at
the
totality
of
the
Thompson v. Linda And A., Inc., 779 F.Supp.2d
139, 147 (D.D.C. 2011) (internal quotations omitted); see also
Rutherford
(“[T]he
Food
Corp.
determination
v.
of
McComb,
the
331
U.S.
722,
[employee-employer]
730
(1947)
relationship
does not depend on such isolated factors but rather upon the
circumstances of the whole activity.”).
status
under
the
MWHL
using
realities” test as the FLSA.
the
Courts analyze employee
same
six-prong
“economic
See Randolph v. PowerComm Const.,
Inc., No. PWG-13-1696, 2014 WL 1260722, at *6-9 (D.Md. Mar. 25,
2014)
(analyzing
simultaneously
whether
the
plaintiff
was
an
employee or an independent contractor under both the MWHL and
the FLSA by applying the six-factor economic realities test);
See also Heath v. Perdue Farms, Inc., 87 F.Supp.2d 452, 458-59
(D.Md. 2000) (applying the six-factor economic realities test in
analyzing
whether
crew
leaders
were
employees
or
independent
contractors for the purpose of both the FLSA and the MWHL).6
6
The MWHL is the state statutory equivalent of the FLSA.
Watkins v. Brown, 173 F.Supp.2d 409, 416 (D.Md. 2001).
Both
the MWHL and the FLSA have similar purposes, almost identical
definitions of “employer,” and the MWHL contains internal
references to the FLSA.
Id.
The requirements under the MWHL
are so closely linked to the FLSA that “[p]laintiffs’ claim
under the MWHL stands or falls on the success of their claim
under the FLSA.”
Turner v. Human Genome Sci., Inc., 292
F.Supp.2d 738, 744 (D.Md. 2003).
9
The
focal
point
of
the
economic
realities
analysis
is
“whether the worker is economically dependent on the business to
which
he
renders
service
or
is,
as
[reality], in business for himself.”
(internal quotations omitted).
a
matter
of
economic
Schultz, 466 F.3d at 304
Courts must look to the economic
reality of the working relationship rather than any labels given
by the parties when determining liability under the FLSA and the
MWHL.
See Calle v. Chul Sun Kang Or, No. DKC 11-0716, 2012 WL
163235 (D.Md. Jan. 18, 2012) (citing
457);
see
also
Quinteros
v.
Heath,
Sparkle
87 F.Supp.2d at
Cleaning,
Inc.,
532
F.Supp.2d 762, 768 (D.Md. 2008) (“[E]ven if a contract clearly
defines the relationship as one of client/subcontractor, it may
still constitute an employer/employee relationship for purposes
of the FLSA.”).
If after application of the six “economic reality” factors
the moving party has shown that there is “no doubt” as to the
relationship between the parties, the court may determine as a
matter of law that the worker is an employee or independent
contractor.
Heath, 87 F.Supp.2d at 459; Viar-Robinson v. Dudley
Beauty Salon, No. PWG-12-1794, 2013 WL 6388646, at *6 (D.Md.
Dec. 5, 2013).
If the parties dispute numerous material facts
that impact the application of these factors, the movant has
failed to show the worker’s status as a matter of law and is not
entitled to summary judgment on this issue.
10
Calle, 2012 WL
163235, at *7; see also Solis v. Gen. Interior Sys., Inc., No.
5:08-CV-0823 NPM/ATB, 2012 WL 1987139, at *4 (N.D.N.Y. June 1,
2012) (denying plaintiff’s motion for summary judgment because
the parties disputed, “by identifying contradictory evidence, .
. . virtually each factual conclusion underlying the factors of
the economic reality test”).
a.
Degree of Control Over Worker
The court must first consider the “degree of control that
the putative employer has over the manner in which the work is
performed[.]”
Schultz, 466 F.3d at 304-05.
In considering the
degree of control exercised by the club over the dancer, courts
should
look
not
only
at
the
club’s
rules
and
guidelines
regarding the dancers’ performances and behavior, “but also to
the club’s control over the atmosphere and clientele.”
Butler
v. PP & G, Inc., No. WMN-13-430, 2013 WL 5964476, at *3 (D.Md.
Nov. 7, 2013) reconsideration denied, No. WMN-13-430, 2014 WL
199001
(D.Md.
Jan.
16,
2014).
significant control include:
tardiness;
enforcing
Examples
of
clubs
exerting
fining dancers for absences and
behavioral
rules;
setting
minimum
performance fees; and requiring dancers to sign in upon arrival.
Id.; see also Reich v. Circle C. Investments, Inc., 998 F.2d
324, 327 (5th Cir. 1993) (finding significant control where the
employer fined dancers, set minimum prices, promulgated rules
concerning dancers’ behavior, and required dancers to be on the
11
floor at opening time); Hart v. Rick’s Cabaret Int’l, Inc., 967
F.Supp.2d 901, 913-19 (S.D.N.Y. 2013) (holding that club exerted
significant control where it had written behavioral guidelines
and imposed fines on the dancers); Thompson, Inc., 779 F.Supp.2d
at 148 (finding significant control where dancers were required
to sign in, follow a schedule, and follow the club’s rules).
In
Butler, 2013 WL 5964476, at *3-4, the court found that although
the club did not exercise control “over the day-to-day decisions
and work of its dancers,” it still exercised significant control
over the dancers by way of controlling the overall atmosphere of
the
club
through
advertising,
setting
business
maintaining the facility, and maintaining aesthetics.
hours,
The court
noted that the dancers were “entirely dependent on the [club] to
provide [them] with customers, and [their] economic status ‘is
inextricably linked to those conditions over which [the club
has] complete control.’”
Id. (quoting Reich v. Priba Corp., 890
F.Supp. 586, 592 (N.D.Tex. 1995)).
