Isayeva v. Diamond Braces

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MICHELLE ISAYEVA and KAHOLY FERNANDEZ, on behalf of themselves, FLSA Collective Plaintiff and the Class, Plaintiffs, v. DIAMOND BRACES, an unincorporated entity, association, or affiliation, ORTHOCLUB, P.C. d/b/a DIAMOND BRACES, JOHN DOE CORPORATIONS 1-100 d/b/a DIAMOND BRACES, and OLEG DRUT, Defendants.

No. 22 Civ. 4575 (KPF)

United States District Court, S.D. New York

March 11, 2024

OPINION AND ORDER

KATHERINE POLK FAILLA UNITED STATES DISTRICT JUDGE

Plaintiffs Michelle Isayeva and Kaholy Fernandez, on behalf of themselves and other hourly employees of the orthodontic practice Diamond Braces, bring this class and collective action against Defendants Diamond Braces, Orthoclub P.C. d/b/a Diamond Braces, Oleg Drut, and John Doe Corporations 1-100 d/b/a Diamond Braces (together “Diamond Braces” or “Defendants”) asserting wage-and-hour claims under the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. §§ 201-219, and the New York Labor Law (the “NYLL”), N.Y. Lab. Law §§ 190-199-a, 650-665. In particular, Plaintiffs allege that Defendants violated the overtime compensation provisions of the FLSA and the NYLL, as well as the NYLL's provisions regarding timely payment of wages, wage notices, and wage statements. Fernandez separately alleges that Defendants terminated her in retaliation for raising complaints regarding Defendants' compensation practices, also in violation of the FLSA and the NYLL, and that Defendants violated the NYLL by failing to pay her for her unused paid time off (“PTO”) at the time of the termination of her employment.

In the motion to dismiss now before the Court, Defendants have launched a volley of arguments that both attack the sufficiency of the various FLSA and NYLL claims in the Second Amended Complaint (the “SAC”) and more broadly call into question the Court's jurisdiction to hear Plaintiffs' various claims brought under the NYLL. For the reasons set forth below, the Court denies Defendants' motion to dismiss, with one limited exception.

BACKGROUND^[1]

A. Factual Background

Diamond Braces is an orthodontic practice that operates more than 40 offices throughout the New York metropolitan area. (SAC ¶¶ 9-11). From on or about March 17, 2022, until August 8, 2022, Fernandez was employed as a Treatment Coordinator, working at various Diamond Braces locations and compensated on an hourly basis. (Id. ¶¶ 54-57) . Likewise, from on or about January 10, 2021, until in or around August 2021, Isayeva was employed as a Dental Assistant, also working at various Diamond Braces locations and compensated on an hourly basis. (Id. ¶¶ 41-44). Both Fernandez and Isayeva were paid on a bi-weekly schedule at a rate of $17 an hour. (Id. ¶¶ 44, 57). In her last month of employment, Fernandez was paid at a rate of $20 an hour. (Id. ¶ 57).

Plaintiffs allege that Defendants' compensation policies for hourly workers violated federal and state wage-and-hour laws in several ways. First, Plaintiffs claim that Defendants engaged in “time-shaving” with respect to certain breaks. Specifically, Plaintiffs allege that employees were required to “clock out” for lunch breaks but also required to eat at their workstations and perform work during those periods, thereby not affording them bona fide meal breaks. (SAC ¶¶ 47-48, 58-59). Plaintiffs further contend that Defendants maintained a similar practice with respect to short rest breaks, providing employees with a weekly break lasting less than twenty minutes, but requiring employees to clock out for such breaks, and therefore not compensating them for that time. (Id. ¶¶ 49-50, 60-61). Because of these time-shaving practices, Fernandez and Isayeva maintain that they were not adequately compensated for their time, in the amount of roughly 3.25 hours per week for Fernandez and 2.75 hours per week for Isayeva. (Id. ¶¶ 51, 62).

Second, Plaintiffs allege that Defendants failed to provide accurate wage notices and wage statements, as required by the NYLL, and that these deficiencies obfuscated Defendants' impermissible time-shaving and untimely payment practices, allowing both problems to continue, to Plaintiffs' financial detriment. (SAC ¶¶ 52, 63). Isayeva also maintains that she was a “manual worker,” within the meaning of the NYLL, and should have been compensated on a weekly basis as required by the statute. (Id. ¶¶ 70-74).

Finally, Fernandez alleges that she was terminated three days after raising these “issues of underpayments and off-the-clock work to which all employees were subject,” in a complaint made to Defendants' Human Resources Department and two other District Managers arising out of her alleged mistreatment by her manager. (SAC ¶ 85; see id. ¶¶ 83-88).

