Opinion
SUCV2015-02876-BLS1
08-31-2016
Joseph Rogier et al. [1] v. Herbert G. Chambers et al. [2] ; Other Parties: Anthony Kent et al. [3] v. Herbert G. Chambers et al. No. 134818
Filed September 1, 2016
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS
Edward P. Leibensperger, Justice of the Superior Court.
Plaintiffs, former employees of automobile dealerships owned by defendant, Herbert G. Chambers, allege violations of the Massachusetts Wage Act and minimum wage and overtime laws. Plaintiffs seek relief on behalf of themselves and a class of all others similarly situated. This motion to dismiss presents the issue of whether plaintiffs may maintain the action against corporate entities by which they were not directly employed. Based on the relatedness of the defendant entities, plaintiffs argue that they have standing to proceed. The non-employer defendants, on the other hand, contend that they are entitled to rely upon the law respecting separate corporate formations to limit plaintiffs to asserting claims only against their direct employers. For the reasons stated below, the non-employer defendants' motion will be allowed.
BACKGROUND
The nine plaintiffs in Rogier (No. 2015-2876) are former employee salespersons at four separate dealerships owned by Chambers. Each of the dealerships is organized as a separate corporation. Rogier and Saia worked at Herb Chambers of Burlington, Inc. Kent, Garrett, Sebelon, Younis and Devlin worked at Herb Chambers Route 9, Inc. Underwood worked at Herb Chambers of Natick, Inc. Zerai worked at Herb Chambers 1186, Inc. The Rogier plaintiffs sue twenty-seven (27) corporations in addition to their direct employers, plus two individuals--Herbert G. Chambers, the owner, president, treasurer, and sole registered director of each of the named defendants, and James Duchesneau, the chief financial officer, vice president and assistant secretary of defendant Jennings Road Management Corp. (" JRM").
The five plaintiffs in Kent (No. 2016-849) are former employee Client Care Specialists and/or Business Development Managers at four separate dealerships owned by Chambers. Each of the dealerships is a separate corporation. Kent and Devlin worked at Herb Chambers of Westborough, Inc. Avallon and Underwood worked at Herb Chambers of Natick, Inc. Avallon also worked at Herb Chambers Andover Street, Inc. Razon worked at Herb Chambers 1186, Inc. As in Rogier, the Kent plaintiffs sue twenty-seven (27) corporations in addition to their direct employers, as well as Chambers and Duchesneau.
Kent, Devlin and Underwood are named plaintiffs in both actions.
Plaintiffs in both cases state in their complaints that they were employed by " defendants" without specifying which of the dealerships or other defendants they are referring to. It is evident from plaintiffs' memoranda in opposition to defendants' motion to dismiss, however, that the use by plaintiffs of the generic " defendants" as their employers is meant as a legal conclusion. That is, that according to plaintiffs all defendants " employed" them based on the legal theories of " joint employer" or " single integrated enterprise" as allegedly recognized under the Federal Fair Labor Standards Act (" FLSA"). To clarify, plaintiffs' counsel was asked at oral argument on this motion whether it could be stipulated as to which entity actually engaged each plaintiff and issued a paycheck to each plaintiff. Plaintiffs' counsel then stipulated that each plaintiff received his or her paycheck from the dealership where each worked. Therefore, for purposes of analyzing the parties' arguments with respect to this motion to dismiss, the dealership corporation where a plaintiff worked will be referred to as his or her direct employer, and the court will consider whether, as a matter of law, the other defendants may be potentially liable as indirect employers under the Massachusetts statutes.
In Rogier, plaintiffs allege that as salespersons they were paid based solely on commissions earned from the sale of vehicles. In Kent, plaintiffs allege that as Client Care Specialists and/or Business Development Managers they were paid between $400 and $800 per week, plus contingent production bonuses. In both cases, plaintiffs allege that the payment scheme violated the Massachusetts Wage Act (G.L.c. 149, § § 148, 150) and statutory requirements for the payment of minimum wages and overtime (G.L.c. 151, § § 1, 1A and 1B).
