Clancy v. The Salvation Army
| Decision Date | 31 January 2023 |
| Docket Number | 22 CV 1250 |
| Parties | Michael Clancy, et al., Plaintiffs, v. The Salvation Army, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Plaintiffs Michael Clancy, Stuart Love, and Merrick Mann worked at rehabilitation centers run by defendant The Salvation Army. Alleging that they were employed by defendant, plaintiffs bring claims for violations of the Fair Labor Standards Act Illinois Minimum Wage Law, and Michigan Workforce Opportunity Wage Act. Under Rule 12(b)(6), defendant moves to dismiss the amended complaint. For the reasons that follow, the motion is denied.
To survive a motion to dismiss under Rule 12(b)(6), a complaint must state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). The complaint must include “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In reviewing a motion to dismiss, a court must construe all factual allegations as true and draw all reasonable inferences in the plaintiffs' favor. Sloan v. Am. Brain Tumor Ass'n, 901 F.3d 891, 893 (7th Cir. 2018) (citing Deppe v. NCAA, 893 F.3d 498, 499 (7th Cir. 2018)). A court may take judicial notice of actions or filings made in other courts, but can take notice of findings of fact only if the facts are not subject to reasonable dispute. Daniel v. Cook Cnty., 833 F.3d 728, 742 (7th Cir. 2016) ).
The Salvation Army ran residential adult rehabilitation programs across the country. [39] ¶ 1.[1]Each year, thousands of vulnerable people-the poor, those suffering from addiction or mental illness, and people with criminal backgrounds- enrolled in defendant's programs. Id. ¶¶ 1, 26.
Rehabilitation program participants were required to work, largely in support of the Salvation Army's thrift stores. [39] ¶¶ 2, 27. Under the direction and control of defendant, workers handled inventory, cleaned, loaded and unloaded trucks, operated heavy machinery, and drove or traveled on trucks. Id. ¶¶ 2, 29, 33, 35. The Salvation Army required participants to work at least forty hours per week in exchange for room, board, clothing, rehabilitative services, and nominal wages. Id. ¶¶ 27, 38, 42.[2]Workers understood and expected that, in exchange for their labor, the Salvation Army would provide them with these benefits and compensation. Id. ¶¶ 27, 40.
Participants who refused or were unable to work could be expelled from the program, and did not receive the promised benefits. Id. ¶¶ 36-38.
Plaintiffs' work for the Salvation Army didn't serve any educational program, and largely did not promote their rehabilitation. [39] ¶ 30. The Salvation Army's requirement that participants work at least forty hours per week left little time to focus on rehabilitation, and defendant didn't provide workers with training that would promote their future employment. Id. Program participants were required to live at the rehabilitation centers, and were reliant on the Salvation Army for food and shelter. Id. ¶ 42. Participants weren't typically charged a fee to participate, but had to give the Salvation Army their Supplemental Nutrition Assistance Program benefits. Id. ¶ 43. Workers generally left the program within 180 days. Id. ¶ 44.
There's an allegation that the labor performed by plaintiffs and other workers primarily benefitted the Salvation Army, which through its thrift stores competed with businesses that paid employees minimum wage or more. [39] ¶ 31. Defendant generated more that $598 million from its stores in 2019, and could not have competed in the thrift store market without the work of rehabilitation program participants. Id. ¶¶ 31-32. Without rehabilitation workers, the Salvation Army would have needed to hire workers and pay them in accordance with applicable wage laws. Id. ¶ 34.[3] Clancy, Love, and Mann participated in Salvation Army rehabilitation programs in Illinois, Missouri, and Michigan. [39] ¶¶ 18-20. While in the programs, plaintiffs worked at least eight hours per day, five days per week. Id. ¶¶ 18-20, 39. The Salvation Army paid plaintiffs a small amount of cash (from as low as $1 a week up to $21 per week). Id. ¶¶ 18-20. Plaintiffs allege that the Salvation Army willfully violated the FLSA (and Illinois and Michigan law) by failing to pay them minimum or overtime wages. Id. ¶¶ 46, 73-74, 107.
