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finding plaintiffs' allegations as to individual defendant's "employer" status under the NCWHA sufficient to survive a motion to dismiss
Summary of this case from Garcia v. Frog Island Seafood, Inc.Opinion
3:03cv51-T
October 16, 2003
MEMORANDUM AND RECOMMENDATION
THIS MATTER is before the Court on Defendant Henry Wilkinson's Motion to Dismiss. Having considered the pleadings, the parties' briefs, and the applicable law, the undersigned will recommend that the Court grant in part and deny in part Defendant Wilkinson's motion.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs, all former employees of Colorcraft Printing Company, Inc. or Colorcraft of Burlington, LLC (collectively, "Colorcraft"), filed this putative class action suit against Colorcraft, Branch Banking and Trust Company, and three former officers or managers with Colorcraft on February 7, 2003. In the Complaint, Plaintiffs allege that Colorcraft ceased doing business on May 3, 2002 and has refused to compensate eligible Plaintiffs and similarly situated members of the putative class for vacation time earned by those employees and wages based on commissions that were also earned by those employees. (Compl. ¶¶ 40-42). Plaintiffs also allege that certain wages deducted from their pay for the purpose of investment in the Colorcraft Printing Company, Inc. 401(k) Plan were not credited or recognized and, finally, that certain wages deducted by Colorcraft to pay for medical insurance provided by Colorcraft were not paid to the insurer resulting in the denial of medical claims and causing Plaintiffs and putative class members to suffer damages. (Compl. ¶¶ 43-47). In the Complaint, Plaintiffs assert a cause of action against Colorcraft for breach of its fiduciary duty under Sections 409 and 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1109 and 1132. Plaintiffs also assert causes of action against all of the defendants for breach of contract under North Carolina common law and for violations of the North Carolina Wage and Hour Act ("NCWHA"), N.C. Gen. Stat. § 95-25.1 et seq.With respect to Defendant Wilkinson, in particular, Plaintiffs allege that Defendant Wilkinson was the chief operating officer of Colorcraft and that, as such, he should be held liable for Colorcraft's breaches of contract, statutory violations, and debts owed to Plaintiffs and the putative class members. (Compl. ¶¶ 30-31). Plaintiffs do not include any allegations under their first cause of action for breach of fiduciary duty under ERISA against Defendant Wilkinson, but they do allege that he and the other defendants breached their employment contracts by refusing to pay Plaintiffs all of the commissions and vacation pay to which they are entitled and refusing to pay amounts deducted from their wages to their insurer for the purposes of health insurance. (Compl. ¶¶ 59-60). As to their employment contracts, Plaintiffs allege that they were employees of Colorcraft, that Plaintiffs had implied employment contracts with Colorcraft, and that Defendant Wilkinson should be held liable for Colorcraft's breaches of contracts. (Compl. ¶¶ 31, 56). Finally, Plaintiffs allege that each of the defendants violated their rights under the NCWHA by failing to pay vacation benefits and commissions. (Compl. ¶ 64). Plaintiffs allege specifically that in refusing to pay Plaintiffs and the putative class members vacation benefits and commissions earned, Defendant Wilkinson, as well as the other defendants, "acted willfully and in knowing disregard" of Plaintiffs' and putative class members' rights under the NCWHA. (Compl. ¶ 65).
Defendant Wilkinson subsequently moved to dismiss the action against him under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6). Plaintiffs filed no response to his motion, and it is now ripe for decision.
MOTION TO DISMISS STANDARD
Under Rule 12(b)(6), a complaint should not be dismissed for failure to state a claim upon which relief can be granted unless "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984); see also Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102 (1957). In evaluating a motion to dismiss, "a court must accept the factual allegations of the complaint as true," GE Investment Private Placement Partners II v. Parker, 247 F.3d 543, 548 (4th Cir. 2001), and all reasonable inferences from the facts alleged must be drawn in the plaintiffs favor, see Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). Notwithstanding this exacting standard, dismissals should be granted when warranted. As recognized by the Supreme Court in Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827 (1989), the Rule 12(b)(6) procedure for early dismissal "streamlines litigation by dispensing with needless discovery and fact finding." Id., 490 U.S. at 326-27, 109 S.Ct. at 1832. Accordingly, "[n]othing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable." Id., 490 U.S. at 327, 109 S.Ct. at 1832.
DISCUSSION
Defendant Wilkinson moves to dismiss each of Plaintiffs' claims against him. As Defendant Wilkinson notes, Plaintiffs did not include any allegations against him under their cause of action alleging ERISA violations. Plaintiffs have asserted that Defendant Wilkinson breached their employment contracts with Colorcraft and that he violated their rights under the NCWHA, and he seeks to have both of these claims dismissed.
