Kroeck v. UKG, Inc.
| Decision Date | 21 September 2022 |
| Docket Number | 2:22-CV-00066-CCW |
| Parties | LARRY KROECK, Plaintiff, v. UKG, INC, KRONOS INCORPORATED, Defendants. |
| Court | U.S. District Court — Western District of Pennsylvania |
OPINION GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S COMPLAINT
Before the Court is UKG, Inc. and Kronos, Inc.'s Motion to Dismiss the Complaint.[1] ECF No. 22. After reviewing the Complaint ECF No. 1, and the parties' briefing on the Motion to Dismiss, ECF Nos. 22-23, 28-29, 32, the Court will grant in part and deny in part the Motion to Dismiss. For the reasons set forth below, the Court will dismiss the Pennsylvania Minimum Wage Act (“PMWA”) claim, the Fair Labor Standards Act (“FLSA”) claim, and the negligence claim. The court will not dismiss the breach of contract claim.[2]
Larry Kroeck is a Pennsylvania resident, who is employed by West Penn Allegheny Health System, Inc. and Allegheny Health Network, Inc. (collectively, “the hospital”). ECF No. 1 ¶¶ 1, 12. He has an oral employment contract with the hospital to provide meals to inpatients and outpatients in the hospital cafeteria. Id. ¶ 12. If hospital staff worked beyond 40 hours, then the additional time would be compensable at an overtime premium rate. Id. ¶ 13. This overtime premium rate is calculated as “time and one-half” above the standard rate. Id. Work performed during the holidays is also compensable at a higher premium rate. Id.
The hospital outsources its payroll system to third-party providers, Defendants UKG, Inc. and Kronos, Inc. Id. ¶ 11. Defendants provide software to assist with timekeeping and other workforce management operations. ECF No. 23 at 1. UKG, Inc. is a business incorporated in Delaware, and Kronos, Inc. is a business incorporated in Massachusetts. ECF No. 1 ¶¶ 4-5.
From December 19, 2021, to January 2, 2022, Mr. Kroeck and other staff worked for some amount of time that included both overtime and holiday pay. Id. ¶¶ 15, 16. During this period, Defendants experienced a ransomware cyberattack. Id. ¶ 14; ECF No. 23, at 1. The ransomware rendered Defendants' payroll software completely inaccessible for their customers. ECF No. 1 ¶ 14 n.3. As a result of the cyberattack, the hospital could not accurately calculate the hours of Mr. Kroeck and other staff. Id. ¶ 19. According to Mr. Kroeck, he worked a total of 134 hours but was only compensated for 80 hours of work. Id. ¶ 20. Mr. Kroeck and other staff were required to record their hours manually along with adding their hours into Defendants' software. Id. ¶ 24.
Mr. Kroeck's Complaint includes four claims against Defendants. In Counts I and II, he alleges that Defendants violated the PMWA and the FLSA by failing to pay him and other staff for all hours worked. In Count IV, he asserts that Defendants breached their contract with the hospital, which harmed him and other staff as third-party beneficiaries of the contract. And in Count VI, he contends that Defendants negligently breached their duty to exercise reasonable care to protect the personal and financial information of Mr. Kroeck and other staff, which caused wages to go unpaid and put them at an increased risk of becoming victims of identity theft crimes. See generally ECF No. 1.[3]
Defendants seek to dismiss the Complaint on multiple grounds: (1) Mr. Kroeck fails to establish an employer relationship that could support the PMWA and FLSA claims; (2) Mr. Kroeck cannot establish himself as a third-party beneficiary between the hospital and Defendants to support the breach of contract claim; and (3) Mr. Kroeck fails to plausibly allege a negligence claim, specifically that Defendants owed a duty, which resulted in concrete and compensable harm. See generally ECF No. 23.
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a claim. In reviewing a motion to dismiss, the court accepts as true a complaint's factual allegations and views them in the light most favorable to the plaintiff. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d. Cir. 2008); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Although a complaint need not contain detailed factual allegations to survive a motion to dismiss, it cannot rest on mere labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, “a formulaic recitation of the elements of a cause of action will not do.” Id. Accordingly, “[f]actual allegations must be enough to raise a right to relief above the speculative level,” id., and be “sufficient to state a claim for relief that is plausible on its face,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than the sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).