Similarly in Thompson, 779
F.Supp.2d at 148, the court cited to the defendants’ rules —
that
prohibited
drugs,”
and
a
“cussing,
prohibition
fighting,
against
biting,
scratching
inappropriate
behavior
or
on
stage — when deciding that the control factor weighed in favor
of the dancers.
Defendants argue that they exercised minimal control over
the dancers.
(ECF No. 46-1, at 22-25).
12
They state that they
did not set schedules for the dancers; rather, the dancers were
permitted to pick their own schedules.
(Id. at 23).
that they did not control the dancers’ performances.
24).
They add
(Id. at
Defendants further contend that they did not reprimand the
dancers or inform them that they were “not following the rules.”
(Id. at 23).
Plaintiffs
disagree,
arguing
that
Defendants
controlled
almost every aspect of their work from the moment they were
hired.
Plaintiffs also provide a set of club-imposed written
guidelines that Defendants gave them regarding dancer conduct
and prices for private dances.
(ECF No. 45-18 “Rule Book”)
(“Violators of the above rules and regulations will be kicked
out of the club.
Indefinitely.”).
Defendants argue that they
did not enforce some of the rules and fees in the guidelines;
thus, Defendants believe that the rules are not evidence of
Defendants’ control over the dancers.
(ECF No. 45-10, at 21).
Courts have previously found, however, that even if a fine is
not implemented or is retracted, “written threat to impose such
fines,
and
its
imposition
of
such
fines
on
non-compliant
dancers, even if largely retracted, is strong evidence of its
control over them.”
Hart, 967 F.Supp.2d at 917; see also Clincy
v. Galardi S. Enters., Inc., 808 F.Supp.2d 1326, 1345 (N.D.Ga.
2011) (finding that despite not enforcing its rules consistently
or uniformly, a club exercised a significant amount of control
13
over dancers merely by its potential authority to discipline
dancers
for
breaking
club
rules).
An
employer’s
“potential
power” to enforce its rules and manage dancers’ conduct is a
form of control.
Aside
control
from
over
operations
See Hart, 967 F.Supp.2d at 918.
Defendants’
dancers
manager,
in
club
other
Doguy
rules,
ways.
Kamara,
Defendants
For
stated
exercised
example,
that
he
Extasy’s
“coached”
dancers whom he believed did not have the right attitude or were
not behaving properly in the clubs.
(ECF No. 45-9, at 26).
Dancers were also required to sign in when they entered the
clubs and to pay a “tip in.”
(ECF No. 45-9, at 10-11, 34).
Furthermore, Defendants maintained the clubs’ atmospheres
as
they
were
responsible
operations in the clubs.
for
advertising
and
day-to-day
(ECF No. 45-10, at 10-12).
Defendants
set hours of operation, the price of entrance for patrons and
dancers, and the types of food and beverages sold.
Defendants
also set the prices for lap dances and dances in the VIP room.
(ECF
No.
45-9,
significant
at
control
8,
13-15).
over
the
Thus,
Defendants
atmosphere,
exercised
clientele,
and
operations of the clubs.
b.
Opportunity for Profit or Loss
The
second
element
of
the
economic
realities
test
is
whether the worker’s opportunity for profit or loss is dependent
on her managerial skills.
See Schultz, 466 F.3d at 305.
14
“[T]he
ability to generate more money based on skill and hard work
denotes independent contractor status.”
Herman v. Mid-Atlantic
Installation Servs., Inc., 164 F.Supp.2d 667, 674 (D.Md. 2000).
Defendants argue that the dancers’ compensation was largely
dependent on each dancer’s own skill and ability to attract
customers, as well as the dancer’s ability to decide how many
days
per
week
Defendants
she
would
highlight
that
work.
the
(ECF
dancers
No.
46-1,
sold
at
tickets
25-27).
for
club
events, passed out flyers to attract more customers to the club,
and allowed their photos to be used on promotional flyers.
at
25-26).
negotiate
Defendants
private
also
dance
fees
contend
that
the
with
patrons
dancers
and
that
(Id.
could
their
compensation largely depended on their level of dancing skill.
(Id. at 26-27).
Defendants cite to Matson v. 7455, Inc., No. CV
98-788-HA, 2000 WL 1132110 at *4 (D.Or. Jan. 14, 2000), for the
proposition
that
when
compensation
is
dependent
on
the
plaintiff’s own skill to attract customers, she was in control
of her own profit or loss.
(Id. at 26).
Plaintiffs counter that the amount the dancers stood to
lose or gain was “generally a function of the actions the clubs,
not
the
entertainers,
[took].”
(ECF
No.
45-1,
at
18).
Plaintiffs cite Harrell v. Diamond A Entertainment, Inc., 992
F.Supp. 1343 (M.D.Fla. 1997), to support their contention that
Plaintiffs had little financial risk and minimal control over
15
the profits they stood to make at the clubs.
19).
(ECF No. 45-1, at
Harrell, in relevant part, states that:
[a dancer] risks little more than [her]
daily “tip out” fee, the cost of her
costumes, and her time.
That a dancer may
increase
her
earnings
by
increased
‘hustling’ matters little.
As is the case
with the zealous waiter at a fancy, four
star restaurant, a dancer’s stake, her take
and the control she exercises over each of
these are limited by the bounds of good
service; ultimately, it is the restaurant
that takes the risks and reaps the returns.
992 F.Supp. at 1352 (M.D.Fla. 1997).
Exotic dance clubs have argued that a dancer’s potential
for greater profits relies on her skill as a dancer and her
ability to entice customers to give large tips.
779
52).
F.Supp.2d
at
149
(citing
Harrell,
992
See Thompson,
F.Supp.
at
1350-
This argument — that dancers can “hustle” to increase
their profits — has been almost universally rejected.
See id.;
Hart, 967 F.Supp.2d at 920; Clincy, 808 F.Supp.2d at 1346 n.12;
Harrell, 992 F.Supp. at 1350, 1352; Priba Corp., 890 F.Supp. at
593.
