Opinion
Index No. 505956/2018
12-30-2020
DMITRY AVRAMENKO, ALEX AVRAMENKO, and VALERIA VECHERSKAYA, Plaintiffs, v. PROFESSIONAL GRADE CONSTRUCTION GROUP INC. and MICHAEL RUBINSTEIN, Defendants. PROFESSIONAL GRADE CONSTRUCTION GROUP INC. and MICHAEL RUBINSTEIN, Third-Party Plaintiffs, v. NATALIA ZALUOTNEVA and AVRAMS INC., Third-Party Defendants.
NYSCEF DOC. NO. 88
DECISION / ORDER
Motion Seq. No. 2 and 3
Date Submitted: 10/1/2020 Recitation , as required by CPLR 2219 (a) , of the papers considered in the review of plaintiffs' motion for partial summary judgment and defendants' cross motion for partial dismissal.
| Papers | NYSCEF Doc. |
|---|---|
| Notice of Motion, Affirmations, Affidavits, and Exhibits Annexed | 30-52 |
| Notice of Cross Motion, Affirmations and Exhibits Annexed | 53-77 |
| Affirmation in Opposition to Cross Motion | 81-82 |
| Reply Affirmations, and Exhibits Annexed | 79-80, 83-85 |
Upon the foregoing cited papers, the Decision/Order on these motions is as follows:
Plaintiffs allege that they are former employees of defendant (and third-party plaintiff) Professional Grade Construction Group, Inc. ("PGCG"). Defendant (and third-party plaintiff) Michael Rubinstein is allegedly the "principal owner and sole shareholder of" PGCG. Plaintiffs commenced this action to recover unpaid wages and commissions allegedly owed to them by PGCG.
Paragraph 8 of the complaint states "Defendant, MICHAEL RUBINSTEIN, upon information and belief, is an adult who resides in Brooklyn, New York and is a principle [sic] owner and shareholder of the defendant, PROFESSIONAL GRADE CONSTRUCTION GROUP, INC." This is the only reference in the complaint to Mr. Rubinstein.
Plaintiff Dmitry Avramenko ("Dmitry") alone asserts claims under the FLSA (Fair Labor Standards Act) for overtime violations (29 USC §§ 201 et seq. - First Claim for Relief), and all of the plaintiffs assert claims for overtime violations under the New York Labor Law (12 NYCRR § 142-2.2 - Second Claim for Relief) and for breach of contract for defendants' "failure to pay [plaintiffs' weekly] salaries and [applicable] commissions" (Third Claim for Relief). The third-party action is not at issue in these motions.
The complaint does not set forth any section of the New York Labor Law, only this one regulation, which is solely addressed to overtime.
Plaintiffs specifically allege that Dmitry was to be paid $1,200 per week, plus overtime, plus commissions for "any additional client [that he] acquired." In his affidavit in support of motion seq. 2, Dmitry asserts that "[a]t first, defendants presented [him] with a complicated method of calculating [his] commissions" but, "[e]ventually, . . . defendants claimed that "Dmitry would receive a 10% payment for every payment that is brought in from [his] contracts" as a salesperson, beginning on November 19, 2016 (E-File Doc 32). In their complaint, plaintiffs further allege that plaintiff Alex Avramenko ("Alex") was to be paid $1,200 per week plus overtime, and Vecherskaya $400 per week.
Dmitry asserts he is owed $277,688.58 for unpaid salary (including overtime) and commissions. Alex asserts he is owed $562,560.58 for unpaid salary and Valeria Vecherskaya ("Valeria") asserts she is owed $11,600 in unpaid salary. Ultimately, plaintiffs seek both compensatory and liquidated damages for their "FLSA" and New York Labor Law claims (the First and Second Claims), damages for breach of contract under their Third Claim, as well as "[p]enalties" and attorneys' fees pursuant to 29 USC § 216 and Labor Law § 663 "and other applicable statutes" (E-File Doc 35 [complaint]).
