Hernandez v. Premium Merchant Funding One, LLC

Background

Erica Hernandez brought an employment-discrimination action against Premium Merchant Funding One, LLC (PMF), James P. Geiselman III, and Daniel P. Moore. She asserted claims under Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the New York State Human Rights Law, the New York City Human Rights Law, and other state laws.

Hernandez alleged that she worked at PMF as a commission-based sales representative from January through November 2018. She alleged that Geiselman propositioned her for sex, that Moore later required her to split commissions and assigned Geiselman as an underwriter on her deals, and that male coworkers were not treated the same way. She also alleged that a PMF manager commented about her clothing and appearance in front of the sales team, and that Moore later approached her from behind and grabbed her breast. She claimed that PMF withheld commissions, constructively terminated her, and failed to pay her final earned commission.

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court generally accepted the complaint’s factual allegations as true for purposes of the motion, but required enough facts to make each claim plausible.

Administrative exhaustion and early right-to-sue notice

The defendants argued that Hernandez had not completed the required administrative steps before filing her Title VII claims. Hernandez filed a charge with the Equal Employment Opportunity Commission on January 4, 2019, requested an early notice allowing her to sue, received that notice on February 13, 2019, and filed this action on February 26, 2019.

The court held that Hernandez satisfied the statutory filing requirements. It also upheld the regulation permitting the Equal Employment Opportunity Commission to issue an early notice allowing suit before 180 days had passed. The court concluded that the relevant statute was ambiguous about whether the agency had to wait 180 days and that the regulation was a permissible interpretation of the statute. The motion to dismiss based on the early notice was denied.

Employee status

The defendants argued that Hernandez was an independent contractor rather than an employee and therefore could not sue PMF under Title VII. The court applied the agency-factor test, which considers matters such as control over the work, payment, benefits, tax treatment, and whether the work is part of the company’s regular business.

Although Hernandez’s contract described her as an independent sales contractor and she was paid using an Internal Revenue Service Form 1099, she alleged that Moore controlled her schedule, instructed her how to perform her work, and changed her compensation structure. Because the employee-versus-independent-contractor question was fact-intensive and required more information, the court held that Hernandez plausibly alleged employee status at the pleading stage.

Title VII pay-discrimination claim

The court dismissed Hernandez’s Title VII claim based on unequal pay. Hernandez alleged that no similarly situated male sales representative had commissions reduced and that male coworkers were not assigned an underwriter. The court held that these general statements did not provide enough facts to create a plausible inference that PMF reduced her compensation because of her sex. She did not identify a specific male comparator or provide additional facts showing that the male coworkers were similarly situated.

Title VII hostile-work-environment claim

The court denied dismissal of Hernandez’s hostile-work-environment claim. A hostile-work-environment claim requires facts showing that the workplace was sufficiently severe or pervasive to alter the conditions of employment and that the conduct can be attributed to the employer.

The court found that the alleged conduct, viewed together, plausibly met that standard at the pleading stage. It emphasized Moore’s alleged act of grabbing Hernandez’s breast, which it described as a severe form of sexual harassment, along with his other alleged conduct involving her commissions, business leads, bullying, and disparagement. Because Moore allegedly had authority over Hernandez’s compensation, the court held that his conduct could be attributed to PMF for purposes of the claim. The court did not decide whether Hernandez would ultimately prove liability.

Title VII quid pro quo claim

The court dismissed Hernandez’s Title VII quid pro quo sexual-harassment claim. This type of claim requires a tangible job action to result from an employee’s refusal to submit to a supervisor’s sexual demands. Hernandez alleged that Geiselman propositioned her and that her commissions were later split, but she did not allege that Geiselman was her supervisor or that he controlled her employment benefits. The complaint instead alleged that Moore made the commission decisions. Hernandez also did not allege that Geiselman conditioned a job benefit on her accepting his sexual advances.

Title VII retaliation claim

The court dismissed Hernandez’s Title VII retaliation claim. The court treated the claim as based primarily on her complaints to PMF management about her compensation. It held that most of those complaints were general complaints about unfair pay or treatment rather than clear complaints about discrimination based on sex.

The court also held that Hernandez did not plausibly allege a causal connection between protected complaints and later adverse action. Her commission reductions allegedly began before she complained to management, and the complaint did not provide facts connecting her complaints to a later commission split. The court therefore dismissed the retaliation claim.

Equal Pay Act claims

The court dismissed Hernandez’s Equal Pay Act claims in their entirety. The Equal Pay Act requires facts supporting an inference that employees of opposite sexes received different wages for substantially equal work performed under similar conditions. Hernandez alleged that male sales representatives did not have their commissions split, but she did not allege facts comparing the employees’ duties, skills, effort, responsibilities, or working conditions.

The court’s footnote also stated that Hernandez did not adequately assert an Equal Pay Act retaliation claim because her complaints did not indicate that she was asserting rights protected by that statute.

State and city claims

Because the New York State Human Rights Law claims were subject to the same standard as the Title VII claims, the court dismissed all of those claims except the hostile-work-environment discrimination claim and the aiding-and-abetting claim. The court exercised supplemental jurisdiction over the remaining state and city claims, even though the parties had not briefed them. The opinion does not state a separate disposition for those remaining claims.

Disposition

The court granted in part and denied in part the defendants’ motion to dismiss. It dismissed Hernandez’s Title VII pay-discrimination, Title VII retaliation, and Title VII quid pro quo claims; denied dismissal of her Title VII hostile-work-environment claim; dismissed all of her Equal Pay Act claims; and dismissed all New York State Human Rights Law claims except the hostile-work-environment discrimination and aiding-and-abetting claims.