Ivanov v. Builderdome, Inc.

Background

Yana Ivanov brought claims against Builderdome, Inc. and Alex Rozengaus under the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL), alleging that she was not paid for services and did not receive the required minimum wage. She also brought claims for breach of contract, unjust enrichment, and gender and pregnancy discrimination. The opinion addresses only Ivanov’s motion for partial summary judgment concerning whether she was an employee under the FLSA and NYLL.

The complaint alleged that Builderdome hired Ivanov as its Creative Director in July 2015. The parties signed an Employment Agreement on August 25, 2015. The agreement called Ivanov an “Employee” and Builderdome an “Employer,” required her to perform assigned duties and follow the employer’s policies, and provided that she would not be compensated until Builderdome received funding. After funding, the agreement provided for one percent equity subject to a vesting schedule and stated that a full-time position and market-based compensation would depend on substantial funding.

Ivanov argued that the agreement established employee status as a matter of law and that its funding-dependent compensation provision violated minimum-wage laws. Builderdome argued that Ivanov was not an employee but an investor whose consideration was her time and knowledge. Rozengaus submitted an affidavit stating that the written agreement did not reflect the parties’ verbal understanding, that Ivanov was intended to be a one-percent dividends partner, and that she was not working full-time for Builderdome. He also stated that she had another full-time job and worked part-time for Builderdome.

Legal Standard and Analysis

Summary judgment is proper when there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court must view reasonable inferences in favor of the nonmoving party. A genuine dispute exists when the evidence could allow a reasonable jury to decide for that party.

The FLSA and NYLL protect employees, and an employer and employee cannot waive the statutory minimum wage by contract. Under the FLSA, courts determine employee status using an “economic reality” test. The test considers the employer’s control over the worker, the worker’s opportunity for profit or loss and investment, the skill and initiative required, the relationship’s permanence and duration, and whether the work is integral to the business. No single factor controls, and the analysis depends on the total circumstances.

The court held that contractual labels alone do not determine employee status. A contract cannot remove an actual employee from the FLSA’s protections, but a person also cannot establish statutory employee status merely by being called an employee in a contract.

Ivanov submitted only the Employment Agreement in support of her motion. She did not provide evidence about the conditions of her work, her hours, her responsibilities, the extent of Builderdome’s direction of her daily work, or whether her work was integral to the business. The agreement referred to employer policies and supervision, but the record did not show that Builderdome had such policies or actually directed her work during the relevant period. The agreement’s reference to a future full-time position also did not explain the nature of her work before funding.

The court also considered evidence that Ivanov worked part-time for Builderdome, had another full-time job, worked for other startups, could determine her hours, was not on Builderdome’s payroll, and received no fringe benefits. These facts created disputes about control and the permanence and duration of the relationship.

The court applied a similar analysis under the NYLL. That analysis focuses especially on the purported employer’s control over the results or the means of achieving them, including whether the worker set her own schedule, could work elsewhere, received benefits, was on payroll, and had a fixed schedule. The court stated that the same lack of evidence prevented it from deciding employee status as a matter of law under the NYLL.

Ruling

The court held that the Employment Agreement weighed in favor of Ivanov’s claim that she was an employee, but it was not sufficient by itself to establish that status under either the FLSA or the NYLL. Because genuine issues of material fact remained, Judge Lewis J. Liman denied Ivanov’s motion for partial summary judgment.