Plaintiffs also allege common-law claims of breach of contract, unjust enrichment, quantum meruit and breach of the covenant of good faith and fair dealing.
At this stage, defendants do not contest whether each plaintiff adequately pleads claims against his or her direct employer corporation, as well as against Chambers as the president and treasurer of each direct employer corporation. Defendants' argument is that plaintiffs do not have standing to sue corporations that were not their direct employers. Because Duchesneau was not an officer of any of the direct employer corporations, defendants contend that plaintiffs may not assert any claims against him.
DISCUSSION
I apply the well-known standard for the consideration of a motion to dismiss. To survive a motion to dismiss, a complaint must set forth the basis for the plaintiff's entitlement to relief with " more than labels and conclusions." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, 888 N.E.2d 879, quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The court accepts as true the facts alleged in the complaint and draws every reasonable inference in favor of the plaintiff. Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676, 940 N.E.2d 413 (2011). Where, as here, the motion attacks the standing of a plaintiff to assert a claim, the motion implicates whether the court has subject matter jurisdiction, although the issue may also be addressed as one raising whether the plaintiff fails to state a claim upon which relief may be granted. Doe v. The Governor, 381 Mass. 702, 705, 412 N.E.2d 325 (1980).
As previously referenced, the complaints in these actions allege that plaintiffs " worked at" specified dealership corporations, but also alleges that all defendants became their employers. I do not need to accept the latter allegation because it is a legal conclusion, not a fact allegation. Moreover, the facts have been clarified, by stipulation, to be that the dealership where a plaintiff worked is the corporation that engaged the plaintiff and issued a paycheck to the plaintiff.
Defendants' motion to dismiss raises a pure question of law: Does Massachusetts law recognize that an employee may sue a corporation other than his or her direct employer for violation of employment laws? Stated another way, assuming the truth of plaintiffs' allegations regarding the common ownership and common operating policies of the corporations within the Herb Chambers family of dealerships, and the control and exercise of authority by at least one of those corporations, JRM, may an employee of one dealership claim that he is also an employee of the other companies? The answer to that question if this case were brought under the FLSA appears to be " yes, " at least as to JRM if not the other dealership corporations. Whether the answer is the same under Massachusetts law requires, principally, an examination of the respective statutes and then an application of Massachusetts common law. Counsel for both sides indicate that there is no Massachusetts appellate precedent directly on point.
1. The FLSA
Under the FLSA, 29 U.S.C. § 201 et seq. (" the Act"), an employee may have multiple employers for the work he performs, each entity responsible for compliance with the requirements of the statute. Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668, 675 (1st Cir. 1998) (" Baystate ") (" The FLSA contemplates several simultaneous employers, each responsible for compliance with the Act"). That is because of the " expansiveness" of the Act's definition of " employer." Falk v. Brennan, 414 U.S. 190, 195, 94 S.Ct. 427, 38 L.Ed.2d 406 (1973). The Act defines " employer" as " any person acting directly or indirectly in the interest of an employer in relation to an employee . . ." 29 U.S.C. § 203(d). The definition is broad and comprehensive so as to apply to many working relationships that, absent the Act, would not fall within an employer-employee category. Baystate at 675. " [T]he remedial purposes of the FLSA require courts to define " 'employer' more broadly than the term would be interpreted in traditional common-law applications." Id., quoting Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962, 965 (6th Cir. 1991).
As a result, entities that are not the direct employer of an employee may, nevertheless, be held responsible as an " employer." In Baystate a temporary employment agency that placed individuals at client companies that were, allegedly, the direct employers of the individuals, was held to be an employer under the Act. The court held that, under the Act, the test was " not to [look] to the common law conceptions of [the employment] relationship, but rather to the 'economic reality' of the totality of the circumstances bearing on whether the putative employee is economically dependent on the alleged employer." Baystate at 675. The court then articulated four factors to evaluate when applying the " economic reality" test: whether the alleged employer (1) had the power to hire and fire the employee; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records. Id. See also, Falk v. Brennan, 414 U.S. 190, 195, 94 S.Ct. 427, 38 L.Ed.2d 406 (1973) (management company managing maintenance men employed by apartment owner may also be employer under the Act); Perez v. Westchester Foreign Autos, Inc., 2013 WL 749497 (U.S.D.C., S.D.N.Y. 2013) (holding management company to be employer under the Act of individuals directly employed by separate automobile dealerships).