Defendants assert that all three plaintiffs were terminated on January 20, 2017 for their "faithless service and breach of fiduciary duties" to PGCG (see E-File Doc 75 [Termination Letters for Dmitry and Alex but not Valeria]). Defendants also assert that "Plaintiffs have not moved for summary judgment on a claim under substantive provisions of Article 6 of New York's Labor Law. Therefore, any relief under Labor Law § 198 is not available to them, and there exists no basis for an award of attorneys' fees or liquidated damages" (E-File Doc 54, ¶ 36 [Jackson aff]).
In motion seq. 2, plaintiffs move pursuant to CPLR 3212 for partial summary judgment and an order that "Dmitry Avramenko is entitled to . . . a judgment for at the least $50,450.23 for commissions/wages, Alex Avramenko for at the least $37,200 for wages, and Valeria Vecherskaya for at the least $12,400 for wages." They also seek an order that plaintiffs "are entitled to reasonable attorneys' fees and liquidated damages in the sum of at least the unpaid wages or commissions" (E-File Doc 30 [Notice of Motion]).
Defendants oppose plaintiffs' motion and cross-move (mot. seq. 3) to dismiss the complaint as asserted against Rubinstein individually. Defendants do not indicate under which section of the CPLR they are moving. In light of the large number of exhibits submitted with motion seq. 3, and because they answered the complaint more than a year ago, defendants presumably cross-move for partial summary judgment dismissing the complaint as against Rubinstein pursuant to CPLR 3212.
Plaintiffs' motion for partial summary judgment (motion seq. 2)
Summary judgment is a drastic remedy that will be granted only where the movant demonstrates that no genuine triable issue of fact exists (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; see generally CPLR 3212). Initially, "the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). If the movant has made such a showing, the burden shifts to the opposing party to demonstrate, with admissible evidence, facts sufficient to require a trial (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).
Here, the plaintiffs request two different determinations from the court. First, they ask for an order awarding them partial summary judgment on the issue of liability and a money judgment for "at least" the amounts that they claim defendants admitted were not paid to them during defendant's deposition. That is, plaintiffs seek summary judgment on liability, specifically their claim that defendant PGCG failed to pay certain "wages or commissions . . . which were due and owing at the time [plaintiffs] left [PGCG's] employ." Plaintiffs contend that both PGCG and Rubinstein qualify as plaintiffs' employers because Rubinstein was the sole shareholder of PGCG and had the authority to hire and fire on behalf of the corporation. Plaintiffs next ask the court for a "declaratory judgment that they are entitled to liquidated damages of 100% of the [ultimate] sum" of unpaid wages and/or commissions which are determined to be owed to them, as well as reasonable attorneys' fees, pursuant to Labor Law § 198.1-a. Plaintiffs' counsel asserts that plaintiffs do not seek any relief with regard to their claims for overtime pay in this motion, just base salary and commissions, as applicable. Plaintiffs submit their own affidavits, the pleadings, a sworn letter from 2015 regarding Dmitry's "commission compensation schedule," Rubinstein's two deposition transcripts, and emails and other documents purportedly demonstrating the amount due for plaintiffs' allegedly unpaid wages and commissions.
Defendants oppose plaintiffs' motion for summary judgment. Defendants argue that the motion should be denied because defendants have a "complete defense in this action," to wit: "plaintiffs engaged in acts of theft and deception whereby they competed against [defendants] while employed by [PGCG]," making them "ineligible for any pay under the faithless servant doctrine." Defendants further argue that plaintiffs have not asserted any claim under New York Labor Law § 193 in their complaint - instead, their claim for withheld (non-overtime) wages is raised only in the breach of contract cause of action. Additionally, defendants argue that there are various issues of fact which preclude summary judgment:
"(1) whether Plaintiffs competed directly with [PGCG] during their employment, (2) whether [nonparty] Aluminum and Supply Co. ("A&S") was a separate and independent entity from [PGCG], (3) whether . . . Rubinstein qualifies as an employer in his individual capacity, (4) the extent of Dimitry['s] involvement in A&S and CADShops.com, and (5) whether Plaintiffs appropriated [PGCG's] customer lists, marketing materials, and other proprietary information to compete directly with [PGCG]"(E-File Doc 54).
