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Davis Polk Secures Pro Bono Victory in Workers’ Rights Case
4/2/2012
On March 21, 2012, Judge Crotty of the U.S. District Court for the Southern District of New York granted summary judgment to a group of former employees of Jin Hua Restaurant Inc. (the "Restaurant") in a two-year-long workers’ rights case. Davis Polk, together with the Asian American Legal Defense and Education Fund ("AALDEF"), serves as pro bono counsel to 22 former employees (waiters, bussers, and dim sum sellers) bringing claims under the federal Fair Labor Standards Act (FLSA) and the New York Labor Law against the manager of the Restaurant, the Restaurant, and its parent company, TYT East Corp ("TYT").

In a complaint filed in 2010, plaintiffs contended that defendants had failed to pay them the minimum and overtime wages mandated by the FLSA and New York Labor Law, and had further violated the labor laws by failing to pay plaintiffs at all in the month prior to the closing of the Restaurant in April 2010. Because the Restaurant had gone out of business due to its mounting debt, plaintiffs were left to attempt recovery from TYT. TYT argued that it was not liable as plaintiffs' employer because they were employed solely by the Restaurant. In short, if plaintiffs could not hold TYT liable, they likely could not collect damages.

Plaintiffs argued that TYT was their employer, among other reasons, because TYT made the decisions to open and close the Restaurant; did not require the Restaurant to pay rent for the space it leased from TYT; hired and fired the managers of the Restaurant, who were TYT directors that had authority to hire and fire plaintiffs and set their working conditions; and paid plaintiffs' salaries before the Restaurant opened its own bank account. Plaintiffs also cited the personal involvement of TYT's chairman in directing renovations at the Restaurant.

In July 2011, plaintiffs moved for summary judgment on the issue of TYT's liability, advancing two theories why the court should hold TYT liable as plaintiffs' employer. First, plaintiffs argued that the Restaurant and TYT were so interrelated that they functioned not as two separate businesses, but rather as one integrated enterprise. This was a somewhat novel theory: we found only one district court case -- an unpublished case in another circuit -- holding an entity liable for FLSA violations under this theory. But because courts regularly use this theory to establish liability under other employment laws (such as Title VII) and because virtually no functional distinction existed between TYT and the Restaurant, we determined to pursue the argument. Second, plaintiffs also advanced a more traditional "joint employer" theory under the FLSA, arguing that TYT should be held liable together with the Restaurant because both entities exercised control over plaintiffs in the performance of their work.

The Court resoundingly endorsed plaintiffs' position, holding TYT jointly liable under both theories. The Court noted that although the Second Circuit had not yet adopted the "integrated enterprise" theory in the FLSA context, it was "appropriate to apply the doctrine in this case," and held that the evidence established that TYT and the Restaurant were a single enterprise. It also concluded that the control that TYT exercised over plaintiffs justified liability under the "joint employer" theory.

While plaintiffs must still establish their damages and move for an award of attorneys' fees, this decision holds defendants liable for their violations of plaintiffs' rights.

The Davis Polk team includes partner Frances E. Bivens and associates Matthew B. Rowland, Joshua Thomas Foust, Benedict J. Schweigert and Alan J. Tabak.