2. The Massachusetts Statutes
In contrast to the FLSA, the Massachusetts statutes under which plaintiffs seek recovery do not define the term " employer." The Wage Act directs " every person having employees in his service" to promptly pay wages. The statute goes on to detail how the " employer" must pay wages and to direct the " employer" to issue a suitable pay slip showing how the employer calculated the pay. Where the Legislature intended to expand liability to a person other than the direct employer, it did so explicitly. The statute makes the president and treasurer of a corporation and any officers or agent having the management of the corporation " deemed" to be the employer. Likewise, Massachusetts law prohibits an " employer" from paying oppressive and unreasonable wages (below minimum wage) or failing to pay overtime wages. To have standing to sue for a violation of the statutes, the plaintiff must be an " employee." G.L.c. 149, § 150.
G.L.c. 149, § 148.
The expansion of liability beyond the direct employer applies to " individuals with the authority to shape the employment and financial policies of an entity . . ." Cook v. Patient Edu., LLC, 465 Mass. 548, 554, 989 N.E.2d 847 (2013) (emphasis added).
G.L.c. 151, § 1.
G.L.c. 151, § § 1A, 1B.
It must be noted that there is a statutory definition of " employer" in G.L.c. 149, § 1. It is " any person acting in the interest of an employer directly or indirectly." That definition is nearly identical to the broad definition of " employer" in the FLSA. But the § 1 definition of " employer" is expressly inapplicable to the sections of the Massachusetts statutes under which plaintiffs bring this action. Absent a statutory definition, " [s]tatutory language should be given effect consistent with its plain meaning." Cooney v. Compass Group Foodservice, 69 Mass.App.Ct. 632, 636, 870 N.E.2d 668 (2007). The plain and common understanding of " employer" is the entity with which an employee has an express or implied contract to work for compensation and from which he receives pay. Black's Law Dictionary (2009) (Employer: " A person who controls and directs a worker under an express or implied contract of hire and who pays the worker's salary or wages").
A related but different statute discussed in Cooney, supra, is illustrative. The Massachusetts Tips Act, G.L.c. 149, § 152A, defines " employer" as any person " having employees in its service" and then expressly mandates that " [n]o employer or other person " (emphasis added) shall confiscate tips or service charges. Because the statute includes " or other person" the Appeals Court held that a non-employer entity could be held liable. Cooney, 69 Mass.App.Ct. at 641 (" The Legislature recognized that this entity is not always the direct employer; . . . The Legislature's use of 'or' between 'employer' and 'other person' indicates that it contemplated that two separate entities could be liable . . ."). In contrast to the Tips Act, the Massachusetts Wage Act and the minimum wage and overtime statutes do not include the words " or other person."
In sum, the Massachusetts statutes involved in this case do not recognize the concept of multiple and simultaneous employers of a single employee based on a test of what entity exercises control over policy and economic reality. Instead, the potential liability of an entity that allegedly controls the economic reality of an employee's work but is not the direct employer must be analyzed under common-law principles. As recognized in Baystate, common-law principles of the employer-employee relationship are significantly narrower than the economic reality test under the FLSA. Baystate at 675.
Plaintiffs also argue for standing under a " single integrated enterprise" theory that they say has been recognized under FLSA. For the same reasons articulated above regarding the language (or lack thereof) of the Massachusetts statutes, this theory fails. Moreover, the " single integrated enterprise" argument under the FLSA " muddles the proper method for analyzing multiple-company liability as joint employers with the separate question of whether they may. constitute a single enterprise for FLSA coverage" purposes. Cavallaro v. UMass Memorial Health Care, Inc., 971 F.Supp.2d 139, 148 (D.Mass. 2013). See also, Roman v. Gaupos III, Inc., 970 F.Supp.2d 407, 415 (D.Md. 2013) (rejecting " single enterprise" theory under the FLSA).
