Heuberger v. Smith

Decision Date07 September 2017
Docket NumberCase No. 3:16-CV-386-JD-JEM
PartiesJASON HEUBERGER, individually, and on behalf of others similarly situated, Plaintiff, v. HARRY L. SMITH d/b/a/ "MY-TRE GLAMMA MANAGEMENT," DESTINY MGT, INC., and DIAMOND PROPOERTIES MGMT, INC., Defendants.
CourtU.S. District Court — Northern District of Indiana

JASON HEUBERGER, individually,
and on behalf of others similarly situated, Plaintiff,
v.
HARRY L. SMITH d/b/a/ "MY-TRE GLAMMA MANAGEMENT," DESTINY MGT, INC.,
and DIAMOND PROPOERTIES MGMT, INC., Defendants.

Case No. 3:16-CV-386-JD-JEM

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA SOUTH BEND DIVISION

September 7, 2017


MEMORANDUM OPINION AND ORDER

This is an action brought under the Fair Labor Standards Act (the "FLSA"), 29 U.S.C. § 201 et seq., and the Indiana Minimum Wage Law (the "IMWL"), Ind. Code § 22-2-2-1 et seq., by Plaintiff Jason Heuberger ("Plaintiff") against his employer, Mr. Harry Smith d/b/a My-Tre Glamma Management ("Glamma"), and two other companies, Destiny MGT, Inc. ("Destiny") and Diamond Properties MGMT, Inc. ("Diamond"). [DE 1] Mr. Smith is the president of both Destiny and Diamond. [DE 24-1 ¶ 8] Between them, Defendants own and operate a total of nineteen McDonald's restaurants in Indiana. [DE 18-3]

Plaintiff alleges that Defendants violated the FLSA (Count I) and the IMWL (Count II) by failing to pay him and similarly situated employees for their attendance at and participation in a mandatory orientation session. [DE 1 ¶¶ 1, 15, 31-50] Plaintiff further alleges that Defendants violated the FLSA (Count III) and the IMWL (Count IV) by deducting a "crew uniform clothing fee" of $2.00 from his and similarly situated employees' paychecks, which reduced the employees' wages to below the minimum wage level. [DE 1 ¶¶ 2, 21, 23, 51-73]

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Pending before the Court are two motions, filed only two days apart from one another: Defendants' Partial Motion to Dismiss Plaintiff's Complaint (the "MTD") [DE 15]; and Plaintiff's Motion for Conditional Collective Action Certification Pursuant to 29 U.S.C. § 216(b) (the "§ 216(b) Motion"). [DE 18] Specifically, Defendants move to dismiss Counts II, III, and IV of Plaintiff's complaint pursuant to Fed. R. Civ. P. Rule 12(b)(6). [DE 15] Destiny and Diamond further move to dismiss the complaint in its entirety as it relates to them, pursuant to Fed. R. Civ. P. Rule 12(b)(1) for lack of standing. At the same time, Plaintiff requests that this Court certify subclasses of employees who participated in the alleged unpaid mandatory orientation, and whose wages were reduced by the crew uniform deductions.

At the outset, Plaintiff admits that his state law claims under Counts II and IV are moot. [DE 25 at 1 n. 1] Therefore, the Court will dismiss those claims with prejudice and confine its analysis below to the remaining issues.1

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FACTUAL BACKGROUND

Defendants Glamma, Destiny, and Diamond, own and operate a total of nineteen McDonald's franchise restaurants in Indiana. [DE 1 ¶ 1; DE 18-3; DE 24-1] Mr. Harry Smith owns and operates ten of these restaurants under the business name "My-Tre Glamma Management." [DE 24-1 ¶ 3] Six of Glamma's restaurants are located in Elkhart, Indiana, while the remaining four are located in Middlebury, Goshen, and Wakarusa, Indiana. Id. Mr. Smith is also the president of both Destiny and Diamond. Id. ¶ 8. Destiny owns and operates one of the remaining nine restaurants, and Diamond owns and operates the other eight. [DE 18-3; DE 24-1 ¶¶ 6-7] None of the restaurants owned and operated by either Destiny or Diamond are located in Elkhart. Id. Plaintiff alleges that Defendants, together, form a "single employer" or "single integrated enterprise" and that they are "joint employers" because they jointly operate this chain of restaurants, and maintain interrelated operations, centralized control of labor, common management, common ownership, and common financial control. [DE 1 ¶ 11]

In or about February 2016, Plaintiff was hired to work at one of these McDonald's restaurants, located at 130 N. Main Street, Elkhart, Indiana. [DE 1 ¶ 12; DE 24-1 ¶ 2] This restaurant is owned and operated by Glamma. [DE 18-3] Around the time of his hire, Plaintiff was required to participate in an unpaid orientation session at one of the six Glamma-owned McDonald's restaurants in Elkhart.2 [DE 18-1 ¶ 4; DE 24-1, Exh. A] Plaintiff alleges that Defendants required their other hourly-paid employees to undergo this same unpaid orientation as a condition of employment. [DE 1 ¶ 14] Plaintiff's orientation generally consisted of filling out paperwork and going over his employer's policies. [DE 18-1 ¶ 6] At all times relevant,

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Plaintiff alleges that Defendants paid him and other employees the exact federal minimum wage of $7.25 per hour. [DE 1 ¶ 19]

