Shages v. MDScripts Inc., Case No. 18 CV 5395

JOAN SHAGES, Plaintiff, v. MDSCRIPTS INC., a Florida corporation, and GARY MOUNCE, an individual Defendants.

Case No. 18 CV 5395

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

May 31, 2019

Judge Joan B. Gottschall

MEMORANDUM OF OPINION AND ORDER

Joan Shages, the plaintiff, filed a six-count complaint against her alleged former employers, MDScripts, Inc. ("MDScripts"), and Gary Mounce, its President and Chief Executive Officer, alleging a breach of contract claim and violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; the Illinois Minimum Wage Law (IMWL), 820 ILCS § 105/1 et seq.; and the Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS § 115/1 et seq. The court has before it a motion to dismiss the complaint in part for failure to state a claim. See Fed. R. Civ. P. 12(b)(6).

A complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). When deciding a motion to dismiss a complaint for failure to state a claim, the complaint's well-pleaded facts must be accepted as true, and all reasonable inferences must be drawn in the plaintiff's favor. Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).

According to the complaint, Mounce recruited Shages in 2014. Compl. ¶ 17. Shages requested a $75,000 annual salary. Compl. ¶ 18. Defendants agreed but structured her compensation package as $60,000 in base salary plus bonuses and profit sharing. Compl. ¶ 19. "MDScripts stated to [the plaintiff] that compensation would never be an issue at MDScripts and that 'raises, bonuses and profit sharing were frequent and generous if earned.'" Id. MDScripts also "promised that [Shages] would receive sick days and vacation pay." Id. Despite these promises, Shages did not receive bonuses or participate in MDScripts' profit sharing plan. Compl. ¶¶ 23, 32, 33, 34, 79. Mounce announced at a corporate retreat in July 2014 that MDScripts would be instituting a merit-based bonus system. Compl. ¶ 25. Shages did not complain because she felt confident that she would qualify for bonuses under the newly announced plan. Compl. ¶ 25.

In July 2015 MDScripts transferred Shages to another position and reclassified her as an hourly employee. Compl. ¶ 25. About a year later, in June 2016, MDScripts assigned Shages to work on a project for a client, referred to as "CareHere." Id. The project was estimated to take 18 months to complete. Id. Shages completed the CareHere project three months early, and CareHere became the company's most successful client within a year. Id. The project required Shages to work substantial overtime, often more than 60 hours a week. See Compl. ¶¶ 28, 30. MDScripts told Shages "to not report her overtime on its time log but rather, to record her hours separately." Compl. ¶ 26. An MDScripts human resources manager warned Shages that she risked losing her job if she complained to Mounce. Compl. ¶ 29.

MDScripts also told its employees in July 2017 that it was eliminating paid vacation time and that employees would be paid for their accrued vacation time. Compl. ¶ 35. Shages had accrued 190 hours of vacation time, but MDScripts did not pay her for it. Compl. ¶ 36. Shagessent defendants a letter complaining of these practices on January 23, 2018. See Compl. Ex. A. Defendants fired her the next day. Compl. ¶ 39.

Joint Employment

Shages sues Mounce in his individual capacity. Compl. ¶ 3. As Mounce acknowledges, Mem. Supp. Mot. to Dismiss 4, ECF No. 12, an individual and a company may be held liable for wage and hour violations as joint employers under the FLSA. Falk v. Brennan, 414 U.S. 190, 195 (1973); Reyes v. Remington Hybrid Seed Co., Inc., 495 F.3d 403, 408-09 (7th Cir. 2007). Indeed, many courts have found corporate officers individually liable under the FLSA, IMWL, and IWPCA. E.g., Pietrzycki v. Heights Tower Serv. Inc., 290 F. Supp. 3d 822, 850-51 (N.D. Ill. 2017); Natal v. Medistar, Inc., 221 F. Supp. 3d 999, 1003-04 (N.D. Ill. 2016); Solis v. Int'l Detective & Protective Servs., Ltd., 819 F. Supp. 2d 740, 743 (N.D. Ill. 2011); Morgan v. SpeakEasy, LLC, 625 F. Supp. 2d 632, 646 (N.D. Ill. 2007). Mounce nevertheless maintains that the complaint does not include enough well-pleaded facts to permit the plausible inference that he employed Shages.