In explaining why “hustling” was not the type of initiative
contemplated by this element, the Priba court articulated that
an individual can “hustle” even in an employment relationship.
Priba Corp., 890 F.Supp. at 593.
increase
their
earnings
by
Therefore, dancers’ ability to
exercising
initiative
does
not
necessarily indicate that dancers are independent contractors.
16
While it is true that “once customers arrive at [the club], a
dancer’s
initiative,
hustle,
and
costume
significantly
contribute to the amount of her tips,” the club’s owner in fact
significantly controls the dancers’ opportunity for profit or
loss, as he “has a significant role in drawing customers to
[his]
nightclub.”
Thompson,
779
F.Supp.2d
Circle C. Invs., 998 F.2d at 328).
at
149
(quoting
The club and its owners,
through “advertisement, location, business hours, maintenance of
facilities,
aesthetics,
and
inventory
of
controlled customer volume in the clubs.
significantly
profit.
controlled
the
beverages
food”
The clubs therefore
dancers’
Reich, 998 F.2d at 328.
and
opportunity
for
A clubs’ setting of minimum
prices for services also controls the dancers’ ultimate ability
to earn a profit.
See Priba Corp., 890 F.Supp. at 593 (finding
that a club controlled the opportunity for profit and loss when
it set the minimum charge for table dances); see also Usery v.
Pilgrim
Equip.
Co.,
527
F.2d
1308,
1313
(5th
Cir.
1976)
(recognizing the significance of the putative employer’s control
over
profits
and
losses
through
implementing
price
controls,
selecting businesses’ locations, and controlling advertising in
finding that laundry service workers were employees).
Here,
dancers
could
promote
themselves
by
handing
out
flyers with their pictures on them and encouraging potential
customers to come to the club.
They also could show extra
17
initiative
while
in
the
performance fees and tips.
clubs
to
try
to
increase
their
Defendants, however, controlled the
stream of clientele that appeared at the clubs by setting the
clubs’ hours, coordinating and paying for all advertising, and
managing the atmosphere within the clubs.
10-12).
Plaintiffs’ ostensibly sustained no losses aside from
their “tip in” fee and their time.
1354.
(ECF No. 45-10, at
Most
Plaintiffs
importantly,
could
negotiate
although
their
Harrell, 992 F.Supp. at
Defendants
own
prices
argue
for
that
dances,
Defendants also admit that the club set prices for lap dances
and
VIP
room
dances.
(ECF
No.
45-9,
at
14,
19).
Thus,
Defendants ultimately controlled a key determinant — pricing —
affecting Plaintiffs’ ability to make a profit.
Furthermore,
Defendants’ rule book states “do not [overcharge] our customers.
If you do, you will be kicked out of the club.”
at 2).
(ECF No. 45-18,
Even assuming this rule was not enforced, this potential
consequence displays Defendants’ effort to control the prices
that dancers charged customers.
This factor also weighs in
favor of Plaintiffs.
c.
Investment in Equipment or Materials
The
third
element
in
the
economic
realities
test
is
Plaintiffs’ level of investment in the business, including their
“investment in equipment or material, or [their] employment of
other workers.”
Schultz, 466 F.3d at 305.
18
In analyzing this
factor, courts look to the capital investments made in the dance
club by the dancers and club owners respectively.
Morse v. Mer
Corp., No. 1:08-CV-1389-WTL-JMS, 2010 WL 2346334, at *4-5 (S.D.
Ind. June 4, 2010) (noting that “[a] dancer’s investment in
costumes
.
.
.
is
relatively
minor
to
the
considerable
investment [the club] has in operating a nightclub.
[It] leases
fixtures for the nightclub . . . owns sound equipment and music,
maintains
and
extensively”)
renovates
(quoting
the
Circle
facilities,
C.
Invs.,
998
and
advertises
F.2d
at
327)
(internal citations omitted).
Defendants concede that they pay:
clubs’
bills
such
as
water
and
rent for both clubs; the
electric;
business
liability
insurance; and for radio and print advertising for the clubs.
(ECF No. 45-10, at 11-12).7
clubs’
security
jockey.
Plaintiffs’
(Id.
guards,
at
Defendants also pay wages to the
bartenders,
12).
Defendants
participation
in
cashiers,
contend,
advertising
and
the
disc
however,
that
activities,
such
as
passing out flyers, demonstrates their investment in the clubs.
(ECF No. 46-1, at 27-28).
were
responsible
for
Defendants also state that Plaintiffs
providing
their
own
wardrobe
when
performing (ECF No. 45-10, at 22), and sometimes, for special
7
Rent and advertising alone cost Defendants approximately
$6,500 a month. (Id.).
19
events, Plaintiffs brought their own food or decorations to the
clubs.
(ECF No. 46-1, at 27-28).
These undisputed facts show that Defendants investment in
the clubs greatly exceeded Plaintiffs’ investment.
Aside from
the dancers providing their own work apparel and occasional food
and decorations for events, Plaintiffs did not invest in the
exotic dance clubs.
d.
Degree of Skill Required
The fourth element is the “degree of skill required for the
work.”
there
Schultz, 466 F.3d at 305.
is
no
special
skill
Other courts have held that
required
to
be
an
exotic
dancer,
pointing to the lack of instruction, certification, and prior
experience required to become an exotic dancer.
Thompson, 779
F.Supp.2d at 149-50; Harrell, 992 F.Supp. at 1351; Morse, 2010
WL 2346334, at *5; Butler, 2013 WL 5964476, at *5.
Here, Defendants concede that individuals did not need any
dancing experience before dancing at Fuego or Extasy, (ECF No.
45-9, at 24-25), and that the court is likely to find that no
particular skill was necessary for Plaintiffs to dance at their
clubs.