To state a claim for violations of the FLSA's minimum and overtime wage provisions, plaintiffs must allege that they were employees of and performed work for the Salvation Army. See Berger v. Nat'l Collegiate Athletic Ass'n, 843 F.3d 285, 290 (7th Cir. 2016) (citing Melton v. Tippecanoe Cnty., 838 F.3d 814, 818 (7th Cir. 2016)). An allegation of an employment relationship is also a requirement for plaintiffs' statelaw claims, and the parties agree that the analyses under Illinois and Michigan law are the same as under the FLSA. See [61-1] at 20-21; [70] at 13 n.7; Callahan v. City of Chicago, 78 F.Supp.3d 791, 821 (N.D. Ill. 2015), aff'd, 813 F.3d 658 (7th Cir. 2016); Deschepper v. Midwest Wine and Spirits, Inc., 84 F.Supp.3d 767, 778 (N.D. Ill. 2015); Allen v. Lincare Inc., CASE NO. 16-CV-11996, 2018 WL 352362, at *8 n.2 (E.D. Mich. Jan. 10, 2018) (citing Dikker v. 5-Star Team Leasing, 243 F.Supp.3d 844, 854 n.3 (W.D. Mich. 2017)); Osterman v. Gen. R.V. Center, Inc., Case No. 19-10698, 2020 WL 6708873, at *2 (E.D. Mich. Nov. 16, 2020) (citations omitted).
The FLSA's relevant definitions are broad, circular, and not particularly helpful in identifying the limits of covered employment relationships. See 29 U.S.C. § 203; Brant v. Schneider Nat'l, Inc., 43 F.4th 656, 664 (7th Cir. 2022). To decide whether a worker was an employee covered under the FLSA, courts look at the totality of the circumstances and assess the economic reality of the working relationship at issue. Berger, 843 F.3d at 290 (quoting Vanskike v. Peters, 974 F.2d 806, 808 (7th Cir. 1992)).
To understand the economic reality of various relationships, the Department of Labor and courts have developed multifactor tests. These include the Department's rule for deciding between an unpaid trainee and an employee, see U.S. Dep't of Labor, Wage & Hour Div., Fact Sheet #71, Internship Programs Under The Fair Labor Standards Act (Updated January 2018), https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships, the Seventh Circuit's test to decide whether migrant workers were employees or independent contractors, see Sec'y of Labor v. Lauritzen, 835 F.2d 1529, 1534-38 (7th Cir. 1987), and the Second Circuit's standard for deciding whether interns were employees. See Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 536-38 (2d Cir. 2016). None of these (or other) tests are exclusive or necessarily applicable to every case. Instead, the Seventh Circuit's approach is flexible, and courts should choose the most helpful guides to understanding the economic reality presented by a given case. See Berger, 843 F.3d at 291; Hollins v. Regency Corp., 867 F.3d 830, 835 (7th Cir. 2017).[4]
As the parties acknowledge, the Seventh Circuit has not decided how to analyze a relationship like the one in this case, when participants in a rehabilitation program performed work. But two Supreme Court cases offer a starting point.
In Walling, the Court found that trainees who received a few days of instruction at a railroad were not employees under the FLSA. Walling v. Portland Terminal Co., 330 U.S. 148, 149, 153 (1947). The Court reasoned that the Act wasn't “intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the premises of another.” Id. at 152. Similarly, the Court noted that the Act's broad definitions of employ and employee could not stretch to include “a person whose work serves only his own interest.” Id. The court concluded that the trainees had provided no “immediate advantage” to the railroads, and were not employees. Id. at 153.
In Alamo Foundation, the Court reached the opposite conclusion about associates of a religious foundation who thought of themselves as volunteers and didn't believe they were owed a minimum wage. Tony and Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 300-01 (1985). The Court found that the associates were entirely dependent on the foundation for long periods of time (years, in some cases), and must have expected to receive in-kind benefits in exchange for their labor. Id. at 301. The associates were employees covered by the Act. Id. at 306.
Walling Alamo Foundation, and other cases that address the limits of the FLSA's coverage agree that one important consideration is whether the worker/employee had any expectation of compensation. See Walling, 330 U.S. at 152; Alamo Found., 471 U.S. at 301; Berger v. Nat'l Collegiate Athletic Ass'n, 843 F.3d 285, 293 (7th Cir. 2016); Fochtman v. Hendren Plastics, Inc., 47 F.4th 638, 646 (8th Cir. 2022). A second inquiry relevant here is whether plaintiffs or the Salvation Army were the primary beneficiary of the relationship. See Walling, 330 U.S. at 152 (); Vaughn v. Phoenix House New York Inc., 957 F.3d 141, 145-46 (2d Cir. 2020) (); Fochtman, 47 F.4th at 645 (gathering cases).[5]A third question that may shed light on whether plaintiffs were employed by the Salvation Army is how dependent the relationship was. See ...
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