B. Procedural History

The path leading to the instant motion has been circuitous. The action was initiated on June 2, 2022, with the filing of a complaint asserting FLSA and NYLL wage-and-hour claims against Defendants by then-Plaintiff Sama Aliyeva, a Dental Assistant employed by Defendants from on or about February 15, 2021, through in or about January 2022, on behalf of herself and a putative collective and class of hourly workers employed by Defendants. (Dkt. #1). After receiving a brief extension, Defendants answered the Complaint on August 10, 2022. (Dkt. #13, 14). On September 22, 2022, the parties requested a stay of the action, including an adjournment of the initial pretrial conference, pending the parties' completion of class-wide mediation with a private, third-party mediator, which request the Court granted the following day. (Dkt. #16, 17).

On December 30, 2022, the parties submitted a joint letter reporting that while mediation had been held, Defendants indicated that they would not be proceeding with a settlement. (Dkt. #20). Thereafter, on January 13, 2023, the parties filed a joint status update, reflecting Aliyeva's intent to amend the complaint to include claims for improper deductions of breaks lasting twenty minutes or less, and Defendants' intention to file a motion to dismiss the amended complaint on various grounds. (Dkt. #22). In light of Defendants' contemplated motion practice, the Court scheduled an initial pretrial conference, which was duly held on February 3, 2023, and at which conference the parties informed the Court that they had reached a class settlement. (Dkt. #25; February 3, 2023 Minute Entry).

Several events occurred following that conference, giving rise to the current posture of the case. On February 10, 2023, Aliyeva filed her First Amended Complaint (the “FAC”), and the parties submitted a joint proposed briefing schedule for Aliyeva's anticipated motion to enforce the parties' class settlement agreement, which schedule the Court endorsed accordingly. (Dkt. #28, 29). On February 28, 2023, Fernandez and Isayeva (i.e., the current Plaintiffs in the case) entered the action by filing consents to become party plaintiffs under the FLSA. (Dkt. #30, 31). That same day, Aliyeva filed a notice of acceptance of a Rule 68 offer of judgment, indicating her intent to exit the action. (Dkt. #32). To provide further explanation, Plaintiffs' counsel - who represented Aliyeva, Fernandez, and Isayeva - filed an additional letter indicating that Plaintiffs were seeking leave to amend the FAC further to reflect Fernandez's and Isayeva's opt-in status, and then to enforce the settlement agreement between the parties as negotiated at the mediation. (Dkt. #34).

Given these developments, the Court ordered the parties to provide a joint letter on March 3, 2023, regarding the status of the motion to enforce the class settlement and Defendants' views on Plaintiffs' request for leave to amend. (Dkt. #35). In lieu of this joint submission, however, Defendants filed a separate letter maintaining that the case had become moot on February 28, 2023, when Aliyeva accepted Defendants' Rule 68 offer of judgment, such that Plaintiffs' notices of consent to sue under the FLSA must be vacated. (Dkt. #38). In that letter, Defendants alleged that Plaintiffs' counsel had engaged in deceitful conduct by inducing Defendants to resolve the case under false pretenses. (Id.). In particular, Defendants maintained that Plaintiffs' counsel entered into a verbal agreement to resolve the matter with respect to Aliyeva, without indicating to Defendants that Plaintiffs' counsel had separate notices of consent to sue under the FLSA for Fernandez and Isayeva that “[counsel] kept in his back pocket ... in an attempt to keep this case alive.” (Id.). Defendants sought not only disqualification of Plaintiffs' counsel, but also an evidentiary hearing to determine if Aliyeva, Fernandez, and Isayeva “were complicit in this deceitful conduct,” and vacatur of Aliyeva's Rule 68 offer. (Id.).

Per the Court's order, Plaintiffs' counsel filed a response letter on March 8, 2023. (Dkt. #40). In that letter, Plaintiffs' counsel vigorously disputed Defendants' version of events, both asserting that Defendants' letter rested on multiple misstatements of fact and accusing defense counsel of engaging misconduct of its own. (Id.). Plaintiffs' counsel maintained that Defendants were, in fact, aware of the possibility of additional plaintiffs since on or about August 26, 2022, and therefore could not claim unfair surprise; counsel further asserted that the action was not moot, as Plaintiffs filed their notices of consent to sue (id. (citing Dkt. #30, 31)), before Aliyeva's acceptance of her Rule 68 offer (id. (citing Dkt. #32, 33)), notwithstanding the fact that both sets of documents were filed on the same day.

By lengthy endorsement on March 9, 2023, the Court found that the case was not moot, given the prior identification of Plaintiffs as potential opt-in parties to the case. (Dkt. #41 at 6 (“It is well accepted in the FLSA...