(ECF No. 46-1, at 29).
Indeed, two Plaintiffs had not
danced at any other club before starting at Fuego or Extasy.
(ECF No. 45-13, at 4; ECF No. 45-11, at 3).
Thus, the minimal
degree of skill required for exotic dancing at these clubs also
20
weighs
in
favor
of
finding
that
the
exotic
dancers
were
employees rather than independent contractors.
e.
Permanency of the Working Relationship
The fifth element of the economic realities test is the
permanence
employer
of
and
the
working
employee.
relationship
See
between
Schultz,
466
the
F.3d
putative
at
305.
Defendants argue that this factor favors finding Plaintiffs are
independent
contractors
because
they
were
permitted
to
work
without any specified contract-completion date, “could come and
go as they please[d,] and were free to dance at other exotic
clubs[.]”
duration
more
(ECF No. 46-1, at 30).
of
their
working
characteristic
of
Plaintiffs contend that the
relationships
employees,
as
with
Defendants
Plaintiffs’
were
periods
employment ranged from several months to several years.
of
In
addition, Plaintiffs argue that their appearances at the clubs
were not “sparse
permanent
period.”
In
ad hoc” appearances, but rather “they were
employees,
working
full
time
for
an
indefinite
(ECF No. 45-1, at 20) (emphasis in original).
previous
cases
involving
exotic
dancers,
courts
have
found that the lack of permanence factor is “entitled to only
modest weight in assessing employee status under the FLSA,” and
many
courts
have
placed
less
emphasis
comparison to the other elements.
on
this
element
in
Hart, 967 F.Supp.2d at 920;
see also Harrell, 992 F.Supp. at 1352 (“Other courts have found
21
that exotic dancers tend to be itinerant, but have tended to
place less emphasis on this factor[;] . . . [t]his Court agrees,
and places little emphasis on this factor.”); Priba Corp., 890
F.Supp. at 593-94 (noting that the proper focus under this prong
is not on the permanence or exclusivity of the relationship, but
the nature of the worker’s dependence on the putative employer).
The
fact
that
dancers
can
work
at
other
clubs
“[does]
not
distinguish them from countless workers . . . who are undeniably
employees under the FLSA — for example, waiters, ushers, and
bartenders” — that may simultaneously work for other businesses.
Hart, 967 F.Supp.2d at 920-21.
Here, dancers at both Fuego and Extasy worked with no
specified contract-completion date.
Their lease agreements do
not specify a date range or term of years, merely stating that
“[t]his lease . . . shall continue on an at-will basis until
further written notice of termination by the LESSOR or LESSEE.”
(ECF No. 46-2, at 3).
Some Plaintiffs worked at either Fuego or
Extasy for less than a year.
Additionally, some dancers worked
at other clubs at the same time that they worked at Fuego or
Extasy.
(ECF No. 45-14, at 5; ECF No. 45-12, at 4).
In sum,
Defendants and Plaintiffs had an at-will arrangement that could
be
terminated
by
either
party
at
any
time.
Furthermore,
Plaintiffs worked for multiple clubs at the same time.
The lack
of permanence in the relationship between the clubs and the
22
dancers
is
determination
not
of
outcome
whether
determinative
the
dancers
were
in
the
overall
employees
of
the
clubs.
f.
Integral Nature of Services Rendered
The
sixth
element
to
consider
is
whether
the
services
rendered by Plaintiffs were “an integral part of the putative
employer’s business.”
Schultz, 466 F.3d at 305.
Defendants
concede that this factor favors the Plaintiffs, but contend that
this factor does not necessarily control whether Plaintiffs were
employees of the clubs under the totality of the circumstances.
“Courts have routinely noted that the presence of exotic
dancers [is] ‘essential,’ or ‘obviously very important,’ to the
success of a topless nightclub.”
*5.
Butler, 2013 WL 5964476, at
At Fuego and Extasy, the exotic dancers were the only
source of entertainment for customers.
The
exotic
businesses,
dancers
were
especially
an
(ECF No. 45-9, at 12).
integral
considering
that
alcohol or food, aside from a few snacks.
part
of
neither
Defendants’
club
served
(ECF No. 45-10, at
10).
g.
Consideration of All Factors
After considering the preceding factors in combination and
resolving all disputed facts in favor of Defendants, there is no
genuine dispute over the nature of the relationship between the
parties.
While the working relationship between the parties
23
lacks permanence, Defendants exercised significant control over
Plaintiffs and had the dominant opportunity for profit or loss.
In addition, Plaintiffs were not required to have specialized
skills to work for Defendants, made limited investments in the
clubs’ equipment and materials.
Most importantly, Plaintiffs
were economically dependent on the clubs rather than being in
business
business.
for
themselves,
and
were
integral
to
the
clubs’
Even though Plaintiffs signed a “lease agreement”
that labeled them independent contractors, under the economic
realities test, this label is not dispositive.
See Butler, 2013
WL 5964476, at *6 (“[N]either the label placed on an employment
relationship, nor an individual's subjective belief about her
employment status, are dispositive.”).
Therefore, Plaintiffs
were employees of Fuego and Extasy under the FLSA and MWHL.
2.
Mr. Offiah’s Personal Liability as an Employer
The next issue is whether Mr. Offiah can be considered an
“employer”
under
the
FLSA
and
MWHL,
such
that
he
would
be
subject to personal liability for any minimum wage or overtime
obligations due to Plaintiffs.
Defendants argue that the facts
relied upon by Plaintiffs do not support their argument that Mr.
Offiah was an employer.
(ECF No. 46-1, at 38).
Defendants cite
Cubias v. Casa Furniture and Bedding, LLC, No. 1:06CV386 (JCC),
2007 WL 150973, at *2 (E.D.Va. 2007) (emphasis added), for the
proposition that “[u]nder the FLSA, an employer . . . includes
24
individuals
with
managerial
responsibilities
and
substantial
control over the terms and conditions of an employee’s work.”