On or about May 1, 2016, the manager of the 130 N. Main Street restaurant, Amy Powers [DE 18-3], gave Plaintiff and other employees a memorandum, which stated that starting that same day, a $2.00 crew uniform clothing fee would be deducted from every paycheck. [DE 1 ¶ 20; DE 18-1 ¶ 8, Exh. B] That memorandum was entitled, "MY-TRE GLAMMA MANAGEMENT UNIFORM CONTRACT." [DE 1 ¶ 20; DE 18-1, Exh. B] Plaintiff claims that, because he is paid at precisely the federal minimum wage, these deductions have caused his net wages to fall below the minimum wage. [DE 1 ¶ 21; DE 18-1 ¶ 9] Plaintiff further alleges that "[a]ll of Defendants' other hourly-paid minimum wage employees had similar experiences to those of Plaintiff" because "[t]hey are subject to the same 'crew uniform clothing fee.'" [DE 1 ¶ 23] Plaintiff's own paychecks, however, indicate that no such deductions were ever taken from his wages. [DE 16-1; DE 24-1, Exh. E]

Plaintiff brings this case as an "opt-in" collective action, and makes the following collective allegations regarding himself and all of Defendants' other hourly-paid employees: they have worked as hourly-paid employees for Defendants; they have been required to undergo two hours of mandatory "orientation" training for Defendants as a condition of their employment; they have not been paid for that orientation; they are and/or were paid the minimum wage; and they have been subjected to the same "crew uniform clothing fee," which decreases their net pay below minimum wage. [DE 1 ¶¶ 28, 30]

It is against the backdrop of these facts that the Court conducts its analysis.

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DISCUSSION

I. Plaintiff's § 216(b) Motion

Plaintiff is essentially asking the Court to certify two subclasses of employees who worked at Defendants' restaurants. The first subclass relates to Plaintiff's allegations that Defendants failed to pay new employees for attending the mandatory orientation session (the "orientation subclass"). For these claims, Plaintiff proposes that "all current and former hourly-paid workers who worked at Defendants' McDonald's restaurants within the prior three years" be certified together. [DE 18 at 1] Second, with regard to his claims that Defendants paid their employees less than the minimum wage by deducting wages as part of a crew uniform fee, Plaintiff requests certification of "all current and former hourly-paid workers who worked at Defendants' McDonald's restaurants for the exact ... minimum wage rate ... at any time since May 1, 2016" (the "uniform deduction subclass"). Id.

a. Collective Actions and the FLSA

The FLSA requires employers to pay wages of at least $7.25 per hour to each of their employees. 29 U.S.C. § 206(a)(1)(C). Under 29 U.S.C. § 216(b), an employee may bring an action to recover unpaid minimum wages on "behalf of himself . . . and other employees similarly situated." 29 U.S.C. § 216(b). This is known as a "collective action." Harkins v. Riverboat Services, Inc., 385 F.3d 1099, 1101 (7th Cir. 2004). However, no current or former aggrieved employee may be a party plaintiff to a collective action "unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." 29 U.S.C. § 216(b).

Collective actions brought under the FLSA are fundamentally different than class actions under Fed. R. Civ. P. Rule 23. See Biddings v. Lake County, No. 2:09-cv-38, 2009 WL 2175584,

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at *2 (N.D. Ind. July 15, 2009). Plaintiffs in a collective action must "opt-in" to the action to be bound by a judgment while plaintiffs in a Rule 23 class action must "opt-out." See id. (citing King v. Gen. Elec. Co., 960 F.2d 617, 621 (7th Cir. 1992); Woods v. New York Life Ins. Co., 686 F.2d 578, 580 (7th Cir. 1982)). Because of the "opt-in" requirement, a representative plaintiff in a collective action must be able to inform other individuals who may have similar claims that they may join his lawsuit. See Biddings, 2009 WL 2175584, at *2 (citing Austin v. CUNA Mut. Ins. Soc'y, 232 F.R.D. 601, 605 (W.D. Wis. 2006)).

Section 216(b) does not explicitly provide for court-ordered notice. 29 U.S.C. § 216(b). However, in appropriate cases, district courts have the discretion to implement § 216(b) by facilitating notice to potential plaintiffs. Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165, 169-70, 110 S. Ct. 482, 107 L. Ed. 2d 480 (1989). In fact, "trial court involvement in the notice process is inevitable in cases with numerous plaintiffs where written consent is required by statute, [and therefore] it lies within the discretion of the court to begin its involvement early, at the point of the initial notice, rather than at some later time." Id. at 171. Such court-authorized notice serves the broad, remedial purpose of the FLSA and is in line with the court's interest in managing its docket, so long as the court takes care to avoid the appearance of judicial endorsement of the merits of the action. Id. at 172-74.

Not only is the FLSA without instructions as to when courts should exercise their discretion and authorize notice to potential plaintiffs, it also does not define the term "similarly situated." Biddings, 2009 WL 2175584, at *2. "In this circuit, district courts generally follow a two-step inquiry when certifying collective actions. In the first step, the Court must determine whether to conditionally certify an action as a collective action." Williams v. Angie's List, Inc., No. 1:16-cv-878, 2017 WL 1546319, at *2 (S.D. Ind....

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