In November we reported on Wigdor v SoulCycle, which had been filed in New York Supreme Court, New York County.  In that action a well-known plaintiff’s attorney, Douglas Wigdor, alleged that SoulCycle retaliated against him by banning him from the Company’s establishments because Wigdor had filed a putative wage and hour class action against SoulCycle.

This action reminded us of Jerry Seinfeld’s “Soup Man,” who would decline to serve customers that did not properly place a soup order.  We had previously asked whether the owner of a store has a right to prevent counsel from entering, for example, to solicit business in their establishment.  The answer is apparently: yes …. and no.

In Wigdor v SoulCycle, Mr. Wigdor asserted four claims: (1) retaliation under New York Labor Law (NYLL) § 215; (2) retaliation under California Labor Code (CLC); (3) prima facie tort; and (4) breach of an obligation of good faith and fair dealing.  SoulCycle moved to dismiss all claims for failure to state a claim, and now the Court has issued a decision on that motion.

The Court dismissed three of the four claims – the retaliation claims under NYLL and CLC as well as the prima facie tort claim – but declined to dismiss the claim for good faith and fair dealing.  See Wigdor v SoulCycle, Index 161572/2014 (Sup. Ct, NY County April 13, 2015).  In dismissing the NYLL and CLC retaliation claims the Court recognized, as we noted in the November blog, that both statutes prohibit retaliation against an “employee.”  Indeed, NYLL § 215 states: “No employer … shall discharge, penalize, or in any other manner discriminate against any employee because such employee has made a complaint to his employer….” id. (emphasis supplied).  The CLC contains a similar provision.  Yet neither statute references protection for the employee’s lawyer.  The Court explained:

Contrary to the plaintiff’s contention, the text of Labor Law § 215 does not reveal a clear intent to authorize a claim where an employer retaliates against an attorney that represents a former employee of the employer.  Indeed, neither the plain language of the statute nor its legislative history, as revealed by the 1967 bill jacket accompanying its enactment and the 1986 bill jacket accompanying its amendment, contemplates an action by someone other than an employee making complaints regarding a former employer.

Id.  Additionally, the Court dismissed the claim for prima facie tort because “other than conclusory contentions, there are no facts supporting the assertion that defendants sole motivation for banning plaintiff from SoulCycle premises was intended to maliciously injure plaintiff.”   Id.  Thus, Seinfeld’s Soup Man would appear to be vindicated.

Unfortunately, the case took a turn for the worse for SoulCycle as the Court refused to dismiss the final claim for breach of good faith and fair dealing.  A prerequisite for asserting such a claim under New York law is that a plaintiff must plead and prove that there was a contractual relationship between the plaintiff and defendant.  SoulCycle argued that it never had a contractual relationship with Wigdor and therefore the claim should be dismissed. The Court disagreed concluding that when Wigdor plead that he had “electronically agreed to SoulCycle’s terms and conditions” he established, at least for the purpose of stating a claim, that a contractual relationship was created.   Accordingly, the breach of good faith and fair dealing claim survives, for now.

Thus, it seems the Court’s ruling does give some guidance to our inquiry as to when a business owner has an appropriate say in deciding who should not be allowed to patronize his/her business.  Certainly, had there been no prior business relationship between Wigdor and SoulCycle, and then this case would have been dismissed.  Yet, apparently when there is some prior “contractual relationship” then the lines become a little cloudy as to when the business owner can decide whether someone should continue to patronize the business.  We are now left to ask, merely because someone had patronized the business before and abided by the terms and conditions of the business owner, such as paying for the goods and services rendered, when can the business owner end that relationship?  How long does the former patron get to ask, as Oliver Twist might – “Please Sir, can I have some more?”

On Friday, February 20, 2015, a federal judge issued an unusual order in Fujiwara, et al. v. Sushi Yasuda, LTD, et al, 12-cv-8742(WHP) (S.D.N.Y. Feb. 20, 2015).  After receiving an anonymous letter in an FLSA lawsuit, United States District Judge William H. Pauley directed counsel for the parties to conduct an investigation into the circumstances concerning the allegations asserted in the anonymous letter and to submit a joint report by next Monday, March 2, 2015 on the status of the investigation.

The lawsuit claimed that a sushi restaurant, Sushi Yasuda, improperly withheld gratuities from employees, and violated the minimum wage and overtime requirements of the FLSA and New York Labor Law (NYLL).  After taking initial discovery, Plaintiffs moved for class certification of their NYLL claims.  However, before Sushi Yasuda filed any opposition, the parties entered into a settlement agreement on a class-wide basis, which the court eventually approved in January 2015.  Thus, the lawsuit had been settled before the anonymous letter was sent to the court.   However, the letter, purportedly sent by an unknown chef at the restaurant, indicated that class members were being pressured by unnamed managers not to cash their settlement checks under the threat of losing their job and work visa.

Certainly, the anonymous letter would trigger concerns of prohibited retaliation under the FLSA, see 29 USC § 215, which explains why Judge Pauley took the unusual step of having counsel for the parties investigate the circumstances surrounding the letter.  Indeed, the court’s reaction to the letter demonstrates that retaliation can occur even after a settlement has been reached between the parties and approved by the court.