(Id.).
Defendants point to Plaintiffs’ job auditions and work
schedules to suggest that Plaintiffs, rather than Mr. Offiah,
had substantial control over the terms and conditions of their
work.
(Id.).
Plaintiffs
contend
that
Mr.
Offiah
“had
sufficient
operational control over [them] and the misclassification [of
Plaintiffs as independent contractors] to make him an employer.”
(ECF No. 45-1, at 28).
They further allege that he controlled
all of the day-to-day operations at the clubs, including “hiring
and firing, advertising, marketing[,]” and the “rate and method
of
Plaintiffs’
pay,
including
the
Plaintiffs as independent contractors.”
decision
(Id.).
to
classify
Plaintiffs add
that Mr. Offiah was the “sole owner, officer and shareholder of
each of the corporate Defendants in this action.”
(Id.).
The FLSA defines “employer” as including “any person acting
directly
or
indirectly
in
relation to an employee.”
“[i]t
is
well
settled
that
the
interest
of
an
29 U.S.C. § 2013(d).
an
individual
may
employer and face liability under the FLSA.”
employer
in
In addition,
qualify
as
an
Roman v. Guapos
III, Inc., 970 F.Supp.2d 407, 416 (D.Md. 2013) (emphasis added).
To determine whether an individual can be liable as an employer
under the FLSA, “courts generally look at the ‘economic reality’
25
of [the] individual’s status in the workplace.”8
Id. (quoting
Gionfriddo v. Jason Zink, LLC, 769 F.Supp.2d 880, 890 (D.Md.
2011).
Courts
examine
a
number
of
factors
including
“the
person’s job description, his or her financial interest in the
enterprise, and whether or not the individual exercises control
over the employment relationship.”
Gionfriddo, 769 F.Supp.2d at
890; Roman, 970 F.Supp.2d at 416.
An individual’s high-level
status in the business, however, does not automatically impart
“employer” liability.
Id. at 417.
Courts in this district also consider the factors set forth
in Bonnette v. California Health & Welfare Agency, 704 F.2d 1465
(9th Cir. 1983), to determine whether an individual constitutes
an “employer” under the FLSA.
See Roman, 970 F.Supp.2d at 417
(citing Bonnette, 704 F.2d at 1470, abrogated on other grounds
by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528
(1985));
Iraheta v. Lam Yuen, LLC,
5995689,
at
*3
(D.Md.
Nov.
29,
No. DKC-12-1426, 2012 WL
2012);
Khalil
v.
Subway
at
Arundel Mills Office Park, Inc., No. CCB-09-158, 2011 WL 231793,
at
*2
(D.Md.
Jan.
24,
2011).
“whether the alleged employer[:]
The
Bonnette
factors
include
(1) had the power to hire and
fire the employees, (2) supervised and controlled employee work
8
The “economic reality” test to determine whether an
individual is an employer under the FLSA, analyzes different
factors than the “economic reality” test to determine whether an
individual is an employee.
26
schedules or conditions of employment, (3) determined the rate
and method of payment, and (4) maintained employment records.”
Bonnette, 704 F.2d at 1470.
and
the
totality
of
the
No single factor is dispositive,
circumstances
must
be
considered.
Roman, 970 F.Supp.2d at 415.
The first element is whether the individual has the power
to hire and fire employees.
See Bonnette, 704 F.2d at 1470.
Plaintiffs assert that Mr. Offiah is in charge of the hiring
process.
(ECF No. 45-1, at 5).
Mr. Offiah initially asserts in
his deposition that he does not “hire” dancers; instead, he
states
that
he
oversees
collecting
potential
workers’
applications and ensuring they audition, but he does not watch
the auditions.
(ECF No. 45-10, at 15-16).
He alleges that
after dancers audition, the dancers themselves decide whether or
not they want to work at the clubs.
(Id. at 15).
Mr. Offiah
later admits in his deposition, however, that he is the only
person at the clubs who can interview and hire dancers, because
“[he] want[s] to make sure it is done right.”
also
emphasizes
that
he
reviews
agreement” with applicants.
the
terms
(Id.)
of
(Id. at 15-16, 18).
Mr. Offiah
the
“lease
Despite Mr.
Offiah’s assertion that he does not “hire” dancers, it is clear
from his deposition that he is the sole person in charge of
overseeing the application and audition process at the clubs,
and
of
reviewing
the
terms
of
the
27
“lease
agreements”
with
applicants, indicating that he controls the onboarding of new
dancers.
The second element of the
Bonnette
test is whether the
individual “supervised and controlled employee work schedules or
conditions of employment.”
Bonnette, 704 F.2d at 1470.
Mr.
Offiah insists that the dancers set their own work schedules.
(ECF No. 45-10, at 12-13).
Mr.
Offiah
had
Even taking this assertion as true,
significant
Plaintiffs’
employment.
controlled
advertising,
As
control
owner
ensured
over
of
that
the
Fuego
bills
conditions
and
Extasy,
were
paid,
ensured that the premises were clean and safe.
at 11-12).
Mr.
Offiah
he
and
(ECF No. 45-10,
He thus controlled the dancers’ work environment.
also
admits
that
he
was
in
charge
operations at Fuego and Extasy.
(Id. at 8).
above,
onboarding
Mr.
of
Offiah
controlled
the
of
day-to-day
As discussed
process
for
new
dancers and discussed the terms of their “lease agreements” with
them, including the fact that they would not be paid.
Taken as
a whole, Mr. Offiah had substantial control over the dancers’
conditions of employment.
The third element is whether the individual “determined the
rate and method of payment.”
Offiah
contends
that
he
Bonnette, 704 F.2d at 1470.
inherited
the
dancers’
Mr.
compensation
system and the pricing for some of the dancers’ services from
the clubs’ previous owners.
