Zak v. Five Tier, Inc.

Background

Daniel Zak sued Five Tier, Inc., asserting claims under the Fair Labor Standards Act (FLSA), the New York Labor Law (NYLL), breach of contract, and promissory estoppel. He sought unpaid wages and benefits, damages, liquidated damages, punitive damages, costs, and attorneys’ fees. Zak alleged that Five Tier intentionally misclassified him as an independent contractor and did not pay all wages owed.

Zak initially worked for Five Tier under a written independent-contractor agreement. He returned to work full-time in March 2019 at $50 per hour. In April 2019, his pay changed to $375 per day without changes to his duties or schedule. He worked five days per week and at least eight hours per day. Five Tier did not pay him for 42 days of work from July 16, 2019, through September 17, 2019, and Zak resigned on September 17, 2019, because of the nonpayment.

Five Tier did not appear, answer, or otherwise defend the case. After the Clerk entered default, the court entered default judgment on March 13, 2023, and referred the case to Magistrate Judge Sarah L. Cave for an inquiry into damages, costs, and attorneys’ fees. Judge Cave issued a Report and Recommendation on December 14, 2023. No party objected.

Review of the Report and Recommendation

Because no party objected, Judge Daniels reviewed the Report and Recommendation for clear error. Finding no clear error, he adopted the Report in its entirety, with the additional ruling that Zak’s FLSA claim had to be dismissed with prejudice.

A default concedes well-pleaded allegations of liability, but it establishes liability only when those allegations sufficiently state a legal claim. The court agreed that Zak’s allegations and evidence established liability under the NYLL. It also agreed that Zak was Five Tier’s employee, rather than an independent contractor, under the relevant analysis.

FLSA and NYLL Claims

The court held that the FLSA claim failed because Zak sought payment of full unpaid wages, not unpaid minimum wages or overtime wages. The court explained that the FLSA provides for minimum wages and overtime, while the NYLL permits recovery of all unpaid wages. The court therefore dismissed Zak’s FLSA claims with prejudice.

Although it dismissed the FLSA claim, the court exercised supplemental jurisdiction over the NYLL claim. It concluded that doing so promoted the efficient resolution of the long-running litigation, particularly because dismissing the NYLL claim would require additional time and expense to pursue the state-law claim elsewhere.

The court adopted the recommendation that Zak’s breach-of-contract and promissory-estoppel claims be deemed abandoned and dismissed with prejudice because Zak sought damages only under the FLSA and NYLL.

Damages and Other Relief

The court agreed that Zak was entitled to recover unpaid wages for 42 working days. It rejected recovery for holidays and approved days off because Zak had not provided legal support for that additional recovery. The court awarded:

- $15,750.00 in unpaid wages; - $15,750.00 in liquidated damages under the NYLL; - prejudgment interest at 9% on $15,750.00 from August 17, 2019, until entry of judgment; - post-judgment interest under 28 U.S.C. § 1961; - $28,511.30 in attorneys’ fees; and - $889.53 in costs.

The court also ruled that the damages would automatically increase by 15% if Five Tier failed to pay the judgment in full within the period prescribed by NYLL § 198(4). The Clerk of Court was directed to close the action.

Disposition

Judge Daniels adopted Magistrate Judge Cave’s Report and Recommendation, dismissed Zak’s FLSA claims with prejudice, and deemed the breach-of-contract and promissory-estoppel claims abandoned and dismissed with prejudice. Five Tier remained liable for the NYLL-related monetary awards and other amounts listed above.