August 22, 2013

Second Circuit Affirms Dismissal of Overtime Lawsuit Where Complaint Fails to Allege Extra Hours Worked

Holland & Knight Alert
Howard Sokol

The most recent of three similar decisions from the U.S. Court of Appeals for the Second Circuit may limit the risk employers face from overtime lawsuits brought under the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL). On Aug. 5, 2013, in Dejesus v. HF Mgmt. Servs., LLC, a/k/a Healthfirst, the court affirmed the dismissal of an FLSA and NYLL overtime lawsuit because the plaintiff failed "to plausibly allege she worked more than 40 hours in a given week and was not paid overtime wages." Although the court recognized that plaintiffs may lack access to the employer's records regarding the plaintiff's exact pay and hours worked, a complaint must at least approximate the number of overtime hours allegedly worked and for which the plaintiff was not compensated. Simply alleging that the plaintiff worked more than 40 hours in certain weeks and was not compensated will not be enough to stay in court.

Employers Benefit from the Decision

This decision makes it less likely that employers will face FLSA and NYLL complaints filed simply as "fishing expeditions" in the hope of finding an overtime violation through discovery or to hold the employer up for a nuisance settlement. It also shows that a plaintiff, who decides not to amend a "bare bones" complaint to add more factual detail — rather than appealing an adverse decision, risks being thrown out of court permanently.

Employment Facts and Complaint's Allegations

Ramona Dejesus was employed by HF Management Services, LLC ("Healthfirst") in New York City as a promoter of its insurance programs and services. Dejesus sued Healthfirst in March 2012, alleging that she was an employee owed overtime wages by the company for the three years prior to April 2011, under both the FLSA and the NYLL. In her complaint, Dejesus alleged, among other facts, that:

  • She worked more than 40 hours per week, the threshold for overtime under both federal and New York law, during "some or all weeks" during the period at issue.
  • She was not paid the rate of 1.5 times her regular wage for each extra hour over 40 in any given week.
  • She was not paid for commissions earned and owed to her at the time her employment ended with Healthfirst.
  • The company "breached the employment agreement/contract" by not paying her the wages she was allegedly owed, although she never attached the alleged contract between her and Healthfirst or, for that matter, describe any of its material terms in the complaint.

The District Court's Ruling

Healthfirst asked the district court to dismiss the complaint, arguing that Dejesus had not alleged enough facts to set out a plausible claim that Healthfirst had failed to pay her overtime compensation for weeks in which she worked more than 40 hours. Although the court is required to take factual allegations in a complaint as true at the outset of a lawsuit, it is not required to accept bare-bones allegations or mere legal conclusions. Rather, the court said that to state a valid claim under the FLSA and the NYLL, the plaintiff is required to allege facts showing that: "(1) she was an employee eligible for overtime pay; and (2) that she actually worked overtime without proper compensation." More specifically, the court said the plaintiff must allege the "approximate" number of unpaid overtime hours allegedly worked per week. This requirement also places the onus upon the plaintiff to state her rate of pay and the amount of total overtime wages due. The court found that Dejesus' complaint was deficient on both grounds. Specifically, Dejesus failed "to set forth the precise position she held [and alleging the attendant duties as one that is not otherwise exempt from overtime under the FLSA], any approximation of the number of unpaid overtime hours worked, her rate of pay, or any approximation of the amount of wages due." Accordingly, the court found that Dejesus' complaint "lacks the minimal allegations necessary to state a claim for unpaid wages under the FLSA" and granted Healthfirst's motion to dismiss. The court seemed to encourage Dejesus to file an amended complaint, stating that "[n]othing in the complaint or the papers suggests that there is no possibility that a valid claim could be stated, given more factual detail and contextual information." Nonetheless, Dejesus chose not to amend her complaint, but rather file an appeal.

The Second Circuit's Review

The Second Circuit affirmed the district's court dismissal of the case and held that Dejesus failed to plausibly allege she worked more than 40 hours in a given week and was not paid overtime wages.

The court relied on and amplified two recent decisions concerning what a complaint must allege to state a valid FLSA claim. In Lundy v. Catholic Health Sys. of Long Island, 711 F.3d 106 (Mar. 1, 2013), the court held that "in order to state a plausible FLSA overtime claim, a plaintiff must sufficiently allege 40 hours of work in a given workweek as well as some uncompensated time in excess of the 40 hours." Although the court "declined to make an approximation of overtime hours a necessity in all cases," it noted that "an approximation ‘may help draw a plaintiff's claim closer to plausibility.'" The court affirmed dismissal of the complaint because even though the plaintiff alleged approximations of the hours worked, the allegations did not "get beyond forty hours in any given week." In the second case, Nakahata v. New York-Presbyterian Health Sys. Inc., 2013 WL 3743152 (July 11, 2013), the plaintiffs alleged that they were not paid for work during meal breaks, training sessions and extra shift time, and thus worked unpaid overtime. In affirming the dismissal of the complaint, the Second Circuit held that the hospital workers' complaint lacked the requisite "specificity" in that it "raised the possibility of an overtime claim" but not a "plausible claim for relief" because it did not show "how these instances added up to [40] or more hours in a given week."

Applying these decisions, the Second Circuit found that Dejesus' complaint "provided [even] less factual specificity" than did the plaintiffs in Lundy and Nakahata. According to the court, Dejesus "did not estimate her hours in any or all weeks or provide any other factual content or context. Indeed, her complaint was devoid of any numbers to consider beyond those plucked from the [FLSA]." Her complaint stated only that Dejesus worked more than 40 hours per week in "some or all weeks" without being paid overtime wages, which, essentially, "rephrased the FLSA's overtime provisions [contained in the FLSA]." Seeming to temper the harsh result for Dejesus, the court pointed out that it "has not required plaintiffs to keep careful records and plead their hours with mathematical precision, [and that] we have recognized that it is the employees' memory and experience that lead them to claim in federal court that they have been denied overtime in violation of the FLSA in the first place." But the court concluded that "[w]hatever the precise level of specificity that was required of the complaint, Dejesus at least was required to do more than repeat the language of the statute." As Dejesus had forgone the opportunity to file an amended complaint, her lawsuit was irrevocably dismissed.

Why Healthfirst Matters

The Second Circuit's three recent decisions about what an FLSA complaint must allege to withstand dismissal are welcome for employers (especially for those within the Second Circuit's jurisdiction — Connecticut, New York and Vermont). If a plaintiff can get by with alleging simply that she was not paid overtime even though she worked more than 40 hours in certain weeks, then plaintiffs can either engage in an expensive fishing expedition in search of a claim, or try to hold the employer up for a settlement. These decisions mean that plaintiffs will need to allege — with at least minimal specificity — facts showing that they actually worked more than 40 hours in particular weeks and that they were not paid overtime in those weeks. This heightened requirement may limit the number of FLSA and NYLL suits.

Employers should remember, though, that the federal Department of Labor has created a Smartphone application to help employees track their overtime hours, which may make it easier for plaintiffs to satisfy even the new heightened pleading standards. So despite these cases, employers should still be taking steps to make sure they comply with the overtime requirements of the FLSA and the NYLL. 

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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