(ECF No. 45-10, at 21).
28
In his
deposition, Mr. Offiah also states that he kept the business
practices of his predecessors because they were “successful.”
(Id. at 9-10).
Mr. Kamara further states that Mr. Offiah was in
charge of determining how to classify the dancers and whether or
not to pay them wages.
(ECF No. 45-9, at 22).
Although the
clubs’ compensation arrangement with the dancers may not have
been his original idea, upon acquiring the clubs, Mr. Offiah
made
the
conscious
decision
to
maintain
the
status
quo
for
dancers’ compensation.
The
fourth
element
employment records.
is
whether
the
individual
Bonnette, 704 F.2d at 1470.
maintains
Mr. Offiah
states in his deposition that he has records of which days the
dancers worked through the “sign in” sheets they were required
to complete upon entering the clubs.
18).
(ECF No. 45-10, at 14, 17-
He admits, however, that he does not know how much money
the dancers earned nor does he have records accounting for this
information.
(Id. at 26-27).
Considering
the
preceding
factors
in
combination,
Mr.
Offiah was at all times Plaintiffs’ employer under the FLSA.
Not only is he the sole individual with ownership and financial
interest in the clubs (ECF No. 45-10, at 7-8), he is also in
charge
of
the
clubs’
day-to-day
operations
conditions of Plaintiffs employment.
and
controls
the
Mr. Offiah’s attempt to
shift blame to past owners for the clubs’ chosen compensation
29
scheme
is
misplaced,
as
he
made
a
conscious
implement or maintain the employment practices.
decision
to
Therefore, Mr.
Offiah is jointly liable for any damages that may be owed to
Plaintiffs under the FLSA and MWHL.
3.
Defendants’ Liability Under the FLSA and MWHL
The
Plaintiffs,
as
employees,
are
entitled
receive minimum wage under the FLSA and MWHL.
by
law
to
Pursuant to the
FLSA, “an employer must pay an employee an hourly wage no less
than the federal minimum wage[,]”
Butler, 2013 WL 5964476, at
*6 (citing 29 U.S.C. § 206(a)(1)), and overtime pay for each
hour worked in excess of forty hours per week.
F.Supp.2d at 412 (citing 29 U.S.C. § 207(a)(1)).
similarly
requires
that
employers
pay
the
Roman, 970
“The MWHL
applicable
minimum
wage to their employees and, in [§§ 3-415 and 3-420 of the Labor
and Employment Article], that they pay an overtime wage of at
least 1.5 times the usual hourly wage” for each hour worked in
excess of forty hours per week.
Id. (quoting Friolo v. Frankel,
373 Md. 501, 513 (2003)) (internal quotation marks omitted).
a.
Plaintiffs’ Entitlement to Minimum Wages and Overtime
Pay
Defendants do not dispute that neither Fuego nor Extasy
paid
Plaintiffs
wages.
(ECF
No.
45-10,
at
9).
Defendants
contend, however, that they have not violated the FLSA, because
“pursuant to the terms of their contracts . . . Plaintiffs and
30
other dancers received greater compensation [than] they would
have earned at a rate of minimum wage.”
(ECF No. 46-1, at 33).
In sum, they assert that Plaintiffs’ performance fees and tips
on average, when divided by the number of hours worked, exceeded
minimum wage.
Defendants also allege that the performance fees
that the dancers retained as part of the clubs’ pre-negotiated
prices for dances, satisfy any wage obligations Defendants may
have owed Plaintiffs.
(Id. at 34).
Plaintiffs disagree, arguing that the performance fees they
received were “tips” rather than “service charges” under the
FLSA and thus do not count as wages.
Plaintiffs contend that
because Defendants charged them fees and did not pay them any
wages,
their
ultimate
pay
was
a
“negative
hourly
rate.”
Plaintiffs argue that in order for Defendants to meet their
statutory
obligations
under
the
FLSA,
Defendants
must
pay
Plaintiffs a minimum wage of $7.25 per hour, and return all “tip
in” and other fees Defendants charged Plaintiffs.
When bringing suit under the FLSA, the employee has the
initial burden of proving that she was improperly compensated.
See Anderson v. Mt. Clements Pottery, Inc., 328 U.S. 680, 687
(1946), superseded by statute on other grounds.
“A prima facie
case can be made through an employee’s testimony giving [her]
recollection of hours worked . . . [and her case] is not to be
dismissed nor should recovery be denied, because proof of the
31
number of hours worked is inexact or not perfectly accurate.
Donovan v. Kentwood Dev. Co., Inc., 549 F.Supp. 480, 485 (D.Md.
1982).
Once the employee establishes this initial burden, the
burden then shifts to the employer.
duty
to
keep
proper
and
accurate
Id.
The employer has a
records
of
the
employee’s
wages, hours, and other conditions and practices of employment.
Id.
When employment records are inaccurate or inadequate and
the employee cannot offer convincing substitutes, the court “is
not to penalize the employee by denying him recovery on the
ground
that
he
is
uncompensated work.”
“The
FLSA
unable
to
prove
the
precise
extent
of
Id.
requires
covered
employers
to
pay
‘nonexempt
employees’ a minimum wage for each hour worked, 29 U.S.C. §
206(a), but allows employers to pay less than the minimum wage
to employees who receive tips, 29 U.S.C. § 203(m).”
Dorsey v.
TGT Consulting, LLC, 888 F.Supp.2d 670, 680 (D.Md. 2012).
An
employer can meet its statutory obligation by paying employees
the FLSA’s required $7.25 per hour minimum wage, or by paying
“tipped
employees”
$2.13
an
hour,
as
long
as
the
conjunction with their tips amounts to at least $7.25.9
9
$2.13
in
Id.
“Tipped employees” are those employees that are “engaged
in an occupation in which [they] customarily and regularly
receive[] more than $30 a month in tips.” 29 U.S.C. § 203(t).
