Mangahas v. Eight Oranges Inc.

Background

Jessy Mangahas, a restaurant worker, filed a proposed class action under New York Labor Law and a proposed collective action under the federal Fair Labor Standards Act. She alleged that Eight Oranges Inc., doing business as The Bao, and Chibaola Inc., doing business as Uluh, operated as a single integrated enterprise. She also sued Richard Lam and Joanne Hong Bao individually.

Mangahas alleged that the restaurants violated wage laws through several practices, including an unlawful tip-sharing arrangement, failure to provide required notices about minimum wages and tip credits, excessive non-tipped side work, deductions from worker pay, an automatic lunch-time deduction, requiring workers to buy uniforms, failure to pay required spread-of-hours premiums, and failure to provide required wage notices and accurate wage statements. She also asserted individual retaliation claims under both federal and New York law.

Motion to Dismiss

Hong Bao moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. She argued that the complaint did not adequately allege that she was an employer under either the Fair Labor Standards Act or New York Labor Law. According to her position, she did not have authority to hire or fire workers, control their schedules or working conditions, determine their pay, maintain employment records, hold shares in the restaurant companies, or participate in restaurant management.

For purposes of the motion, the court generally had to accept the complaint’s well-pleaded factual allegations as true and draw reasonable inferences in Mangahas’s favor. The court could consider the liquor-authority application referenced in the complaint, but it could not consider Hong Bao’s affidavits or tax documents because those materials were not properly part of the complaint and were offered to dispute the complaint’s factual allegations.

Court’s Analysis

The Fair Labor Standards Act defines an employer broadly as a person acting directly or indirectly in an employer’s interest regarding an employee. The court applied the “economic reality” test, which considers whether the individual had power to hire and fire workers, supervised or controlled their schedules or working conditions, determined their pay, or maintained employment records. The court explained that an individual need not personally perform every one of these functions, directly interact with workers, or personally participate in the alleged wage violations to qualify as an employer.

The court found that the complaint alleged enough facts to make Hong Bao’s potential employer status plausible. The allegations stated that she owned and operated the restaurants, was involved in their day-to-day management, visited them approximately twice a week, directed workers about their duties, and had authority to stop unlawful pay practices, transfer restaurant assets and liabilities, declare bankruptcy, enter contracts, and close or sell the restaurants. The complaint also alleged that Hong Bao identified herself as an owner and principal of The Bao in a New York State Liquor Authority application and in a deposition.

The court rejected the argument that Lam’s alleged status as an employer prevented Hong Bao from also being an employer. It explained that the federal and New York wage laws can impose responsibility on multiple employers at the same time.

Disposition

The court denied Hong Bao’s motion to dismiss. The ruling kept Mangahas’s claims against Hong Bao in the case at the pleading stage, but it did not determine whether Hong Bao violated the wage laws or whether Mangahas would ultimately prevail. The Clerk of Court was directed to close the docket entry for the motion.