PGCG asserts that it provided Alex, who resided in Belarus while employed by PGCG, with funding to "form[] Aluminum and Supply ("A&S"), a Belarusian company, as a subsidiary and satellite office for [PGCG] in Belarus" to "more cost effectively manage . . . design work" for PGCG and "facilitate a stronger working relationship with [PGCG's] key aluminum supplier, Alumintechno LLC," also located in Belarus.
Defendants contend that Alex established an "entity called CADShops.com" which allegedly copied PGCG's advertising design and offered identical services to those offered by PGCG, leading defendants to believe that plaintiffs were using PGCG's time and funds to create a direct business competitor. Defendants, however, claim they took "the high road" and once introduced CADShops.com "as a vendor to one client."
Defendants also argue that plaintiffs "converted . . . intellectual property" from PGCG - a project cost calculator tool - that was taken from PGCG without permission and used on a website operated by third-party defendant Avrams Inc.
Plaintiffs reply that they are entitled to summary judgment on the issue of liability for the unpaid wages and commissions based on defendants' admissions, regardless of the defendants' counterclaim alleging the "faithless servant" doctrine, which can be tried separately.
Conclusions of Law
Even construing plaintiffs' third cause of action as a Labor Law claim - though it is asserted in the complaint as a claim for breach of contract and not a violation of Labor Law §§ 193 or 198 - plaintiffs are not entitled to summary judgment. "In order to state a claim under [Labor Law] article 6, a plaintiff must first demonstrate that he or she is an employee entitled to its protections. Although the definition of employee is broad, independent contractors are not included" (Bhanti v Brookhaven Mem. Hosp. Med. Ctr., Inc., 260 AD2d 334, 335 [2d Dept 1999]). The Labor Law defines an employee as "any person employed for hire by an employer in any employment" (Law Law § 190 [2]). The court looks to the following factors to determine whether an individual is an employee or an independent contractor: "whether the worker (1) worked at his own convenience, (2) was free to engage in other employment, (3) received fringe benefits, (4) was on the employer's payroll and (5) was on a fixed schedule" (Bynog v Cipriani Group, Inc., 1 NY3d 193, 198 [2003]). "[T]he critical inquiry in determining whether an employment relationship exists pertains to the degree of control exercised by the purported employer over the results produced or the means used to achieve the results" (id.).
Here, plaintiffs have not eliminated all triable issues of fact as to whether Alex and Valeria were PGCG's employees within the meaning of the Labor Law. Alex and Valeria aver that they were to be paid weekly salaries and that defendants were thirty-one weeks behind on those weekly payments at the time they were terminated. Alex, however, avers that he was employed as the "director" of nonparty PGA (E-File Doc 34), not of PGCG. Plaintiff's other submissions, such as Rubinstein's deposition testimony, indicate that Alex was working for PGA but was paid by PGCG (E-File Doc 41 at 21-24). Rubinstein further testified at his deposition that both Alex and Valeria were somehow paid their wages through PGCG's written contract with nonparty Aluminum & Supply, allegedly a Belarusian entity formed by Alex (E-File Doc 42 at 20-21). There are pages missing from Mr. Rubenstein's deposition transcript, which further confuses matters. On Page 22, apparently discussing Alex, he says: "He was not a W-2. Um, I don't remember the condition of his employment. I mean he was getting paid in, I guess wire transfers. I don't remember, when he initially was hired, whether I gave the money to Dmitry and Dmitry sent him the money, or I sent him the money. When he was hired, he was not in the U.S." Rubinstein later (Pages 30-33) explained that he kept no employment records, that he did not send plaintiffs any 1099s or W-2s, and he did not withhold any taxes or social security or unemployment from their pay. He does acknowledge that the company was about seven months behind in paying Alex and Valeria (Pages 49-50). This is not enough for summary judgment. There are clearly issues of fact as to whether Alex and Valeria were actually employees of defendant PCGC during the relevant period, given that the court can only speculate as to the relationship between PGCG and Aluminum & Services, in the absence of any admissible evidence concerning an alleged contract between those two entities, and in the absence of any records of wages or other payments tendered to the plaintiffs by defendants to support their claims that they were employees and not independent contractors.