Employers utilizing the tip credit under Section 203(m) are
further required to: (1) inform employees that the tip credit is
32
Here, there is a dispute of material fact over whether
Plaintiffs were properly compensated under the FLSA and MWHL.10
Plaintiffs assert that their compensation after fees amounted to
negative
hourly
wages
(ECF
No.
45-1,
at
22-23);
Defendants,
however, point to Plaintiffs’ deposition testimony to support
the fact that Plaintiffs received in excess of $7.25 per hour.11
being claimed, and (2) permit employees to retain all tips they
receive. Id. (citing 29 U.S.C. § 203(m)).
10
Nor have Plaintiffs provided a reasonable assessment of
the amount and extent of the work they performed that was
improperly compensated.
See Anderson v. Mt. Clemens Pottery
Co., 28 U.S. 680, 687-88 (1946) (noting that plaintiffs have the
burden of showing that they “performed work for which [they
were] improperly compensated and . . . produce sufficient
evidence to show the amount and extent of that work as a matter
of just and reasonable inference”).
11
Plaintiff Everett asserts in her deposition that she
would take home anywhere from $300-$500 per night on weekdays to
$1,000-$2,000 per night on weekends.
(ECF No. 45-12, at 7).
Plaintiff Garcia asserts that she took home approximately $200$250 on Friday nights and approximately $200-$300 on Saturday
nights; at most she estimated receiving $400 per night.
(ECF
No. 45-13, at 7).
Plaintiffs did not stipulate the number of
hours they worked, but based on Fuego’s and Extasy’s hours of
operation, the maximum number of hours a dancer can work per
twenty-four hour period ranges from eight to ten. (ECF No. 461, at 8).
Viewing these facts in the light most favorable to
Defendants, Plaintiffs’ wages greatly exceed minimum wage. Even
on slow days, Plaintiff Everett was making at least $37.50 per
hour on weeknights and $100 per hour on weekends, and Plaintiff
Garcia was making at least $20 per hour on weekends.
Plaintiffs’ contention that the “tip in” fee Defendants
charged them reduced their compensation below minimum wage, is
unavailing as Defendants argue that the “tip in fee” ranged from
$20-$42 per night; deducting this fee from their wages still
would not reduce Plaintiffs’ total compensation to less than
33
Importantly, Plaintiffs do not stipulate which portions of
their income came from performance fees and which portion came
from
tips.12
determination
This
difference
because
is
“service
central
charges”
to
the
offset
statutory minimum wage duties, while “tips” do not.
F.Supp.2d at 928-32.
performance
fees
paid
employers’
Hart, 967
The parties heavily dispute whether the
to
Plaintiffs
“service charges” under the FLSA.13
No. 46-1, at 33-35).
liability
constituted
“tips”
or
(ECF No. 45-1, at 29-31; ECF
The parties also contest material facts
regarding the performance fees, such as:
what amount was given
$7.25 per hour, and certainly would not reduce it to a negative
hourly rate.
12
In their depositions, the total amount of income
Plaintiffs alleged making from performance fees and tips,
divided by the total hours they could have worked, equals an
hourly sum that exceeds minimum wage.
After tips are deducted
from their total income, however, the hourly sum may not exceed
minimum wage.
Plaintiffs refer to the cash they were handed
from customers as “tips,” (ECF No. 45-12, at 7); Plaintiffs’ use
of this term is not indicative that they were “tips” within the
meaning of the FLSA, however, as Plaintiffs reference any cash
payment as “tips” even though a portion of these payments
encompassed the performance fee they received. (see ECF No. 4513, at 7).
13
The Parties’ motions demonstrate that the issue of
whether performance fees constitute service charges under the
FLSA is unsettled, as courts have come to conflicting outcomes
on this issue.
(See, e.g., ECF No. 45-1) (citing Hart, 967
F.Supp.2d 901; Priba Corp., 890 F.Supp. 586); (See, e.g., ECF
No. 46-1) (citing Ruffin v. Entm’t of the E. Panhandle, No.
3:11-CV-19, 2012 WL 1435674 (D.N.W.Va. Apr. 25, 2012); Doe v.
Cin-Lan, Inc., No. 08-DV-12719, 2010 WL 726710 (E.D. Mich. Feb.
24, 2010).
34
to Plaintiffs for each service rendered, how performance fees
were
collected
and
distributed,
and
were accurately tracked by Defendants.
whether
performance
fees
These facts are material
because they are central to the determination of whether the
performance
fees
paid
to
Plaintiffs
constitute
wages.14
See
Thornton v. Crazy Horse, Inc., No. 3:06-CV-00251-TMB, 2012 WL
2175753, at *9-10 (D.Ala. June 14, 2012) (providing the relevant
factors courts have assessed when determining “whether a payment
is a tip or a service charge”).
The only evidence produced to support each side’s argument
regarding the performance fees is deposition testimony.
the
dispute
over
performance
fees
and
Defendants’
Thus,
ultimate
liability hinges on the credibility of each parties’ testimony.15
14
In Thornton v. Crazy Horse, Inc., 2012 WL 2175753, at *9,
the court notes the relevant factors in assessing whether a
payment is a service charge or tip under the FLSA:
(a) whether the payment was made by a
customer who has received a personal
service; (b) whether the payment was
made voluntarily in an amount and to a
person designated by the customer; (c)
whether the tip is regarded as the
employee’s property; (d) the method of
distributing
the
payment;
(e)
the
customer’s
understanding
of
the
payment; and (f) whether the employer
included the payment in its gross
receipts.
15
The role of weighing evidence and determining witness
credibility is reserved for the jury.
See Dennis v. Columbia
Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002)
35
Neither
party
has
provided
financial
records
accounting
for
payment or receipt of the performance fees, which appear to be
primarily undocumented, cash transactions.
