Savor Health, LLC v. Day

Background

Savor Health, LLC sued its former employee, Andrea Day, alleging misappropriation of trade secrets, breach of contract, violations of the Computer Fraud and Abuse Act and Stored Communications Act, and other torts. Day brought counterclaims against Savor and third-party claims against Susan Bratton, Savor’s founder and CEO. Day alleged violations of the Fair Labor Standards Act (FLSA), the New York Labor Law (NYLL), common-law fraud, breach of contract, account stated, and shareholder liability.

Savor and Bratton moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court applied the same standard used for a motion to dismiss for failure to state a claim: accepting well-pleaded facts as true and deciding whether the pleading plausibly supported legal relief.

Rulings

FLSA minimum-wage claims

The court dismissed Day’s FLSA minimum-wage claims against Savor and Bratton. To plead coverage under the FLSA, Day had to allege either that she personally engaged in interstate commerce or that Savor was an enterprise engaged in interstate commerce with at least $500,000 in annual sales or business. The court found that Day’s allegation that she was engaged in interstate commerce was only a legal conclusion, and she did not allege facts showing that Savor met the $500,000 requirement.

Bratton’s status as an employer

The court denied dismissal of Day’s FLSA and NYLL claims against Bratton on the ground that she was not Day’s employer. Day alleged that Bratton controlled aspects of her employment, including hiring and firing, pay, work schedules, work methods, payroll deductions, and the company’s cash flow. The court found those allegations, together with the employment agreement’s requirement that Day report to Bratton or her designee, sufficient at the pleading stage to plausibly allege that Bratton was an employer under the NYLL.

NYLL wage claims

The court dismissed Day’s NYLL minimum-wage claims. Day alleged that Savor owed her $69,944 in unpaid wages, but she did not allege how many hours she worked or provide enough information to determine whether her pay fell below the statutory minimum wage. The court also concluded that the NYLL does not provide a claim for contractual wages above the statutory minimum through a so-called gap-time theory.

The court treated Day’s allegations that she was paid less frequently than required as a separate timely-payment claim under NYLL § 191. It stated that this claim was adequately pleaded, assuming Day fell within one of the worker categories covered by that provision. The court limited that claim to the timing of payments, not recovery of contractual wages above the statutory minimum.

Retaliation claims

The court denied the motion to dismiss Day’s FLSA and NYLL retaliation claims. It rejected Day’s theory based on her August 1, 2019 oral statement to Bratton that she was owed wages and commissions, because the statement did not clearly indicate that she was asserting a violation of wage laws rather than seeking contractual payments.

The court allowed the retaliation claims based on Day’s September 30, 2019 complaint to the New York Department of Labor to proceed. It concluded that the complaint could reasonably be understood as reporting statutory wage violations. Day also plausibly alleged that Savor’s lawsuit was filed in retaliation, that the lawsuit was baseless or brought in bad faith, and that it harmed her reputation and future employment prospects. The court further held that post-termination complaints can support FLSA and NYLL retaliation claims.

Fraud claims

The court dismissed Day’s fraud claims against Savor and Bratton. Regarding the alleged excess health-insurance deductions, Day did not identify a false statement or omission on which she relied. Regarding the post-termination continuation-coverage premiums, the court found that Bratton’s statements described the ordinary operation of the continuation-coverage scheme, under which the former employee pays the premiums. Day also did not allege that she failed to receive the coverage or that the actual premiums were lower than represented.

Shareholder-liability claim

The court dismissed Day’s shareholder-liability claim against Bratton and the John/Jane Does. New York law requires an unsatisfied judgment against the limited liability company before an action to enforce this type of shareholder liability may begin. Because Day had no such judgment against Savor and her claims against Savor remained undecided, the claim was premature.

Disposition and amendment

The court granted Savor’s motion for judgment on the pleadings, with the exception of Day’s FLSA and NYLL retaliation claims. The court granted Day leave to amend because additional facts might cure deficiencies in some claims. It expressly stated that the dismissals were without prejudice and directed Day to amend within three weeks if she chose to do so.