Archie v. Grand Cent. Partnership, Inc.

• Decision Date: 09 February 2000
• Docket Number: No. 95CIV.0694(TPG)(SEG).,95CIV.0694(TPG)(SEG).
• Citation: 86 F.Supp.2d 262
• Parties: Keith ARCHIE, et al., Plaintiffs, v. GRAND CENTRAL PARTNERSHIP, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

86 F.Supp.2d 262

Keith ARCHIE, et al., Plaintiffs, v. GRAND CENTRAL PARTNERSHIP, INC., et al., Defendants.

No. 95CIV.0694(TPG)(SEG).

United States District Court, S.D. New York.

February 9, 2000.

COPYRIGHT MATERIAL OMITTED

Mitchell A. Lowenthal, Cleary, Gottlieb, Steen & Hamilton, New York, NY, for Plaintiffs.

Geoffry Best, LeBoeuf, Lamb, Leiby & MacRae, New York, NY, for Defendants.

MEMORANDUM OPINION

GRUBIN, United States Magistrate Judge.

This case, brought pursuant to the Fair Labor Standards Act, 29 U.S.C. § 201 (the "FLSA"), and the New York Minimum Wage Act, N.Y. Labor Law § 650, was referred to me for a determination of the damages to be paid to each of the plaintiffs. This order is to resolve the pending motions of the parties and to establish the formula for the final calculation of each plaintiff's entitlement.

The liability of the defendants was found by the Honorable Sonia Sotomayor after trial in an opinion reported at 997 F.Supp. 504. Familiarity by the readers hereof with that opinion and the factual and legal background of this matter is assumed and will not be repeated herein. Briefly, defendants ran a multi-service drop-in center for the homeless (the "Center"), for which they received funding pursuant to a contract from New York City (attached as Exhibit K to the Declaration of Jennifer L. Kroman, dated October 19, 1998 (the "Contract")) as well as from other sources.¹ One of the programs defendants offered was called Pathway to Employment ("PTE"), in which participants were assigned to work 40 hours per week performing tasks that were also performed by the Center's staff employees in the areas of clerical, maintenance, food services, administrative, outreach and recycling work. The staff members were paid minimum wage or more, while PTE participants received substantially less.

All plaintiffs herein were homeless or formerly homeless persons who participated in the PTE program between 1990 and 1995. Defendants argued at trial that plaintiffs were not employees, but trainees receiving essential job skills development. Judge Sotomayor, however, found that defendants were a common enterprise engaged in interstate commerce and so covered by the FLSA and that plaintiffs were employees of defendants pursuant to both the FLSA and the New York Minimum Wage Law. Judge Sotomayor thus concluded that plaintiffs were entitled to the difference between the lawful minimum wage and the compensation they actually received, plus statutory damages equal to the amount of back wages, as well as costs and attorney's fees.

The following facts, relevant to the issues treated herein, have been found by Judge Sotomayor or are otherwise undisputed. Pursuant to the Contract with the City and to its own policies, the Center was always open to any homeless persons, providing them with, among other things, meals, counseling, showers, clothing, mail access and referrals for employment and housing. However, those persons who chose to take part in the PTE program were required to make arrangements for stable housing prior to entering the program. The Center's policy was to turn away no homeless person. The Contract provided that no funds were to be spent on meals for employees. Contract, Art. 4.9 ¶ C. Staff members paid $1.00 for each meal, and they did not receive counseling or shelter. Although the Center had no beds, many homeless people spent nights there on chairs. The Contract provided that the defendants and the City would minimize overnight sleeping at the Center. Contract, Art. III ¶ CC.1.

1. "Benefits" Generally

The major controversy outstanding between the parties as to damages concerns whether certain benefits provided to PTE participants are to be considered compensation and deducted from the payable wage rate. The FLSA defines "wage" to include "the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees...." 29 U.S.C. § 203(m); see also 29 C.F.R. §§ 531.3, 531.29. Defendants argue that if plaintiffs are (retroactively) employees, the benefits they were provided are (retroactively) compensation. Thus, they seek to deduct the costs of meals, shelter, counseling and transportation from damages. Plaintiffs dispute this contention on numerous grounds.