Rubinstein testified that PGA is an aluminum fabrication business whereas PGCG is an aluminum construction and installation business. He further testified that PGCG entirely funded PGA's existence since the latter was insolvent. Both businesses, he said, were New York corporations wholly owned and controlled by Rubinstein.
An unsigned copy of a contract between "Aluminum And Supply" and nonparty PGA was filed by defendants in opposition to Motion 2 and in support of the cross motion designated Motion 3. In any event, it is not in admissible form.
Accordingly, the branch of motion seq. 2 that seeks summary judgment for the thirty-one weeks of wages allegedly withheld by defendant PCGC from Alex and Valeria must be denied.
With regard to Dmitry, even if plaintiffs had asserted a claim for the violation of Labor Law § 193 and even assuming that Dmitry had established that he was PGCG's employee, the portion of the motion seeking summary judgment for Dmitry's unpaid wages and/or commissions must be denied. Labor Law § 190 (1) defines "wages" as the "earnings of an employee for labor or services rendered, regardless of whether the amount of earnings is determined on a time, piece, commission or other basis" (see Truelove v Northeast Capital & Advisory, 95 NY2d 220, 223 [2000]). "Whether a commission is earned is dependent upon the terms of the agreement providing for such commission" (Gennes v Yellow Book of New York, Inc., 23 AD3d 520, 521 [2d Dept 2005]).
Plaintiffs seek recompense for unpaid wages, including overtime, commissions, and penalties pursuant to their (apparently, mostly oral or otherwise not formally written) employment agreements. Plaintiffs further seek penalties and attorneys' fees under Labor Law § 663 "and other applicable statutes." Plaintiffs state the claim for unpaid wages as a contract claim, however, and not a violation of Article 6 of the Labor Law. It is not clear, absent admissible records, whether the plaintiffs were employees or independent contractors or which of the entities were their respective employers.
To establish liability under the Labor Law on a claim for unpaid wages, the employee has the burden of proving that he or she performed work for which he or she was not properly compensated, and the employer had actual or constructive knowledge of that work (see O'Donnell v Jef Golf Corp., 173 AD3d 1528 [3d Dept 2019]; Kuebel v Black & Decker Inc., 643 F3d 352, 361 [2d Cir 2011]; Shang Shing Chang v Wang, 2018 WL 1258801, *1-2, 2018 US Dist LEXIS 40121, *2-3 [ED NY, Mar. 12, 2018]). Although the employee has the burden of proving a failure to compensate, "it is the employer's responsibility to maintain accurate records of an employee's hours" (Padilla v Manlapaz, 643 F Supp 2d 302, 307 [ED NY 2009]; see Williams v Epic Sec. Corp., 358 F Supp 3d 284 301 [SD NY 2019]). "In situations where an employer's payroll records are inaccurate or inadequate [to show the employee was uncompensated for additional work], an employee has carried out his [or her] burden if he [or she] produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference" (Berrios v Nicholas Zito Racing Stable, Inc., 849 F Supp 2d 372, 379 [ED NY 2012] [internal quotation marks and citations omitted]; see Kuebel v Black & Decker Inc., 643 F3d at 362). This burden is not high and may be satisfied through estimates based on an employee's own recollection and testimony (see id. at 362; Shang Shing Chang v Wang, 2018 WL 1258801, *1, 2018 US Dist LEXIS 40121). After the employee meets his or her burden, "[t]he burden then shifts to the employer to prove by a preponderance of the evidence that the [employee] was properly paid for the hours worked" (Padilla v Manlapaz, 643 F Supp 2d at 307; see Labor Law § 196-a [a]; Berrios v Nicholas Zito Racing Stable, Inc., 849 F Supp 2d at 380).
