Perez v. Escobar Construction, Inc.

Background

Marco Antonio Perez Perez and Jose Eduardo Sanchez Arias brought a proposed collective and class action against Escobar Construction, Inc., Nations Construction, Inc., JRS Services, LLC, Jhony Aris Escobar, Elias Osmin Alvarez Palacios, and Jenny Carolina Alvarez. They alleged violations of the Fair Labor Standards Act (FLSA), the federal wage-and-hour law, and the New York Labor Law (NYLL). Their allegations included unpaid overtime, unpaid workdays, inadequate wage notices and pay statements, and inadequate records of hours and wages.

The defendants moved to dismiss the Second Amended Complaint under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). A Rule 12(b)(6) motion tests whether the complaint contains enough factual allegations to state a legally plausible claim. The court also reviewed the plaintiffs’ objection to Magistrate Judge Gorenstein’s denial of their request to file a Third Amended Complaint adding six plaintiffs and related allegations.

Objection to Denial of Leave to Amend

The court reviewed Judge Gorenstein’s procedural ruling for clear error. The plaintiffs had sought to amend after the scheduling order’s January 15, 2021 deadline. The court held that they did not show the diligence or “good cause” required to modify that deadline under Rule 16. In particular, the court found that the plaintiffs knew about at least one proposed additional plaintiff before filing the Second Amended Complaint and did not explain why the additional plaintiffs could not have been included then. The plaintiffs’ decision to connect the amendment request to the defendants’ motion to decertify the federal collective did not establish good cause.

The court also upheld Judge Gorenstein’s alternative conclusion under Rule 15. Although Rule 15 generally favors allowing amendments, the court may deny an amendment for undue delay or prejudice. The court found that adding the proposed plaintiffs after discovery had closed would likely require reopening discovery, including depositions, and that this supported denial of leave to amend.

The court overruled the plaintiffs’ objection. It expressly stated that the denial was without prejudice to the six additional plaintiffs’ ability to assert their claims separately.

Motion to Dismiss

To state claims under both the FLSA and NYLL, the plaintiffs had to plausibly allege that each defendant was their employer. The court applied the “economic reality” analysis, which considers the practical degree of control over the workers. For formal control, relevant factors include the power to hire and fire, supervision of schedules or working conditions, control over the rate and method of pay, and maintenance of employment records. The court did not analyze separate functional-control factors because the parties had not provided arguments or facts addressing them.

As to Jhony Aris Escobar, the court found that the complaint contained some factual allegations supporting hiring and firing authority and the setting of pay. But it found the allegations about supervising schedules and maintaining records insufficient. The complaint’s general statements about those factors were conclusory, and some allegations suggested that project supervisors—not Mr. Escobar—managed schedules. The court therefore held that the complaint did not plausibly allege that Mr. Escobar employed the plaintiffs.

As to Elias Osmin Alvarez Palacios, the court found nonconclusory allegations relating only to pay calculations, paychecks, and related financial tasks. Other allegations were either contradicted by the complaint or merely repeated the legal factors without supporting facts. The court therefore held that the plaintiffs had not plausibly pleaded an employment relationship with Mr. Palacios.

As to Jenny Carolina Alvarez, the court found no specific facts showing that she was the plaintiffs’ employer. Allegations that she hired a supervisor, signed company checks, paid workers, or controlled work conditions were either unrelated to whether she employed the plaintiffs or too conclusory. The court therefore held that the complaint did not plausibly allege that Ms. Alvarez employed them.

The court also rejected the claims against the corporate defendants. The plaintiffs relied on a theory that the companies operated as a single enterprise. But the court held that allegations of common ownership, shared operations, or common purpose did not by themselves show that any corporate defendant controlled the plaintiffs as employees. Because the plaintiffs had not adequately alleged that the individual defendants were their employers or that the corporate defendants employed them, the FLSA and NYLL claims failed at this threshold stage.

Disposition

The court overruled the objection and granted the defendants’ Motion to Dismiss. It directed the Clerk of Court to enter judgment dismissing the Second Amended Complaint and close the case. The opinion did not add a “with prejudice” or “without prejudice” qualification to that dismissal. The court noted that the case remained stayed as to Escobar Construction under an earlier order. The court did not reach the defendants’ other dismissal arguments because the employer-status issue was dispositive.