Markovic v. Milos HY, Inc.

Background

Violeta Markovic and Darko Ilic sued Milos HY, Inc., Milos, Inc., Costas Spiliadis, and related Milos restaurant operations on behalf of themselves and other similarly situated workers. They alleged violations of the Fair Labor Standards Act (FLSA), the New York Labor Law (NYLL), the New York State Human Rights Law, and the New York City Human Rights Law.

The wage allegations concerned unpaid or missing tips, unlawful tip-pooling practices, wages below New York’s minimum wage, unpaid overtime and spread-of-hours premiums, inaccurate time and wage records, inadequate wage notices and statements, and unpaid non-tipped side work. The plaintiffs alleged that managers and owners controlled collected tips and that workers sometimes received less than the tips customers had paid. Markovic separately alleged sexual harassment, gender discrimination, and retaliation, including termination after complaints about workplace conduct.

The FLSA collective-action issue

The defendants argued that the FLSA claims were time-barred because Markovic and Ilic did not file written consents to join the collective action until December 16, 2022. The court agreed that the plaintiffs could not maintain an FLSA collective action because the consents were filed after the applicable limitations period had expired. Other similarly situated workers therefore could not participate in that collective action.

The court rejected the argument that the late consents also barred Markovic and Ilic from pursuing their own individual FLSA claims. Their complaint was filed within the three-year limitations period available for plausibly alleged willful violations, and the pleadings clearly asserted both individual and collective claims. The court therefore allowed the individual claims to continue.

The court also found that the allegations plausibly supported willfulness. The complaint alleged that tipped workers complained about missing or underpaid tips, that managers refused to provide tip records, and that management threatened to fire workers who complained. Those allegations could support a finding that the defendants knew their practices were unlawful or recklessly disregarded that possibility. The court stated that the complaints did not have to come from the particular workers who later filed suit.

Tip claims and state-law claims

The court held that the plaintiffs had pleaded enough facts to make their FLSA tip-retention claims plausible. At the pleading stage, they did not need to identify which particular manager or owner took specific missing tips. It was enough that they alleged that collected tips exceeded the amount distributed and that managers and owners were the only potential recipients of the missing money.

Because the individual FLSA claims survived, the court also retained supplemental jurisdiction over the related state-law claims. Supplemental jurisdiction allows a federal court to hear related state-law claims arising from the same underlying dispute.

Abstention

The defendants alternatively asked the court to dismiss or pause the case under the Colorado River doctrine, which permits a federal court in exceptional circumstances to defer to a parallel state-court proceeding. The court concluded that this case and the state-court action were not parallel because they involved different parties and sought different relief. Markovic and Ilic were not parties to the state case, and a decision there would not resolve all of their federal claims.

The court further held that, even if the proceedings were considered parallel, the relevant factors favored keeping the case in federal court. Among other things, the case included federal claims, the state proceeding might not adequately protect these plaintiffs’ federal rights, and the plaintiffs’ late consent filings meant that this case was proceeding on individual rather than collective claims. The court therefore continued to exercise jurisdiction over the case.

Claims against Spiliadis

The defendants argued that the complaint did not adequately allege that Spiliadis was an employer under the FLSA and NYLL. The court applied the “economic reality” test, which examines factors such as the power to hire and fire, control of work schedules or conditions, determine pay, and maintain employment records. Ownership alone is not enough; the individual must have operational control related to the employees’ work.

The court found the allegations thin but sufficient at the motion-to-dismiss stage. The plaintiffs alleged that Spiliadis hired general managers, had ultimate staffing authority, participated in day-to-day operations, regularly visited the restaurants, supervised and instructed managers and employees, and corrected employees’ work. Taken together, those allegations plausibly indicated that he exercised operational control and could qualify as an employer.

Disposition

The court denied the defendants’ motion to dismiss the First Amended Complaint. The court’s conclusion states that the motion to dismiss was “DENIED.” The opinion also explains that the earlier motion to dismiss the original complaint was denied as moot because the First Amended Complaint replaced the original complaint.