I. Breach of Contract
Plaintiffs' breach of contract claims against Defendant Wilkinson are plainly due to be dismissed. Plaintiffs allege specifically that they were employees of Colorcraft and that they had implied contracts of employment. Nowhere do Plaintiffs allege that they had contracts of employment with Defendant Wilkinson; rather, they allege that Defendant Wilkinson should be held liable for Colorcraft's breaches of contract. Fundamental to the law of contract, however, is the tenet that "parties to a contract may bind only themselves and that the parties to the contract may not bind a third person who is not a party to the contract in absence of his consent to be bound." Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 438, 238 S.E.2d 597, 602-03 (1977); see also Triad Int'l Maint. Corp. v. Guernsey Air Leasing, Ltd., 178 F. Supp.2d 547, 552 (M.D.N.C. 2001). Here, there is no allegation or even reasonable inference that Defendant Wilkinson entered into an employment contract with any of the plaintiffs to which he could be considered bound. Accordingly, the undersigned will recommend that the Court grant Plaintiffs' breach of contract claim.
II. NCWHA Claim
Plaintiffs' claim against Defendant Wilkinson under the NCWHA presents a closer question and one that, at this stage of the proceedings, must be resolved against Defendant Wilkinson, notwithstanding Plaintiffs' failure to respond to his motion. Defendant Wilkinson argues that this claim should be dismissed because Plaintiffs have not alleged facts sufficient to support the conclusion that he is an "employer" that may be held liable for violations under the NCWHA.
The NCWHA defines "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee." N.C. Gen. Stat. § 95-25.2(5). This definition of "employer" is identical to the pertinent part of the definition of "employer" under the Fair Labor Standards Act ("FLSA"), the Equal Pay Act ("EPA") and the Family and Medical Leave Act ("FMLA"). See 29 U.S.C. § 203 (FLSA and EPA); 29 U.S.C. § 2611(4)(A)(ii)(1) (FMLA). Because the language used in each of these legislative acts is identical, the court looks to decisions interpreting these federal provisions to guide its interpretation of § 95-25.2(5). See 13 N.C.A.C. § 12.0103 (where North Carolina General Assembly has used terminology or language of the FLSA, North Carolina Department of Labor will look to federal judicial and administrative interpretations for guidance and such interpretations will control in the enforcement of the NCWHA); Stone v. Lynch, 68 N.C. App. 441, 443, 315 S.E.2d 350, 352 (1986) (when North Carolina and federal statutes contain identical language, courts look to federal decisions to supplemental any state decisions interpreting pertinent provisions).
As several courts have recognized, the definition of "employer" under the FLSA is to be interpreted more broadly than the term would be interpreted under common law in keeping with the remedial purposes of the Act. See, e.g., Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999); Dole v. Elliott Travel Tours, Inc., 942 F.2d 962, 965 (6th Cir. 1991); Donovan v. Agnew, 712 F.2d 1509, 1510 (1st Cir. 1983); see also Falk v. Brennan, 414 U.S. 190, 195, 94 S.Ct. 427, 431 (1973). Individuals may be held liable as "employers" even without "piercing the corporate veil," see Brock v. Hamad, 867 F.2d 804, 808 n. 6 (4th Cir. 1989); Patel v. Wargo, 803 F.2d 632, 637-38 (11th Cir. 1986), and there may be several employers responsible for compliance with these legislative acts within one corporation or other business organization, Dole, 942 F.2d at 965; Donovan, 712 F.2d at 1510. In deciding whether a particular individual is an "employer" for purposes of the FLSA, courts apply an "economic reality" test, examining the totality of the circumstances to determine whether the individual has sufficient operational control over the workers in question and the allegedly violative actions to be held liable for unpaid wages or other damages. See Herman, 172 F.3d at 139; Dole, 942 F.2d at 965; Donovan, 712 F.2d at 1511, 1513. Personal liability does not require an ownership interest in the corporation; instead, the more salient measure is the extent of the individual's operational control over the enterprise and its employees. See Donovan, 712 F.2d at 1511; see also Patel, 803 F.2d at 632 ("To be personally liable, an officer must either be involved in the day-to-day operation or have some direct responsibility for the supervision of the employee."). Factors that may be considered include whether the individual: (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. See Herman, 172 F.3d at 139. These factors are not exclusive, nor is any one factor dispositive; rather, the determination of whether a particular individual had sufficient operational control within a business enterprise to be considered an "employer" for purposes of the FLSA requires a consideration of all of the circumstances and relevant evidence. See Herman, 172 F.3d at 139.