3. Common-Law Principles
" The rule in the Commonwealth is that corporations are to be regarded as separate entities where there is no compelling reason of equity 'to look beyond the corporate form for the purpose of defeating fraud or wrong, or for the remedying of injuries.'" Gurry v. Cumberland Farms, Inc., 406 Mass. 615, 625-26, 550 N.E.2d 127 (1990), quoting My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 618, 233 N.E.2d 748 (1968). Moreover, " [t]he mere fact of common management and shareholders among related corporate entities has repeatedly been held not to establish, as a matter of law, a partnership, agency or 'joint venture' relationship that renders the corporation a 'single employer'" Id. at 624.
Recently, the Supreme Judicial Court considered whether taxicab drivers who were classified as independent contractors could sue several corporate entities on the ground that they were all their " employers" for purposes of the Wage Act. Sebago v. Boston Cab Dispatch, Inc., 471 Mass. 321, 28 N.E.3d 1139 (2015). The Court held that disregard of the corporate form required analysis of a number of factors, generally including nonobservance of corporate formalities, confused intermingling of business assets and use of the corporation in promoting fraud. Id. at 328. Where the " allegations are limited to common ownership and control, there is no cause to analyze the defendants as a single employer." Id. at 329. Thus, the Court proceeded to examine the independent contractor/employment issue for each defendant separately.
Here, plaintiffs do not allege the factors that would allow a court to pierce the corporate veil to hold Herb Chambers companies that were not direct employers liable as a single employer. In their opposition to the motion to dismiss plaintiffs concede that they do not advance a corporate veil-piercing theory. Opposition, p. 12. Instead, they allege only the kind of joint ownership and control that, while relevant under the FLSA, the Supreme Judicial Court found inadequate to constitute grounds for treating separate corporations as a single employer. Applying common-law principles recognizing the propriety of corporate forms to limit liability, plaintiffs may not succeed against entities that were not their direct employers.
Lastly, plaintiffs point to the " juridical links" doctrine described by the Supreme Judicial Court in Weld v. Glaxo Wellcome, Inc., 434 Mass. 81, 90, 746 N.E.2d 522 (2001), as a basis for denying the motion to dismiss. That doctrine was used to analyze whether a class representative's claim satisfied the typicality element for a class action under Mass.R.Civ.P. 23. The Court held that under the circumstances of that case, where plaintiffs and all members of the class possessed an identical claim against one defendant, plaintiff's claims satisfied the typicality requirement to proceed against certain co-defendants with whom plaintiff had not interacted. The doctrine is merely a procedural device that permits collective adjudication. It does not confer standing to a plaintiff as a matter of substantive law. Id. Thus, the doctrine is not a ground for denying defendants' motion.
The Court noted that in order to recover against all defendants jointly, plaintiffs would have to prove their allegations of conspiracy. Id. at note 10. There is no conspiracy claim in the present cases.
CONCLUSION
Plaintiffs do not have standing to sue corporations that were not their direct employers.
This is true under the applicable Massachusetts statutes as well as the common law. Accordingly, those claims must be dismissed. As a result, the claims against all corporations listed in footnotes 2 and 4, other than Herb Chambers of Burlington, Inc., Herb Chambers Route 9, Inc., Herb Chambers of Natick, Inc., Herb Chambers 1186, Inc., Herb Chambers of Westborough, Inc. and Herb Chambers Andover Street, Inc. are dismissed.
The claims against Chambers, individually, may stand only with respect to his role as president and treasurer of the corporations that were direct employers of plaintiffs. The claims against Duchesneau are dismissed because it is not alleged that he was the president, treasurer or officer of any of the corporations that directly employed plaintiffs.