Gunthorpes v. The IM. Grp.

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LAURIE GUNTHORPES, Plaintiff, v. THE IM. GROUP, LLC, Defendant.

No. 21 CV 5140 (ARR)(RML)

United States District Court, E.D. New York

April 10, 2024

REPORT AND RECOMMENDATION

ROBERT M. LEVY, United States Magistrate Judge.

By order dated September 8, 2023, the Honorable Allyne R. Ross United States District Judge, referred plaintiff's second motion for default judgment to me for report and recommendation. For the reasons stated below, I respectfully recommend that the motion be granted.

Background and Facts

Plaintiff Laurie Gunthorpes (“Gunthorpes” or “plaintiff”) commenced this wage and hour action on September 15, 2021, against defendant The IM. Group, LLC (the “IM. Group” or “defendant”) asserting claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., and the New York Labor Law (“NYLL”). (Complaint, filed Sept. 15, 2021 (“Compl.”), Dkt No. 1.) Defendant was properly served with the summons and complaint. (Affidavit of Service of Robert Egelston, sworn to Sept. 24, 2021, Dkt. No. 6; see also Report and Recommendation, dated Dec. 5, 2022, Dkt. No. 15, at 4-5.) Defendant has failed to answer or otherwise move with respect to the complaint. Plaintiff moved for entry of default pursuant to Federal Rule of Civil Procedure 55(a) as to defendant on January 14, 2022. (See Request for Certificate of Default, filed Jan. 14, 2022, Dkt. No. 8.) On January 20, 2022, the Clerk of the Court noted the default of the IM. Group. (See Clerk's Entry of Default, dated Jan. 20, 2021, Dkt. No 10.) On September 7, 2023, plaintiff filed a second motion for default judgment. (See Motion for Default Judgment, dated Sept. 7, 2023, Dkt. No. 21.) On September 8, 2023, Judge Ross referred plaintiff's motion for default judgment to me for report and recommendation.

Plaintiff seeks a default judgment on claims under the FLSA and NYLL for defendant's failure to (1) compensate her for seven bi-weekly payroll periods and (2) provide proper wage notices and wage statements. (Compl. ¶¶ 1-2, 17, 36-40, 49-52, 67-69, 72-73; see also Plaintiff's Memorandum of Law in Support of the Motion for Default Judgment, dated Sept. 7, 2023 (“Pl.'s Mem.”), Dkt. No. 21-1.) Plaintiff requests an award of unpaid minimum wages, unpaid regular wages, liquidated damages, statutory damages, pre- and post-judgment interest, and attorney's fees and costs. (Pl.'s Mem. at 24.)

Discussion

The Federal Rules of Civil Procedure prescribe a two-step process for a plaintiff to obtain a default judgment. First “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default,” as it has done here. FED. R. CIV. P. 55(a). Second, after a default has been entered against the defendant and the defendant fails to appear or move to set aside the default under Rule 55(c), the court may, on a plaintiff's motion, enter a default judgment. FED. R. CIV. P. 55(b)(2). To grant a default judgment, the court must ensure that the plaintiff took all the required steps in moving for default judgment, including providing proper notice to defendant of the lawsuit. Here, as explained above, plaintiff has demonstrated that defendant was properly served with the summons and complaint. Plaintiff has also demonstrated that she served the Motion for Default Judgment and accompanying submissions on defendant in compliance with Local Rule 55.2(c). (See Declaration of Service of Lawrence Spasojevich, Esq., dated Sept. 7, 2023, Dkt. No. 21-7.)

A. Timeliness

For claims to be timely under the FLSA, they must have arisen within the two years prior to filing of the complaint, or-for willful violations-within the three years prior. 29 U.S.C. § 255(a). Here, the complaint, which was filed on September 10, 2021, alleges willful violations of the FLSA. (See Compl. ¶¶ 24, 25, 28.) Therefore, the FLSA's three-year statute of limitations applies. Because plaintiff alleges that she was not properly paid wages from May 21 to August 13, 2021, I find that her claims are timely under the FLSA. (Id. ¶ 15.) Regardless of willfulness, plaintiff's claims must arise within six years prior to the filing of the complaint to be timely under the NYLL. See N.Y. LAB. L. §§ 198(3), 663(3). Therefore, plaintiff's claims are timely under both statutes.