Here, Dmitry has not established prima facie entitlement to summary judgment on his claim for unpaid wages and commissions in the motion papers. With regard to his wages, he avers that he was to be paid a base salary of $1200 per week plus overtime and commissions. He asserts that he was entitled to a commission of 10% of his sales beginning on November 19, 2016, but that he did not receive those commissions (E-File Doc 32). It is not clear from Dmitry's affidavit whether he was paid his weekly salary during the relevant period of time, as he avers that he did not receive his commissions. The only proof that Dmitry submits to demonstrate the value of the commissions that he has earned at any time during the course of his employment, however, is an email from Lena Druchenko, a former accountant for PGCG and its "sister company," nonparty Professional Grade Aluminum Corp. ("PGA"), which purportedly included a file attachment ("Dima Q4 2016.xlsx"), which indicates certain amounts of money allegedly owed to Dimitry (E-File Doc 43). These submissions are not submitted in admissible form and are thus inadequate to establish that plaintiff Dmitry is entitled to recover "at least" $50,450.23 in unpaid wages and commissions earned. Dmitry's self-serving affidavit and this inadmissible email are not sufficient to demonstrate his entitlement to summary judgment regarding his claim for unpaid wages and commissions.
Further, the branch of the plaintiffs' motion which requests a declaratory judgment with regard to liquidated damages and attorneys' fees is denied as premature. "[O]nly a prevailing party is entitled to recover an attorney's fee" and "[t]o be considered a prevailing party, a party must be successful with respect to the central relief sought' " (Village of Hempstead v Taliercio, 8 AD3d 476, 476, 778 NYS2d 519 [2004], quoting Fatsis v 360 Clinton Ave. Tenants Corp., 272 AD2d 571, 571, 709 NYS2d 421 [2000]). "Such a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope" (DKR Mtge. Asset Trust 1 v Rivera, 130 AD3d 774, 776, 14 NYS3d 414 [2015] [internal quotation marks and citation omitted]). Plaintiffs allege three distinct claims against defendants—they failed to pay wages, overtime compensation, and commissions. None of these claims are decided herein, thus the claims for penalties, liquidated damages, and attorneys' fees cannot be decided at this juncture.
As movants have not made the requisite prima facie showing for summary judgment, the burden does not shift to defendants to raise a triable issue of fact and motion seq. 2 must be denied (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).
Defendants' cross motion to dismiss the complaint against Rubinstein (mot. seq. 3)
Defendants seek an order dismissing the complaint as asserted against Rubinstein individually. Defendants contend that there is no basis to pierce the corporate veil, and that in any event, no such theory of liability was plead in the complaint. Alternatively, defendants argue that Rubinstein was not an "employer" under the New York Labor Law because 1) plaintiffs have not alleged that he "supervised or controlled the plaintiffs' work schedules or conditions of employment" and, thus, have not "established that Rubinstein satisfied the economic reality test," and 2) "Plaintiffs were employed by Prograde [PGCG], not Michael Rubinstein . . . in his individual capacity. Indeed, Rubinstein does not qualify as an employer under the 'economic reality' test, as all three of the Plaintiffs - two of whom worked remotely in Belarus - controlled their own hours and conditions of employment." As noted above, defendants are likely cross- moving pursuant to CPLR 3212, although they fail to state which section of the CPLR this cross motion is based on. Defendants submit, among other things, the pleadings, plaintiffs' deposition transcripts, Rubinstein's deposition transcripts, discovery, correspondence, various email communications, copies of alleged advertisements, and two contracts purportedly entered into by nonparty PGA.
E-File Doc 54, ¶ 6.
Plaintiffs argue that Rubinstein may be found liable under a veil-piercing theory and also that defendants' motion fails to demonstrate as a matter of law that Rubinstein was not an "employer" within the meaning of the New York Labor Law or the FLSA.
