Gonzalez v. Hanover Ventures Marketplace LLC

Background

Denny Gonzalez brought a proposed class and collective action against Hanover Ventures Marketplace LLC, doing business as Le District; John Doe Company 1, doing business as HPH Hospitality; and Paul Lamas, Peter Poulakakos, Nicolas Abello, and David Coucke. He asserted claims under the Fair Labor Standards Act (FLSA), New York Labor Law (NYLL), Title VII, the New York Human Rights Law, the New York City Human Rights Law, and New York common law.

Gonzalez alleged that Le District employees were paid a tip-credit minimum wage while performing more than 20 percent of their work in non-tipped tasks. He also alleged that defendants automatically deducted 30-minute meal breaks even when employees worked through them, changed schedules at the last minute, failed to provide legally required wage notices and wage statements, operated an improper tip pool, and retained service or administrative fees from large events. Gonzalez also alleged persistent sexual harassment, but the rulings addressed in this opinion concern class certification and specified wage claims.

Gonzalez sought certification of a NYLL class covering non-exempt employees employed by defendants at Le District during the period stated in his proposed certification order, and a tipped subclass covering tipped employees during that period. The proposed class contained approximately 1,354 members, and the tipped subclass contained approximately 644 members.

Class Certification

The court applied Federal Rule of Civil Procedure 23. That rule requires numerosity, common questions, typical claims, and an adequate representative and counsel. For the type of class sought here, it also requires that common issues predominate over individual issues and that a class action be superior to other ways of resolving the dispute.

The court held that numerosity was satisfied because the proposed class had more than 1,000 members. It found commonality and typicality because the evidence showed that Le District employees were subject to common wage policies, including the same or substantially similar notices, pay records, and automatic meal-break deductions. The court explained that disputes about the legal sufficiency of those policies concerned the merits of the claims, not whether the claims could be certified as a class action.

The court also found adequacy, noting that defendants did not challenge Gonzalez’s adequacy and that the record showed no conflict between him and the class. The court found that common questions about defendants’ compensation policies predominated over individualized questions and that a class action was superior, even though individual employees’ hours, job duties, and damages could differ. The court therefore granted the motion for class certification. Because Gonzalez’s proposed class notice was not attached, the court directed him to submit the notice and related distribution and deadline proposals by March 26, 2024.

Partial Summary Judgment

Summary judgment is granted when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. The court ruled as follows.

Unpaid Meal-Break Claim

The court denied summary judgment on the claim that defendants deducted 30 minutes from employees’ hours even when they were required to work during that period. Gonzalez submitted testimony from a manager and declarations from 18 employees supporting his account. Defendants submitted testimony that meal breaks were mandatory and were provided.

Because the evidence created a factual dispute about whether employees received uninterrupted meal breaks, the court could not decide this claim on summary judgment. The court stated that, if employees were made to work through the deducted time, the practice could violate both the NYLL and the FLSA.

Unpaid Minimum-Wage Claims Based on Tip Credit

The court granted summary judgment for Gonzalez and the tipped subclass on liability for unpaid minimum wages under the NYLL and FLSA. The court concluded that defendants’ tip-credit notices were legally inadequate. Pre-2018 notices did not state that the tip credit could not exceed the tips employees actually received, and post-2018 notices stated an hourly rate plus tips but did not identify the amount of the tip credit.

The court explained that inadequate tip-credit notice invalidates an employer’s use of the tip credit. It also identified independent grounds supporting that result: evidence that defendants retained or improperly distributed tips, including through a tip pool involving non-tipped personnel or managers, and evidence that tipped employees performed 2.5 to 3 hours of non-tipped work before service. Under the NYLL, more than two hours of non-tipped work in a shift eliminates the tip credit for that day; the court also noted that the FLSA requires non-tipped work to be paid at least at minimum wage.

The court did not treat every recordkeeping or wage-statement violation as independently invalidating the tip credit. It stated that failure to maintain records and failure to list the exact tip-credit amount on wage statements could support other statutory damages but did not themselves invalidate the tip credit. The inadequate wage notices and the evidence concerning tip retention and non-tipped work were sufficient bases for the ruling.

Wage Theft Prevention Act Claims

The court granted summary judgment on Gonzalez’s claims under New York’s Wage Theft Prevention Act. It found that defendants failed to comply with requirements concerning wage-and-hour notices, the amount of tip credit claimed, wage statements, and record retention.

Willfulness and FLSA Limitations Period

The court did not grant summary judgment on whether defendants’ FLSA violations were willful. Willfulness would permit use of a three-year limitations period instead of the usual two-year period. Gonzalez relied on an alleged prior wage-and-hour grievance, but the court found that he had not supported his assertion with sufficient record citations or legal authority. The court therefore could not decide the issue on the existing record.

Liquidated Damages

The court also could not decide on summary judgment whether the class was entitled to liquidated damages under the FLSA or NYLL. Gonzalez argued that defendants’ policies and their failure to correct them showed a lack of good faith. Defendants argued that they reasonably relied on New York Department of Labor forms and acted in good faith. The court found both sides’ evidence and legal support insufficient to resolve whether defendants had made the required good-faith efforts. It also noted that employees cannot recover liquidated damages under both statutes for the same violations.

Whether Lamas and Poulakakos Were Employers

The court denied summary judgment on whether Lamas and Poulakakos were employers under the FLSA and NYLL. The court applied the economic-reality test, which examines factors such as the power to hire and fire, control over schedules and working conditions, authority over pay, and maintenance of employment records.

The evidence showed that Lamas and Poulakakos were partial owners, set policies and payroll, supervised the Director of Operations, and had authority to fire that director. But the evidence also showed that they did not have authority to fire individual employees and had access only to the director’s employee records. The record did not establish whether they were present at Le District, controlled employees’ daily tasks, or personally interacted with Gonzalez or other employees. The court therefore denied summary judgment on their employer status.

Disposition

The court granted the motion for class certification. It granted Gonzalez’s motion for partial summary judgment solely as to the claims for unpaid minimum wages and Wage Theft Prevention Act violations, and otherwise denied the motion. The clerk was directed to terminate the two motions, and the parties were directed to appear for a later conference.