Because there are
disputes of material fact regarding the issue of Defendants’
liability under the FLSA and MWHL, Plaintiffs motion for partial
summary judgment as to this issue is denied.
b.
Plaintiffs’ Entitlement to Liquidated Damages
Plaintiffs
contend
that
in
addition
to
damages
in
the
amount of unpaid wages, they are entitled to liquidated damages.
(ECF
No.
32
¶
73(c)).
“Generally,
an
employer
liable
for
minimum wage violations under the FLSA is liable both for unpaid
wages and liquidated damages in an equal amount.”
WL
5964476,
at
*6
(citing 29
U.S.C.
§
Butler, 2013
216(b)).
Because
Plaintiffs are not entitled to partial summary judgment on the
issue of liability for minimum wage and overtime pay under the
FLSA and MWHL, it is premature at this juncture to consider
whether they are entitled to liquidated damages.
B.
Defendants’ Cross Motion for Partial Summary Judgment
Defendants
filed
a
judgment requesting that:
cross
motion
for
partial
summary
(1) “in the event that this Court
finds that Plaintiffs are employees entitled to back wages from
(noting that a court should “view the evidence in the light most
favorable to . . . the nonmovant, and draw all reasonable
inferences in her favor without weighing the evidence or
assessing the witness[es’] credibility”).
36
Defendants, summary judgment should be granted to Defendants on
their
claim
for
breach
of
contract”
(ECF
No.
46-1,
at
35)
(emphasis added)[;] and (2) “in the event that this Court finds
that
Plaintiffs
Defendants,
should
be
are
summary
granted
employees
judgment
to
entitled
and/or
Defendants
on
to
partial
their
back
wages
summary
claims
from
judgment
for
unjust
enrichment with the amount to be determine[d] at a later date
and with further evidence.”
(Id. at 37) (emphasis added).
Because there is a genuine dispute at to whether Plaintiffs
are
entitled
to
back
wages
under
the
FLSA
and
MWHL,
it
is
premature at this juncture to determine whether Defendants are
entitled
to
their
requested
relief.
Defendants
have
only
requested that the court grant their specified relief “in the
event that” the court finds them liable under these Acts, a
determination
which
has
not
yet
been
made.
Defendants’ counterclaims for breach of contract16
16
Moreover,
and unjust
Defendants argue that Plaintiffs have breached their
agreement by pursuing “employee” status under the FLSA after
they agreed to be “independent contractors,” and by seeking
additional compensation under the FLSA when they had already
agreed to the compensation arrangement in the “lease agreement.”
Defendants’ arguments essentially assert that Plaintiffs’ breach
was the filing of a lawsuit to enforce their statutory rights to
minimum wage under the FLSA and MWHL. If Defendants’ arguments
were valid, then any plaintiff challenging a potentially illegal
compensation arrangement could be liable for breach of contract.
Workers
would
then
be
disincentivized
from
challenging
questionable compensation arrangements, which would undermine
the purpose of the FLSA, which is to “eliminate labor conditions
detrimental to the maintenance of the minimum standard of living
37
enrichment are essentially defenses to statutory liability for
wages under the FLSA and MWHL, and are so intertwined with the
initial determination of liability and damages under these Acts
that it is impossible to determine the former before determining
the latter.
Put simply, the court cannot determine whether
Defendants are entitled to a setoff or reduction in damages,
before
determining
whether
Plaintiffs
are
even
entitled
to
well-being
of
damages.17
necessary
workers.”
for health, efficiency, and general
Gionfriddo, 769 F.Supp.2d at 892-93.
17
Plaintiffs have also challenged Defendants’ rights to
prosecute their counterclaims. Plaintiffs provide documentation
from the Maryland State Department of Assessments and Taxation
(“SDAT”) website showing that each of the corporate Defendants
is not in good standing, as their status reads “forfeited” or
“dissolved.” (ECF No. 48-1).
Under Maryland law, a forfeited
corporation is considered non-existent. Md. Code Ann., Corps &
Ass'ns § 3–503(d); Lopez v. NTI, LLC, No. DKC2008-1579, 2008 WL
5120542, at *5 (D.Md. Dec. 4, 2008).
“Upon forfeiture, the
corporation’s directors act as trustees, and may [s]ue or be
sued in their own names as trustees or in the name of the
corporation. However, trustees are only vested with such powers
as are necessary or proper to liquidate the corporation and wind
up its affairs.”
Djourabchi v. Self, 240 F.R.D. 5, 9 (D.D.C.
2006) (internal quotations and citations omitted) (finding under
Maryland law that the sole proprietor of a corporation, whose
charter had been forfeited, could be treated as its “directortrustee” under Md. Code Ann., Corps. & Ass’ns § 3-515(c)(3)).
The current status of the corporate defendants’ under
Maryland law is unclear; Plaintiffs’ SDAT website exhibit was
submitted in February 2014, and Defendants have not responded to
this accusation by Plaintiffs.
It appears from the SDAT
website, however, that Nico Enterprises, Inc. may have been
revived. Depending on the status of these corporate defendants,
Mr. Offiah may be the only proper party to continue this suit in
the name of these corporations whose charters have been
38
IV.
Conclusion
For the foregoing reasons, the motion for partial summary
judgment filed by Plaintiffs will be granted in part and denied
in
part.
The
motion
for
Defendants will be denied.
partial
summary
judgment
filed
by
A separate order will follow.
/s/
DEBORAH K. CHASANOW
United States District Judge
forfeited, but only if this suit relates to the winding up of
these
businesses;
even
if
the
corporate
defendants
are
dismissed, however, Mr. Offiah is still a proper defendant as he
is the sole owner of these businesses, and without their limited
liability protections, he will be personally liable for their
debts.
Id.
Defendants will be directed to establish the bona
fides of their status within 14 days.
39
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?