Conclusions of Law
"The FLSA defines 'employee' as 'any individual employed by an employer,' and to 'employ' as including 'to suffer or permit work,' " (Arena v Delux Transp. Services, Inc., 3 F Supp 3d 1, 9 [EDNY 2014], quoting 29 USC §§ 203 [e] [1], 203 [g]). The courts apply the "economic reality test" to determine whether an individual is an employee of an individual or an entity employer (e.g. Patrowich v Chemical Bank, 63 NY2d 541 [1984]; Kaiser v Raoul's Rest. Corp., 72 AD3d 539 [1st Dept 2010]; see Carter v Dutchess Community College, 735 F2d 8, 12 [2d Cir 1984]). That test looks to whether the alleged employer: (1) had the authority to hire and fire employees: (2) supervised and controlled work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.
As discussed above, the Labor Law defines an employee as "any person employed for hire by an employer in any employment" (Law Law § 190 [2]). The court looks to "whether the worker (1) worked at his own convenience, (2) was free to engage in other employment, (3) received fringe benefits, (4) was on the employer's payroll, and, (5) was on a fixed schedule," but "the critical inquiry in determining whether an employment relationship exists pertains to the degree of control exercised by the purported employer over the results produced or the means used to achieve the results" (Bynog v Cipriani Group, Inc., 1 NY3d 193, 198 [2003]).
There is no private right of action against corporate officers for violations of Article 6 of the Labor Law (§ 190 et seq.; Stoganovic v Dinolfo, 92 AD2d 729, 461 NYS2d 121 [4th Dept 1983], affd 61 NY2d 812 [1984]). Here, plaintiffs seem to be bringing suit against defendant Rubinstein as an employer, not as a corporate officer. The complaint is deficient in this regard. Therefore, defendants' motion is granted to the extent that Rubinstein is dismissed as an individual party defendant. While Rubinstein's EBT transcripts make it clear that PGCG and Rubinstein are completely united in interest, since he said he is the only shareholder and the only officer, plaintiffs have not asserted anywhere in the complaint that they were employed by Rubinstein individually, as opposed to PGCG. In fact, plaintiffs have not asserted any claims under Article 6 of the Labor Law in their complaint against Rubinstein (or PGCG).
While plaintiffs might have alleged that Rubinstein was an employer within the meaning of the FLSA or the Labor Law (see e.g. Lauria v Heffernan, 607 F Supp 2d 403, 409 [ED NY 2009]; see Wing Wong v King Sun Yee, 262 AD2d 254, 255, 693 NYS2d 536 [1st Dept 1999]), if they are indeed "employees," they have failed to do so in their complaint. Though plaintiffs are not necessarily required to show at the outset that the corporate veil should be pierced, or allege that Rubenstein exercised complete domination and control over the corporation (Bonito v Avalon Partners, Inc., 106 AD3d 625 [1st Dept 2013]), the complaint is bereft of any allegations indicating that Rubinstein may be individually liable to plaintiffs.
In conclusion, motion seq. 3 is granted to the extent it seeks to dismiss the complaint as against Rubenstein individually. In addition, Rubinstein is also granted permission to withdraw all third-party claims raised by him in his individual capacity (E-File Doc 56 [indicating in defendants' attorney's affidavit that Rubinstein formally withdraws all of his third-party claims, leaving only PGCG's third-party claims]).
Accordingly, it is ORDERED that plaintiffs' motion for partial summary judgment is denied (motion seq. 2).
AND IT IS FURTHER ORDERED that the defendants' cross motion to dismiss the complaint as asserted against defendant Rubinstein is granted (motion seq. 3).
AND IT IS FURTHER ORDERED that an amended third-party complaint, without Rubenstein in the caption or in the description of the claims shall be filed and served within 45 days. The third-party defendants may amend their answers in the time frame provided for in the CPLR.
This constitutes the decision and order of the court. Dated: December 30, 2020
ENTER:
/s/ _________
Hon. Debra Silber, J.S.C.