B. Liability

An entry of default alone is insufficient to establish liability, “since a party in default does not admit mere conclusions of law.” Trs. of the Plumbers Loc. Union No. 1 Welfare Fund v. Philip Gen. Constr., No. 05 CV 1665, 2007 WL 3124612, at *3 (E.D.N.Y. Oct. 23, 2007) (citation omitted). Where a plaintiff moves for default judgment, the court “is required to accept all of [the plaintiff's] factual allegations as true and draw all reasonable inferences in [the plaintiff's] favor.” Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)). However, the court must also “determine whether [plaintiff's] allegations establish [defendant's] liability as a matter of law.” Id. “To establish a claim under the FLSA, plaintiff must prove the following: (1) the defendant is an employer subject to the FLSA; (2) the plaintiff is an ‘employee' within the meaning of the FLSA; and (3) the employment relationship is not exempted from the FLSA.” Acosta v. DRF Hosp. Mgmt. LLC, No. 18 CV 346, 2019 WL 1590931, at *9 (E.D.N.Y. Mar. 13, 2019), report and recommendation adopted, 2019 WL 1585225 (E.D.N.Y. Apr. 12, 2019) (citation omitted).^[1]

1. Non-exempt Status

“Congress intended the FLSA to aid the unprotected, unorganized and lowest paid of the nation's working population; that is, those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage.” Freeman v. Nat'l Broad. Co., 80 F.3d 78, 86 (2d Cir. 1996) (quoting Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 707 n.18 (1945)). Consistent with this intention, the FLSA's minimum wage and maximum hour requirements do not apply to “any employee employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). “Regulations promulgated by the Secretary [of Labor] provide that an employee is employed in a ‘bona fide executive, administrative, or professional' capacity only if he or she is compensated on a ‘salary basis.'” Yourman v. Giuliani, 229 F.3d 124, 127 (2d Cir. 2000) (citing Auer v. Robbins, 519 U.S. 452, 455 (1997)). An employee is paid on a salary basis “if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of his [or her] compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a). The regulations promulgated by the Secretary of Labor provide that an employee falls under an exemption to the FLSA when: (1) the employee is “[c]ompensated on a salary or fee basis at a rate of not less than $684 per week”; (2) the employee's “primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers”; and (3) the employee's “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance” 29 C.F.R. § 541.200(a)(1)-(3); see also Difilippo v. Barclays Cap., Inc., 552 F.Supp.2d 417, 422-23 (S.D.N.Y. 2008). “An employee . . . is paid on a salary basis . . . only if he [or she] ‘receive[s] the full salary for any week in which [he or she] performs any work without regard to the number of days or hours worked.'” Helix Energy Sols. Grp., Inc. v. Hewitt, 598 U.S. 39, 49 (2023) (quoting 29 C.F.R. § 541.601); see also Anani v. CVS RX Servs., Inc., 730 F.3d 146, 147 (2d Cir. 2013) (“to qualify for the exemption, an employee ‘must be compensated on a salary basis at a rate of not less than $455 per week.'”) (citing 29 C.F.R. § 541.600(a)).

Here plaintiff's claims arise from defendant's failure to pay her for several weeks at her salaried rate of $2,884.62 per week. (Pl.'s Mem. at 15, 18 (“Plaintiff was compensated at a rate of $0.00 for fourteen weeks”); Compl. ¶ 15; Declaration of Laurie Gunthorpes in Support of Plaintiff's Motion for Default Judgment and Damages, dated Mar. 16, 2022 (“Gunthorpes Decl.”), Dkt. No. 14-7, ¶ 10.) Plaintiff alleges that she was employed by defendant as the Director of Accounting and Finance and that her duties included overseeing the accounting and finance of defendant's business and engaging in contact with entities outside New York via electronic mail, mail, and telephone calls. (Compl. ¶ 14; Gunthorpes Decl. ¶ 6.) The regulations explain that duties “directly related to management policies or general business operations” are duties “directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” 29 C.F.R. § 541.201(a). Significantly, they include such duties as tax, finance, and accounting. Id. § 541.201(b); see also Klein v. Torrey Point Grp., LLC, 979 F.Supp.2d 417, 425-26 (S.D.N.Y. 2013). Additionally, plaintiff's job title -Director of Accounting and Finance - indicates that her primary duties likely included the exercise of discretion and independent judgment with respect to matters of significance. These facts appear to render plaintiff exempt from the requirements of the FLSA. Nevertheless, because defendant paid her below $684 per week for the period of May 21 to August 13, 2021, she does not satisfy the salary-basis requirement to...