The FLSA's definition of "employer" reaches "any person acting directly or indirectly in the interest of an employer in relation to an employee. . . ." 29 U.S.C. § 203(d). The FLSA's definition of the verb "employ," includes "suffer or permit to work," which is "the broadest definition . . . ever included in any one act." Reyes, 495 F.3d at 408 (quoting United States v. Rosenwasser, 323 U.S. 360, 363 n.3 (1945) (other citation omitted). The IMWL and IWPCA contain similarly broad definitions of "employ" and "employer." See 820 ILCS 105/3(c), (d); 820 ILCS 115/2 (same definitions); see also Costello v. BeavEx, Inc., 810 F.3d 1045, 1050 (7th Cir. 2016) (discussing IWPCA's "broad" definition of employer). While these definitions may potentially differ on some issues, for purposes of determining joint employment they are"materially the same." Pietrzycki, 290 F. Supp. 3d at 850 (citing Cho v. Maru Rest., Inc., 194 F. Supp. 3d 700, 704 (N.D. Ill. 2016)).

The joint employment analysis requires consideration of the "economic reality" of the relationship between Mounce and Shages rather than "technical concepts." Goldberg v. Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961) (citations omitted). The "totality of 'the circumstances of the whole'" relationship must be considered. Karr v. Strong Detective Agency, Inc., 787 F.2d 1205, 1208 (7th Cir. 1986) (citing Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)). The Seventh Circuit has not listed specific factors to guide this analysis. Natal, 221 F. Supp. 3d at 1003; Morgan, 625 F. Supp. 2d at 649. Courts in the Seventh Circuit have identified several relevant factors, such as "'whether the alleged employer: (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.'" Pietrzycki, 290 F. Supp. 3d at 850 (quoting Deschepper v. Midwest Wine & Spirits, Inc., 84 F. Supp. 3d 767, 778 (N.D. Ill. 2015)); see also Vill. of Winfield v. Ill. State Labor Relations Bd., 678 N.E.2d 1041, 1044 (Ill. 1997) (listing similar factors considered under Illinois' joint employment test); Andrews v. Kowa Printing Corp., 838 N.E.2d 894, 904 (Ill. 2005) (applying test to IWCPA claim).

The complaint here pleads a plausible joint employment claim against Mounce. Under the flexible economic reality analysis, a defendant who did not supervise the employee's day-to-day activities may nevertheless be individually liable depending on the control the defendant had over the alleged violation. Natal, 221 F. Supp. 3d at 1003 (citing Afanassov v. VorBroker, 2002 WL 1400534, at *1 (N.D. Ill. June 27, 2002)); Morgan, 625 F. Supp. 2d at 646. Shages must plead facts raising the inference of joint employment above the speculative level; she does notneed to plead every fact she intends to prove at trial. Shages alleges generally¹ that "Defendant Gary Mounce is the President and CEO of MDScripts who exercised operational control over its employees, including [the plaintiff], and had the power to hire and fire them, the ability to supervise them, and the power to set wages for them." Compl. ¶ 3. Shages backs up these general allegations with well-pleaded facts. According to the complaint, Mounce recruited Shages from a customer after becoming impressed with her knowledge of MDScripts' software. Compl. ¶ 16. And he personally negotiated the terms of her compensation package. See id. ¶¶ 16-19. With favorable inferences, those allegations demonstrate Mounce's hands-on involvement in employment decisions and day-to-day operations. Further, Mounce promised Shages a specific level of total compensation, $75,000 a year. See Comp. ¶¶ 16-19. He renewed his promise of bonuses throughout Shages' employment, suggesting that he had control over setting compensation. See Compl. ¶¶ 31, 79.

This is sufficient, but the complaint pleads still more. Shages alleges that MDScripts' human resources manager warned her that she risked losing her job if she complained to Mounce about the long hours she was working. Compl. 7. The manager might have said that Mounce could do nothing about the hours she worked and the overtime she received because the manager, or someone else in the company, had the power to control those things. See Shah v. Littelfuse Inc., 2013 WL 1828926, at *4 (N.D. Ill. Apr. 29, 2013) (dismissing complaint because allegations showed that defendant did not participate in decision on whether to increase the plaintiffs' pay). Instead, when Shages wrote Mounce about her complaints and she was fired thenext day, it can be inferred that Mounce was demonstrating his power to control hiring, firing, hours, and compensation. Compl. ¶¶ 37-39.

Taken together and in the light most favorable to Shages, the complaint's well-pleaded facts raise a plausible inference that Mounce and MDScripts jointly employed Shages, at least with respect to the violations she alleges. Mounce's motion to dismiss is denied.

Breach of Contract And IWPCA Claims

Mounce and MDScripts also move to dismiss Shages' IWPCA and breach of contract claims. They argue that Shages did not have an enforceable contractual right to be paid $75,000 a year on the well-pleaded facts alleged in the complaint. Defendants also argue that the FLSA preempts Shages' breach of contract claims.

A. Preemption

The court considers defendant's preemption argument first. The Supremacy Clause, U.S. Const. Art. VI, Cl. 2, gives Congress the power to preempt state law "either by express provision, by implication, or by a conflict between federal and...