Xue v. Koenig

Background

Feng Xue and Calculus Trading Technology, LLC sued Stewart Koenig and Prime Consulting International, LLC over wages allegedly owed to Xue. The opinion describes Xue as a software engineer who received employment with a third party through Prime Consulting International, LLC, a staffing agency. The parties worked together for more than 12 years, until December 2017, when they disputed the wages owed to Xue.

Defendants asserted counterclaims based on contract and tort law. They alleged that the plaintiffs breached three contracts by either bringing Fair Labor Standards Act claims or using the possibility of such claims to take one of defendants’ clients, BNY-Cowen.

In an earlier September 14, 2022 order, the court denied defendants’ motions to dismiss Xue’s Fair Labor Standards Act claims for lack of subject-matter jurisdiction and for summary judgment. The court also granted plaintiffs’ motion to dismiss defendants’ amended counterclaims. Defendants then moved for reconsideration under Federal Rule of Civil Procedure 54(b) and Local Rule 6.3.

Legal Standard

Reconsideration is an extraordinary remedy generally reserved for situations involving an overlooked controlling decision or fact that could reasonably change the result. Common grounds include a change in controlling law, newly available evidence, clear error, or the need to prevent serious unfairness. The decision rests within the district court’s discretion.

Analysis

The court had previously found that plaintiffs presented enough evidence to show that Xue was an employee of Prime Consulting International, LLC under the Fair Labor Standards Act. That law distinguishes employees from independent contractors by examining the economic reality of the work relationship. The court applied five factors identified by the U.S. Court of Appeals for the Second Circuit:

Defendants argued that the court had overlooked documents showing that Xue chose to be treated as an independent contractor in tax returns and a federal loan application. The court reconsidered each factor but concluded that the documents did not change its earlier analysis.

For the control factor, the court relied on evidence that Prime Consulting International, LLC set Xue’s initial hourly wage, established the initial six-month trial period, required weekly hour reports, and retained the ability to increase his hourly wage. The court recognized that contractor-related tax treatment could support defendants’ position, but found that Xue had not independently elected 1099 status. Instead, the arrangement required him to subcontract through Prime Consulting International, LLC, which paid him as a 1099 worker. The tax treatment therefore did not outweigh the evidence of defendants’ control.

For the investment and profit-or-loss factor, defendants emphasized tax benefits, more than $400,000 in earnings paid through Calculus, deductions of $892,228, and Xue’s work and income from Queens Auto Parts. The court found that Xue’s income and tax benefits were not the kind of capital investment that had supported independent-contractor findings in other cases. The court did find that Xue’s additional employment favored defendants because it reduced his economic dependence on Prime Consulting International, LLC. But that fact was not decisive, and a worker can have more than one employer without losing Fair Labor Standards Act protections.

The court left unchanged its finding on the skill factor. Although software engineers are skilled workers with specialized training, the record did not show that Xue used those skills in an independent way. The court also left unchanged its finding on the duration factor because Xue worked for defendants for more than 12 years. Finally, defendants conceded that the allegedly overlooked evidence did not affect the factor concerning whether Xue’s work was integral to Prime Consulting International, LLC’s business. The court maintained its finding that providing information-technology experts on request was the most integral part of that business.

Ruling

The court concluded that the allegedly overlooked evidence added only one point in defendants’ favor: Xue had income from another form of employment. That point did not outweigh the other factors favoring employee status. The court declined to reconsider its earlier decisions denying defendants’ motions for summary judgment and to dismiss the Fair Labor Standards Act claims for lack of subject-matter jurisdiction, and granting plaintiffs’ motion to dismiss defendants’ amended counterclaims.

Judge Nelson S. Román therefore denied defendants’ motion for reconsideration and directed the clerk to terminate that motion. The parties were also directed to notify Judge Krause of the opinion and contact Judge Krause’s chambers to schedule a conference.