Applying these principles to Plaintiffs' claim against Defendant Wilkinson under the NCWFFA, Defendant Wilkinson correctly notes that the specific allegations against him are few and that aside from the allegation that he served as chief operating officer of Colorcraft, Plaintiffs have not alleged facts relating to the extent of his control over compensation decisions or, more specifically, the decisions about which Plaintiffs complain. Nevertheless, this case is before the Court on a motion to dismiss, and all reasonable inferences that may be drawn from the allegations of fact must be drawn in favor of Plaintiff. See Edwards, 178 F.3d at 244. Here, Plaintiff has alleged that Defendant Wilkinson was the chief operating officer of Colorcraft and that he could be held liable for Colorcraft's violations of the NCWHA. While the latter is a legal conclusion that the Court need not accept, see id., one of the key factors in determining whether an individual may be held liable for violations of the NCWHA, as discussed above, is the extent of operational control, and Defendant Wilkinson's job title alone suggests that he might have had sufficient operational control to warrant the imposition of liability against him. Defendant Wilkinson ultimately may show that he did not have sufficient control over the pertinent decisions to subject him to liability, but at this stage in the proceedings, the undersigned simply cannot say that "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon, 467 U.S. at 73, 104 S.Ct. at 2232.
The undersigned notes also that this holding is consistent with other decisions in which district courts have recognized the fact-specific nature of the individual liability inquiry under the federal statutes or, in one case, a state statute with identical language, and denied motions to dismiss. See, e.g., Morrow v. Putnam, 142 F. Supp.2d 1271, 1276 (D. Nev. 2001) (denying motion to dismiss where plaintiff alleged defendants, as officials of public agency, willfully interfered with his rights under FMLA and noting that discovery may reveal that defendants did not exercise requisite level of authority over plaintiffs employment to be considered "employer"); Snider v. Belvidere Township, 1998 WL 920400, at *3 (N.D. Ill. Dec. 28, 1998) (denying motion to dismiss where plaintiff alleged individual defendant was supervisor and allegedly responsible for wage disparity under EPA); Rupnow v. TRC, Inc., 999 F. Supp. 1047, 1048 (N.D. Ohio March 31, 1998) (denying motion to dismiss where plaintiff alleged that her employment was terminated following letter to defendant complaining about work assignment and noting that determination of whether defendant qualified as "employer" under FMLA required further development of facts); Danio v. Emerson College, 963 F. Supp. 61, 63 (D. Mass. 1997) (denying motion to dismiss under state equal pay act with identical definition of "employer" as federal act where job titles indicated substantial involvement in plaintiffs employment and indicated operational control); Larson v. School Bd. of Pinellas County, 820 F. Supp. 596, 599 (M.D. Fla. 1993) (denying motion to dismiss based on broad definition of "employer" under FLSA where plaintiff alleged that individual defendants were officials or agents of school board with authority to take discriminatory actions as alleged in complaint); see also Equal Employment Opportunity Comm `n v. Hemphill, 1995 WL 683502, at *3 (N.D. Ill. Nov. 16, 1995) (permitting plaintiff to amend complaint to include more specific allegations of operational control of defendant to avoid dismissal). While a minority of district courts have required more specific pleading, see, e.g., Bravo v. Eastpoint Int'l, Inc., 2001 WL 314622, at *2 (S.D.N.Y. March 30, 2001); Sandom v. Travelers Mortgage Servs., Inc., 752 F. Supp. 1240, 1251-52 (D.N.J. Dec. 20, 1990), these cases have not included allegations of job title sufficient to infer some operational control, as are present in this case.
ORDER
For the foregoing reasons, the undersigned concludes that Plaintiffs have failed to allege facts sufficient to state a claim against Defendant Wilkinson for breach of contract under North Carolina law but have alleged facts sufficient to state a claim against him under the NCWHA. IT IS, THEREFORE, RESPECTFULLY RECOMMENDED that Defendant Wilkinson's Motion to Dismiss under Rule 12(b)(6) be GRANTED as to Count II of the Complaint alleging breach of contract and DENIED as to Count III of the Complaint alleging violations under the NCWHA.
The parties are hereby advised that, pursuant to 28, United States Code, Section 636(b)(1)(C), written objections to the findings of fact, conclusions of law, and recommendation contained herein must be filed within ten (10) days of service of same. Failure to file objections to this Memorandum and Recommendation with the district court will preclude the parties from raising such objections on appeal. Thomas v. Arn, 474 U.S. 140, 152, 106 S.Ct. 466, 473 (1985); United States v. Schronce, 727 F.2d 91, 93-94 (4th Cir. 1984).