Ivanov v. Builderdome, Inc.

Background

Yana Ivanov sued Builderdome, Inc. and Alex Rozengaus. She alleged that they failed to pay her the minimum wage required by the federal Fair Labor Standards Act and the New York Labor Law. She also asserted breach-of-contract and unjust-enrichment claims under New York law, along with gender- and pregnancy-discrimination claims under the New York State Human Rights Law and the New York City Human Rights Law.

The court held a one-day bench trial on May 3, 2021. Ivanov worked with Builderdome from about July 2015 until about November 2017 as its Creative Director, handling visual work for its proposed website, mobile application, investor materials, and homeowner questionnaire. She worked mainly from home, set her own hours, was not required to report her hours, and was free to work for other companies. She received no salary or other payment. Builderdome never obtained funding, made sales, or successfully launched its product.

The parties’ written Agreement called Ivanov an employee and Builderdome an employer, but it did not state a salary. It said she would not be compensated until the company obtained funding, and it promised a 1% equity interest under a vesting schedule after funding. It also contemplated a future full-time position and market-based compensation after funding. The court found the Agreement ambiguous about whether Ivanov was already an employee or was instead contributing work in exchange for possible future employment and equity.

Wage Claims

The court applied the federal law’s “economic reality” test, which examines the actual relationship rather than relying only on the labels used in a contract. The factors included Builderdome’s control over Ivanov, her opportunity for profit or loss and investment, the skill and initiative her work required, the relationship’s permanence, and whether her work was central to Builderdome’s business.

The court concluded that Ivanov was not an employee under the federal law. Builderdome exercised little control over her schedule, hours, methods, or work for other companies. Ivanov had substantial design skill and worked independently. The court found that her promised equity interest gave her an opportunity for profit or loss and reflected an investment of her time in the business. Although the nearly two-year relationship and the importance of her design work supported employee status, the other circumstances—including her freedom to work elsewhere and her independent control over her work—outweighed those considerations.

The court also concluded that Ivanov was not an employee under the New York Labor Law. It emphasized that she worked at her own convenience, could take other work without permission, received no benefits, was not on a payroll, and had no fixed schedule. The court therefore rejected her federal and state minimum-wage claims.

Contract Claim

Ivanov claimed that Builderdome breached the Agreement by failing to pay her minimum wage or market-value compensation and by rejecting an investment opportunity that would have preserved the value of her promised equity. The court rejected both theories.

The Agreement expressly provided that compensation would begin only after Builderdome obtained funding. Because Builderdome never obtained funding, the court held that no contractual right to pre-funding wages or reimbursement became payable. The court recognized an implied obligation to act in good faith when seeking funding, but found that Rozengaus and Builderdome made substantial efforts to obtain financing. It also found legitimate, non-arbitrary reasons for declining the only financing offer, including concerns that the amount was insufficient and that the proposed terms could make future fundraising more difficult. The court therefore found no breach of contract.

Unjust Enrichment

Ivanov sought the alleged fair value of the services she provided. The court explained that unjust enrichment is an equitable claim used when there is no enforceable agreement covering the subject. Here, the Agreement addressed what Ivanov could receive for her work, including future employment, equity, and possible reimbursement after funding. Because the contract covered the same subject, the court held that it barred the unjust-enrichment claim.

Pregnancy Discrimination

Ivanov claimed that Builderdome discriminated against her by ending her employment, changing her website title from “creative director” to “designer consultant,” and removing her profile from the company website. The court rejected these claims under both New York discrimination laws.

The court found that Builderdome never terminated Ivanov. She stopped providing services after seeing that her profile had been removed, without receiving a termination communication and without discussing the issue with Rozengaus or Coto. The court also held that the title change, without a change in duties, pay, benefits, or reporting structure, was not a materially adverse employment action. In addition, the court found that Rozengaus offered nondiscriminatory reasons for the title change and profile removal: Ivanov could not attend investor meetings, and Builderdome wanted to present a smaller team to potential investors. The court therefore found that Ivanov did not establish pregnancy discrimination.

Disposition

The court found for Builderdome and Rozengaus on all counts. It directed the Clerk of Court to enter judgment in favor of the defendants, terminate all pending motions, and close the case.