However, the letter does raise additional questions.  Because the letter is anonymous there is no way to know whether the author was a named plaintiff, an opt-in plaintiff, or a class member that never affirmatively joined the litigation.  The FLSA anti-retaliation provision, however, prohibits any retaliatory conduct “against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA] or has testified or is about to testify in any such proceeding …” Id. at §215(a)(3).   Thus, one question is presented as to whether a claim of FLSA retaliation can involve an individual who engaged in no protected activity.  Additionally, in this case there was no determination on the class certification under Rule 23 or under state law.  Thus, there could not be retaliation based on the unknown author’s standing as a class member involved in the litigation.  Because the FLSA relies on an “opt-in” procedure, as opposed to Rule 23 class certification, an individual who does not opt-in to the litigation, is not presenting any FLSA claim or bound by any determination concerning such claims in that litigation.  See, e.g., Guzman v. VLM, Inc., 07-cv-1126 (JG), 2008 WL 597186 at *10 (E.D.N.Y. Mar. 2, 2008); Butler v. American Cable & Tel, LLC, 09-cv-5336, 2011 WL 4729789, at *12 (N.D.Ill. Oct. 6, 2011).

Of course, the argument can be made that, by virtue of sending the letter, the anonymous-chef author has engaged in some type of protected activity, even if he/she is not a named Plaintiff or opt in Plaintiff.  Thus raising the question as to whether such activity, merely sending a letter to the judge, actually satisfies the requirements of Section 215.

Putting those questions aside, there is no question that the court, by virtue of its inherent authority to supervise the settlement and ensure that the settlement is fairly effectuated, would have jurisdiction to address the possibility of any conduct which could impact the settlement and to punish anyone who threatens the fair and efficient resolution of the settlement.  Exercising such jurisdiction inevitably requires a determination as to whether any threat was actually made, and if so, what exactly was stated or threatened.

Whatever the answer to the questions posed above, it is important for any employer to impress on its managers that they may not threaten any employee for asserting an FLSA claim.  Certainly, any such threats could result in additional claims of retaliation, which will inevitably cost the employer more to defend.  Indeed, in order to truly realize the benefit of the settlement agreement and finally resolve these wage and hour claims, the employer should want the settlement payment to be fulfilled so that the employer can move on and return to business without further issues.

In FLSA cases in which retaliation is alleged, it is incumbent upon the employer to defend by showing that the disciplinary process had started prior to the protected activity, meaning that the employer must show that the employee’s engaging in the protected activity could not salvage a job that was legitimately in danger.  If such evidence is not already in existence, then there is the risk that the retaliation complaint will have life breathed back into it, possibly leading to an unpredictable jury trial.  A recent case illustrates this maxim.

In Cantu v. Vitol, filed in federal court in the Southern District of Texas, the employer fired two people.  The employer filed a summary judgment motion and, for one of the workers, it made a sufficient showing that it had already commenced disciplinary actions against the worker and had actually planned to dismiss her well before she instituted legal action against the Company for failure to pay overtime.

So, the district court granted summary judgment as to that employee.  The court, however, did not agree that the employer had presented sufficient evidence i.e. documents/paper trail, showing performance or conduct issues with the second employee, so the motion was denied as to that worker.  The court made specific mention of the fact that there was no proof that the termination decision had been made before the lawsuit was filed.

The employees, a pair of contract administrators for an energy trading company, sought back-due overtime.  The employees had sent notice of their lawsuit to the Company and were then both fired only days after.  Both claimed their discharges were in retaliation for their protected activity.  The Company made a showing that one of the employees had a longstanding dispute with one of the traders; there was also evidence that other traders were unhappy with this employee’s work. Significantly, the Company also demonstrated that it had started to look for a replacement for the employee before the suit was filed.

As to the second worker, the evidence was less convincing and, indeed, rather scanty.  The Company failed to produce any of the e-mail messages that it claimed showed that concerns about the employee’s work performance had been raised prior to her discharge.  Also significant, and making the situation even more problematic for the employer, was the fact that when the employee received a change in responsibilities and increase in workload, she complained about overtime and then she allegedly began to experience different and harsher treatment from Company management, culminating in her firing.
 

On March 22, 2011, the United States Supreme Court held in Kasten v. Saint-Gobain Performance Plastics Corp., that the Fair Labor Standards Act (“FLSA”) prohibits employers from retaliating against employees who make verbal, as well as written, complaints regarding a violation of the statute. The Supreme Court did not, however, specify whether a “complaint” must be made to a government agency, or whether an internal complaint is sufficient to trigger the protection of the FLSA.

In Kasten, the plaintiff sued the company for allegedly terminating his employment in retaliation for verbally complaining to company officials about the placement of its time clocks. The Western District of Wisconsin ruled that the plaintiff’s informal complaint did not constitute protected activity under the FLSA. In affirming the District Court’s decision, the Seventh Circuit ruled that the FLSA’s use of the phrase “file any complaint” indicates that the statute only protects written complaints.

The Supreme Court rejected the Seventh Circuit’s interpretation of the phrase “file any complaint,” and held that “considering the purpose and context” of the FLSA’s anti-retaliation provisions, both verbal and written complaints should be protected. The Court further provided that the following standard should be considered when determining whether an employee has filed a complaint: “[A] complaint is filed when a reasonable, objective person would have understood the employee to have put the employer on notice that [the] employee is asserting statutory rights under the [act].”

In light of this decision, employers can expect an increase in retaliation claims under the FLSA. To protect themselves from such claims, employers should treat potential verbal complaints under the FLSA in the same manner as they would verbal complaints under federal and state anti-discrimination laws.

Specifically, employers should consider: (1) implementing and notifying employees of a complaint procedure for claims of wage and hour violations; (2) training managers and supervisors on how to identify protected complaints; and (3) advising managers and supervisors to consult with Human Resources prior to taking any adverse action against an employee who has previously complained.