Plaintiffs' overall position, that there should be no allowance for any benefits provided, is not tenable. Defendants are hardly "estopped," as plaintiffs argue, from being able now to treat plaintiffs as employees for purposes of damages because they argued that plaintiffs were not employees in the liability phase of this case. That issue was, of course, the gravamen of this case, and the court, agreeing with plaintiffs, found that they were employees and were to have been paid as such. A similar situation existed in Donovan v. Tony and Susan Alamo Foundation, 567 F.Supp. 556, 563, 574 (W.D.Ark. 1982), mod. on other grounds, 722 F.2d 397 (8th Cir.1983), aff'd, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), where "volunteers" who had worked were found to have been employees for purposes of minimum wage. The court allowed deduction for those reasonable costs deemed part of their wages even though the defendant, of course, had unsuccessfully argued the plaintiffs had not been employees.

Plaintiffs further maintain that defendants provided the benefits not as wages but because the Contract required them to do so and because it was defendants' policy to provide them to all homeless persons and, thus, as plaintiffs would have received these benefits even if they had not been in the PTE program, they should not be seen as part of wages now. This contention is similarly misplaced. The issue is not what these plaintiffs would have received as unemployed homeless persons, but what they would have received as employees. The fact is that they would not have received the same benefits if they had been treated as and properly paid as employees. Nor is the issue what defendants thought the status of plaintiffs was then. It is undisputed that defendants at the time did not consider the benefits they provided to be compensation for plaintiffs' work. The question is how to deal with the situation in retrospect, and it is not as difficult an issue as the parties make it out to be. Defendants had staff members doing the same work as plaintiffs who did receive minimum wage and did not receive the same free benefits that plaintiffs and other homeless persons did. However defendants may have thought of plaintiffs at the time, the court has found that they were in fact employees just as the staff members were. If plaintiffs' contentions were accepted, they would be placed in a position better than that of employees; they would be paid as employees but receive all the entitlements of the non-working homeless persons that employees did not receive.

Plaintiffs' additional paralogistic arguments are rejected for the same reasons. Thus, that defendants did not maintain records showing deductions from wages on a workweek basis, as required under 29 C.F.R. § 516.27(b) for employers who provide benefits as wages, does not mandate denial of deductions now. Of course defendants did not keep such records, as they did not view plaintiffs in the status of employees until Judge Sotomayor held them to have been so. Moreover, plaintiffs offer no authority that the failure to have kept records by itself mandates denial of deductions. Plaintiffs rely on Donovan v. New Floridian Hotel, Inc., 676 F.2d 468 (11th Cir.1982), where the court rejected the defendants' effort to deduct the cost of meals and lodging when the defendants had not kept the records required by the regulations. However, the court in that case did not rest its decision on the absence of the required records, but rather on the fact that the defendants had not put forward evidence that supported their claims as to the costs to them of the room and board. The matter is one of sufficient evidence:

... the district judge, who was charged with making credibility choices, held that defendants had failed to establish the reasonable cost by "credible evidence." The district court was entitled to discount [the] unsubstantiated estimate of cost on credibility grounds.

676 F.2d at 475. Indeed, it is in the nature of cases like this one that the FLSA record-keeping requirements will never be met. Thus, in Donovan v. Tony and Susan Alamo Foundation, where it was determined that people who lived at the Foundation and worked for it were to have been treated as employees and should have been paid accordingly, the court allowed deductions for board, lodging and other benefits based on estimates of cost despite the Foundation's failure to have maintained the required records:

Obviously, the books were not maintained with a view toward "segregating the cost" of benefits provided the associates. There is a sufficient basis, however, for drawing reasonable inferences as to the actual costs.

567 F.Supp. at 563.

Similarly, plaintiffs' assertion that benefits cannot be deducted because plaintiffs were not given notice and because their acceptance was not voluntary and uncoerced is rejected. Such purported requirements serve no purpose and make no sense where the employment relationship is not found until after the fact.² Finally, plaintiffs' contention that defendants may not deduct for benefits provided during non-compensable time is also rejected. Notwithstanding Brock v. Tony and Susan Alamo Foundation, 842 F.2d 1018, 1020 (8th Cir.1988), cert. denied, 505 U.S. 1204, 112 S.Ct. 2992, 120 L.Ed.2d 869 (1992), by plaintiffs' proposition an employee would have to be working a 24-hour day before an employer could include, for example, lodging as part of the wage. Cf. Soler v. G. & U., Inc., 833 F.2d 1104, 1110-11 (2d Cir.1987); Martinez v. Deaf Smith...