Zheng v. Liberty Apparel Co. Inc.

• Decision Date: 30 December 2003
• Docket Number: No. 02-7826.,02-7826.
• Citation: 355 F.3d 61
• Parties: Ling Nan ZHENG, Ren Zhu Yang, Yun Zhen Huang, Wen Qin Lin, Sai Bing Wang, Ye Biao Yang, Cui Zhen Lin, Rong Yun Zheng, Hui Fang Lin, Xiu Ying Zheng, Jin Ping Lin, Hui Ming Dong, Yu Bing Luo, Sau Chi Kwok, Sai Xian Tang, Yi Zhen Lin, Rui Fang Zhang, Mei Juan Yu, Mei Ying Li, Qin Fang Qiu, Yi Mei Lin, Mei Zhu Dong, Fung Lam, Xiu Zhu Ye, Sing Kei Lam, and Xue Jin Lin, Plaintiffs-Appellants, v. LIBERTY APPAREL COMPANY INC., Albert Nigri, and Hagai Laniado, Defendants-Cross-Claimants-Appellees, Ngon Fong Yuen, 88 Fashion Inc., Top Five Sportswear, Inc., S.P.R. Sportswear, Inc. and 91 Fashion, Inc., Defendants, Lai Huen Yam, a/k/a Steven Yam, 998 Fashions, Inc. and 103 Fashion Inc., Defendants-Cross-Defendants.
• Court: U.S. Court of Appeals — Second Circuit

355 F.3d 61

Ling Nan ZHENG, Ren Zhu Yang, Yun Zhen Huang, Wen Qin Lin, Sai Bing Wang, Ye Biao Yang, Cui Zhen Lin, Rong Yun Zheng, Hui Fang Lin, Xiu Ying Zheng, Jin Ping Lin, Hui Ming Dong, Yu Bing Luo, Sau Chi Kwok, Sai Xian Tang, Yi Zhen Lin, Rui Fang Zhang, Mei Juan Yu, Mei Ying Li, Qin Fang Qiu, Yi Mei Lin, Mei Zhu Dong, Fung Lam, Xiu Zhu Ye, Sing Kei Lam, and Xue Jin Lin, Plaintiffs-Appellants, v. LIBERTY APPAREL COMPANY INC., Albert Nigri, and Hagai Laniado, Defendants-Cross-Claimants-Appellees, Ngon Fong Yuen, 88 Fashion Inc., Top Five Sportswear, Inc., S.P.R. Sportswear, Inc. and 91 Fashion, Inc., Defendants, Lai Huen Yam, a/k/a Steven Yam, 998 Fashions, Inc. and 103 Fashion Inc., Defendants-Cross-Defendants.

No. 02-7826.

United States Court of Appeals, Second Circuit.

Argued: January 16, 2003.

Decided: December 30, 2003.

Appeal from the United States District Court for the Southern District of New York, Richard Conway Casey, J.

COPYRIGHT MATERIAL OMITTED

James Reif (Margaret A. Malloy, of counsel), Gladstein, Reif & Meginniss, LLP, New York, NY, for Plaintiffs-Appellants.

Michael H. Klein, Kestenbaum, Dannenberg & Klein, LLP, New York, NY, for Defendants-Appellees.

Jennifer S. Brand, Assistant Attorney General (M. Patricia Smith, Assistant Attorney General, Daniel J. Chepaitis, Assistant Solicitor General, of counsel, Eliot Spitzer, Attorney General of the State of New York, on the brief), Office of the Attorney General of the State of New York, New York, NY, for amicus curiae Eliot Spitzer, Attorney General of the State of New York.

Catherine K. Ruckelshaus (Laurence E. Norton, II, Amy Sugimori, of counsel), National Employment Law Project, Inc., New York, NY, for amici curiae Asian-American Legal Defense and Education Fund and National Employment Lawyers' Association.

Before: WINTER, LEVAL, and CABRANES, Circuit Judges.

JOSÉ A. CABRANES, Circuit Judge.

This case asks us to decide whether garment manufacturers who hired contractors to stitch and finish pieces of clothing were "joint employers" within the meaning of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et seq., and New York law. Plaintiffs, garment workers in New York City who were directly employed by the contractors, claim that the manufacturers were their joint employers because they worked predominantly on the manufacturers' garments, they performed a line-job that was integral to the production of the manufacturer's product, and their work was frequently and directly supervised by the manufacturers' agents. The manufacturers respond that the contractors who, among other things, hired and paid plaintiffs to assemble clothing for numerous manufacturers, were plaintiffs' sole employers. Both plaintiffs and the manufacturers moved for summary judgment on the issue of joint employment.

The United States District Court for the Southern District of New York (Richard Conway Casey, Judge), applying the four-factor test set forth in Carter v. Dutchess Community College, 735 F.2d 8 (2d Cir. 1984), granted the manufacturers' motion, and held that the manufacturers could not be held liable for violations of the FLSA or its New York statutory analogues. The District Court also declined to exercise supplemental jurisdiction over a surviving New York claim.

We conclude that the District Court erred when it limited its analysis to the four factors identified in Carter. Accordingly, we vacate the judgment of the District Court and remand the cause to the District Court with instructions concerning further proceedings.