The United States Court of Appeals for the Third Circuit has established a three-step process for district courts to follow in analyzing a Rule 12(b)(6) motion:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Finally, “where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”
Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011) (quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010)).
That said, under Rule 8's notice pleading standard, even after the Supreme Court's decisions in Twombly and Iqbal, a plaintiff need only “allege sufficient facts to raise a reasonable expectation that discovery will uncover proof of her claims.” Connolly v. Lane Constr. Corp., 809 F.3d 780, 788-89 (3d Cir. 2016) (). On the other hand, “[t]o prevail on a Rule 12(b)(6) motion to dismiss based on an affirmative defense . . . a defendant must show that ‘the defense is “apparent on the face of the complaint” and documents relied on in the complaint.'” Lupian v. Joseph Cory Holdings LLC, 905 F.3d 127, 130 (3d Cir. 2018) (quoting Bohus v. Restaurant.com, Inc., 784 F.3d 918, 923 n.2 (3d Cir. 2015)).
Finally, when deciding a Rule 12(b)(6) motion and as noted above, the Court “must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010). Thus, for the purpose of deciding the present Motion, the Court accepts as true the facts alleged in the Complaint and views those facts in the light most favorable to the plaintiff. See Burtch, 662 F.3d, at 220.
Mr. Kroeck alleges that Defendants violated the FLSA and PMWA by failing to pay overtime wages. The FLSA requires employers to pay its employees an overtime premium rate of “one and one-half times the regular rate at which [the employee] is employed.” 29 U.S.C. § 207. Similarly, the PMWA requires employers to pay an overtime premium rate that is “not less than one and one-half times the employe's regular rate.” 43 P.S. § 333.104(c). Given the similarities between the statutes, courts have analyzed FLSA and PMWA claims under the same framework. Bansept v. G & M Auto., 434 F.Supp.3d 253, 258 (E.D. Pa. 2020); see also Espinoza v. Atlas R.R. Constr., LLC, 657 Fed.Appx. 101, 105 (3d Cir. 2016) ().
The threshold question is whether Defendants can be considered to be an employer of Mr. Kroeck for purposes of the FLSA. There is no dispute that the hospital acted as an employer for Mr. Kroeck. ECF No. 1 at ¶ 12; ECF No. 23 at 2 (citing ECF No. 1 ¶14 n.3). Therefore, Mr. Kroeck must establish that Defendants, as the third-party payroll software providers for the hospital, acted as “joint employers” with the hospital for the purposes of supporting the FLSA and PMWA claims. In re Enter. Rent-A-Car Wage & Hour Emp. Pracs. Litig., 683 F.3d 462, 468 (3d Cir. 2012); N.L.R.B. v. Browning-Ferris Indus. of Pa., 691 F.2d 1117, 1123 (3d Cir. 1982); Talarico v. Pub. P'ships, LLC, 837 Fed.Appx. 81, 84 (3d Cir. 2020). Courts determine whether an organization is a joint employer by examining whether it exerted “significant control” over the employees. In re Enter., 683 F.3d at 468; N.L.R.B., 691 F.2d at 1123. To evaluate what constitutes “significant control,” the primary test-known as the Enterprise test-weighs the following four factors asking whether the alleged employer has: “(1) authority to hire and fire employees; (2) authority to promulgate work rules and assignments, and set conditions of employment, including compensation, benefits, and hours; (3) day-to-day supervision, including employee discipline; and (4) control of employee records, including payroll, insurance, taxes, and the like.” In re Enter., 683 F.3d at 469; see also Talarico, 837 Fed.Appx. at 84. These factors are non-exhaustive, and courts should ultimately look to the economic realities of the relationship. Goldberg v. Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961); Talarico, 837 Fed.Appx. at 84 (quoting In re. Enter., 683 F.3d at 469).
Under the first Enterprise factor, Mr....
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