Sanchez v. Clipper Realty, Inc.

Background

Rodney Sanchez alleged that he worked as a porter at Clover House, a residential building in Brooklyn, from about September 2019 through September 15, 2020. He brought claims under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL), on behalf of himself and proposed collective and class members. He alleged that the defendants failed to pay him for 90 hours of training, required him to work through unpaid lunch breaks, paid him every two weeks rather than weekly, and failed to provide required wage statements and notices. He also alleged that the defendants fired him after he returned from back surgery with a temporary medical restriction, but he voluntarily dismissed his New York State and New York City human-rights claims without prejudice to refiling them in a separate state-court action.

The defendants were Clipper Realty, Inc.; Clipper Realty OP L.P.; Clipper Realty Construction LLC; Clipper 107 CH LLC; and Clipper Equity LLC. The defendants sought to compel arbitration under a collective bargaining agreement (CBA) between Clipper 107 CH LLC and Sanchez’s union. They also sought dismissal of the claims against Clipper Realty, Inc., Clipper Realty OP L.P., and Clipper Equity LLC.

Arbitration ruling

The court held that it could consider the CBA when deciding the motion to compel arbitration. Based on Sanchez’s allegations that he worked as a porter at Clover House and contacted the union about his wage problems, the court found that he was covered by the CBA. The court also concluded that the union had authority to bind him to the CBA during his employment, even though he was not personally named as a party to the agreement.

The original CBA required arbitration of disputes involving interpretation or application of the agreement or conduct related to it. The court held that this language did not clearly and unmistakably waive Sanchez’s right to bring FLSA and NYLL claims in court because it did not specifically refer to statutory claims or statutes.

The parties later amended the CBA in March 2022. The amendment covered disputes involving rights or duties created by any federal, state, or local law or regulation, and therefore clearly encompassed the FLSA and NYLL claims. But Sanchez’s employment had ended in September 2020, about 18 months before the amendment. Applying the reasoning of a prior Second Circuit decision and New York state cases, the court held that the union lacked authority to bind Sanchez to an arbitration provision adopted after he was no longer an employee or union member. The court therefore denied the motion to compel arbitration.

Partial motion to dismiss

The defendants also argued that Clipper Realty, Inc., Clipper Realty OP L.P., and Clipper Equity LLC were not Sanchez’s employers and should be dismissed from the case. At the motion-to-dismiss stage, the court had to accept well-pleaded allegations as true and decide whether they plausibly showed that the defendants could be liable as employers.

The court explained that multiple legally separate companies may be treated as one integrated employer when their operations, labor control, management, and ownership are sufficiently connected. Sanchez alleged common ownership and management, shared offices and payroll services, common contact information, jointly managed buildings, employee transfers among buildings, and involvement by different entities in supervising, paying, and processing leave. The court found these allegations sufficient to make the single-integrated-enterprise theory plausible, although it described the issue as close and not airtight. Because discovery was needed to resolve the issue, the court denied the partial motion to dismiss.

Disposition

The court denied the defendants’ motion to compel arbitration and denied their partial motion to dismiss. The court did not decide whether Sanchez or the proposed class members ultimately proved any wage-law violation. It ordered the parties to confer and submit a proposed case-management plan by November 21, 2022.