BACKGROUND

The relevant facts are laid out in Judge Casey's opinion, Zheng v. Liberty Apparel Co., 2002 WL 398663, at *1-2 (S.D.N.Y. Mar.13, 2002), and we recount only those facts necessary to resolve the issues on appeal. Unless otherwise noted, the facts are undisputed.

Plaintiffs-Appellants are 26 non-English-speaking adult garment workers who worked in a factory at 103 Broadway in New York's Chinatown. They brought this action against both (1) their immediate employers, six contractors doing business at 103 Broadway ("Contractor Corporations") and their principals (collectively, "Contractor Defendants"), and (2) Liberty Apparel Company, Inc. ("Liberty") and its principals, Albert Nigri and Hagai Laniado (collectively, "Liberty Defendants"). Because the Contractor Defendants either could not be located or have ceased doing business, plaintiffs have voluntarily dismissed their claims against those defendants with prejudice. Accordingly, plaintiffs now seek damages only from the Liberty Defendants.

Liberty, a "jobber" in the parlance of the garment industry, is a manufacturing company that contracts out the last phase of its production process. That process, in broad terms, worked as follows: First, Liberty employees developed a pattern for a garment, cut a sample from the pattern, and sent the sample to a customer for approval. Once the customer approved the pattern, Liberty purchased the necessary fabric from a vendor, and the vendor delivered the fabric to Liberty's warehouse. There, the fabric was graded and marked, spread out on tables, and, finally, cut by Liberty employees.

After the fabric was cut, Liberty did not complete the production process on its own premises. Instead, Liberty delivered the cut fabric, along with other essential materials, to various contractors for assembly. The assemblers, in turn, employed workers to stitch and finish the pieces, a process that included sewing the fabrics, buttons, and labels into the garments, cuffing and hemming the garments, and, finally, hanging the garments. The workers, including plaintiffs, were paid at a piece rate for their labor.

From March 1997 through April 1999, Liberty entered into agreements with the Contractor Corporations under which the Contractor Corporations would assemble garments to meet Liberty's specifications. During that time period, Liberty utilized as many as thirty to forty assemblers, including the Contractor Corporations. Liberty did not seek out assemblers; instead assemblers came to Liberty's warehouse looking for assembly work. In order to obtain such work, a prospective assembler was required by Liberty to sign a form agreement.

Plaintiffs claim that approximately 70-75% of their work during the time period at issue was for Liberty. They explain that they knew they were working for Liberty based on both the labels that were sewn into the garments and the specific lot numbers that came with the garments. Liberty's co-owner, Albert Nigri, asserts that the percentage of the Contractor Corporations' work performed for Liberty was closer to 10-15%. He derives that figure from individual plaintiffs' handwritten notes and records.

The parties do not dispute that Liberty employed people to monitor Liberty's garments while they were being assembled. However, the parties dispute the extent to which Liberty oversaw the assembly process. Various plaintiffs presented affidavits to the District Court stating that two Liberty representatives — a man named Ah Sen and "a Taiwanese woman" — visited the factory approximately two to four times a week for up to three hours a day, and exhorted the plaintiffs to work harder and faster. In their affidavits, these plaintiffs claim further that, when they finished working on garments, Liberty representatives — as opposed to employees of the Contractor Corporations — inspected their work and gave instructions directly to the workers if corrections needed to be made. One of the plaintiffs also asserts that she informed the "Taiwanese woman" that the workers were not being paid for their work at the factory.

Albert Nigri, on the other hand, avers that Liberty's quality control person made brief visits to assemblers' factories and was instructed to speak only with Lai Huen Yam, a co-owner of the Contractor Corporations, or with his wife. Furthermore, Nigri asserts in his affidavit that Liberty representatives were expected to spend just thirty minutes at each of the assemblers' work sites. Finally, Nigri states that Liberty did not employ two quality control persons simultaneously; did not employ a quality control person during some of the relevant time period; and did not employ a man as a quality control person.

In their complaint, plaintiffs alleged that both the Liberty Defendants and the Contractor Defendants violated 29 U.S.C. § 206 and N.Y. Lab. Law § 652(1) ("§ 652(1)"), which require an employer to pay employees a legally mandated minimum wage. Plaintiffs alleged further that all of the defendants, including Liberty and its principals, violated 29 U.S.C. § 207 and N.Y. Comp.Codes R. & Regs. tit. 12, § 142-2.2 ("§ 142-2"), which require employers to compensate employees at one-and-one-half times the regular rate when an employee works in excess of 40 hours per week. Additionally, plaintiffs alleged that defendants violated N.Y. Lab. Law § 191, which requires employers to pay manual workers on a weekly basis, and N.Y. Lab. Law § 193, which prevents employers from making unauthorized deductions from employees' wages. Finally, plaintiffs alleged that, in violation of N.Y. Lab. Law § 345-a ("§ 345-a") — a statutory provision that applies to the apparel industry only — Liberty Defendants entered into contracts with the Contractor Corporations even though they knew, or should have known, that the Contractor Corporations failed to comply with the provisions of New York law that govern the payment of wages.

Liberty Defendants moved for summary judgment on all claims against them on the ground that plaintiffs were not their employees. Plaintiffs cross-moved for summary judgment, seeking a determination that they were employed by Liberty. In a March 13, 2002 Opinion and Order, the District Court granted Liberty Defendants' motion for summary judgment and dismissed every federal and state claim in the complaint on the merits except the claim arising under N.Y. Lab. Law § 345-a, which does not...