Schwind v. Ew & Associates, Inc., 03 CIV. 9904(WCC).

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtWilliam C. Conner
Citation357 F.Supp.2d 691
PartiesJohn SCHWIND, Plaintiff, v. EW & ASSOCIATES, INC. and Elaine Wirth, Defendants.
Docket NumberNo. 03 CIV. 9904(WCC).,03 CIV. 9904(WCC).
Decision Date18 February 2005

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357 F.Supp.2d 691
John SCHWIND, Plaintiff,
EW & ASSOCIATES, INC. and Elaine Wirth, Defendants.
No. 03 CIV. 9904(WCC).
United States District Court, S.D. New York.
February 18, 2005.

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Dan Getman, Esq., New Palz, NY (Dan Getman, Esq., Of Counsel), for Plaintiff.

The Law Offices of N. Edward N. Hernandez, Esq. (Vincent C. Ansaldi, Esq., Of Counsel), Astoria, NY, for Defendants.


WILLIAM C. CONNER, Senior District Judge.

Plaintiff John Schwind brings the instant action against defendants EW & Associates, Inc. ("EWA") and Elaine Wirth (collectively, the "defendants"), pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., New York State Labor Law, New York common law, the Employee Retirement Income Security Act ("ERISA") and the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Plaintiff alleges that during the course of his employment, as an independent contractor from April 1998 through January 1, 2001 and June 2002 through October 2002, and as an employee from January 1, 2001 through June 24, 2002, he was improperly denied overtime pay pursuant to 29 U.S.C. § 213 and New York State Labor Law Articles 6 and 19 and its implementing regulations 12 N.Y.C.R.R. § 142.2 et seq. Plaintiff also alleges a common law claim for breach of contract and an ERISA-COBRA claim for EWA's alleged failure to provide notice of plaintiff's right to receive a continuation of his employee health plan pursuant to 29 U.S.C. § 1166(a)(4). In the present motion, defendants move for summary judgment pursuant to FED. R. CIV. P. 56 on the basis that plaintiff's overtime is exempt under several statutory provisions and, with respect to the ERISA-COBRA claims, defendants contend that EWA was exempt from the duty to provide notice of continued health insurance coverage. For the reasons stated hereinafter, defendants' motion is granted in part and denied in part.


The following facts are undisputed unless otherwise indicated. Defendants operate a software training, computer consulting

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and employee placement business. (Complt.¶ 11.) EWA was originally formed in 1992 as a sole proprietorship under the name E & W Limited by defendant Elaine Wirth. (Defs. Rule 56.1 Stmt. ¶ 4.) It is uncontested that plaintiff initially worked as an independent contractor for E & W Limited in or about April 1998; however, plaintiff contends that even though he was treated as an independent contractor, working on a commission basis during this time, he was an employee within the meaning of the FLSA and relevant state law. (Pl. Rule 56.1 Stmt., Defs. Stmts. Denied ¶ 5.)

E & W Limited was incorporated to form EWA in 1998 because plaintiff was able to acquire IBM as an account for defendants, and IBM would agree to work only with a corporation. (Defs. Rule 56.1 Stmt. ¶ 6.) EWA and plaintiff agreed to split the profits from the IBM account 50/50 after deducting administrative costs. (Id. ¶ 7.) Plaintiff's duties with respect to the IBM account were to manage the account and interview and hire trainers to provide consulting services to IBM. (Id. ¶ 8.) The IBM account lasted from March 1998 until April 1999. (Id. ¶ 10.) At the time plaintiff was initially hired, EWA was a small company with approximately one part-time worker and one or two other employees. (Id. ¶ 19.)

Beginning on or about January 1, 2001, plaintiff became an "official employee" of EWA as the Vice President of Sales and was paid a base salary of $70,000, plus, in 2001, $70,000 of additional compensation for total compensation of $140,000 in that year. (Id. ¶¶ 13, 16-17; Pl. Rule 56.1 Stmt. ¶ 6.) EWA never docked plaintiff's pay. (Id. ¶ 18.) Plaintiff continued in this position under these terms until June 24, 2002 at which time he again began to be treated as an independent contractor until about October 2002. (Pl. Rule 56.1 Stmt. ¶¶ 6-7.) Furthermore, according to defendants, when plaintiff became an EWA employee on January 1, 2001, plaintiff elected not to join the EWA health plan, but rather chose to remain enrolled with his own insurance company. (Defs. Rule 56.1 Stmt. ¶ 14.) Plaintiff denies this allegation, asserting that his health insurance premiums were paid by EWA. (Pl. Rule 56.1 Stmt., Defs. Stmt. Denied ¶ 14.)

In addition, defendants maintain that plaintiff purchased 48 shares of EWA stock by way of a promissory note held in collateral from the end of December 2001 until his last day of employment with EWA; however, plaintiff alleges that Wirth agreed to sell plaintiff 48% of the stock of EWA, but the sale was never completed and no stock was ever transferred to plaintiff. (Defs. Rule 56.1 Stmt. ¶ 15; Pl. Rule 56.1 Stmt., Defs. Stmt. Denied ¶ 15.)

Plaintiff and defendants agree that as an independent contractor plaintiff performed the same duties that he performed as Vice President of Sales. (Pl. Rule 56.1 Stmt. ¶ 8; Defs. Rule 56.1 Stmt. ¶ 11.) However, the parties largely dispute the extent of plaintiff's responsibilities while employed by defendants. According to plaintiff, while he was treated as an independent contractor, he worked as a salesman "for EWA and only EWA." (Pl. Rule 56.1 Stmt. ¶ 9.) Plaintiff contends that his pay was "determined solely through EWA's efforts at selling and delivering its services" and that "[o]nce EWA was paid by the customer, only then did plaintiff receive any pay for his work." (Id.) In addition, plaintiff alleges that defendant Wirth was involved in all aspects of plaintiff's job. For instance, Wirth "oversaw plaintiff's work by directing which customers, prospects and potential trainers should be contacted ... directed which proposals should be generated and what the [sic] terms should be included in sales proposals and contracts ... had final decision-making authority

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over proposals, hiring, engagement of contractors ... [and] signed all contracts." (Id.) Further, plaintiff was not permitted to "subcontract the work he did to anyone else... [and] was required to devote full-time efforts to performing the contractor work. Plaintiff's work was exclusive to EWA." (Id.) When plaintiff became a salaried employee and received the title of Vice President of Sales, his duties did not change. Plaintiff alleges that defendants failed to keep records of the specific hours of work or the duties performed, but contends that his duties consisted primarily of sales in that he "spent 2/3 of his time engaged in sales or activities incidental to sales, such as preparing contracts and proposals." (Id. ¶¶ 10-14.)

Defendants, on the other hand, contend that plaintiff "sold training projects and provided the trainers to the customer to do the training" and in order to do so, plaintiff "chose potential trainers who would be sent to fulfill the services sold ... [and] conducted and participated in interviews of potential trainers." (Defs. Rule 56.1 Stmt. ¶¶ 22, 27-28.) According to defendants, plaintiff was "in charge of directing the trainers and EW & Associates employees where to go and what to do in order to complete the client's training... [and] his duties also included meeting and communicating with the client to help schedule trainers." (Id. ¶¶ 29, 33.) In addition, defendants allege that plaintiff had "input on the hiring of prospective ... employees... [and] had the authority to propose business deals to clients... [and] to lower a price offered for supplying training consultants based on his own judgment and without input from Elaine Wirth." (Id. ¶¶ 31-32, 37.) Additionally, defendants allege that Wirth was never given a detailed description of how plaintiff accomplished his work and that plaintiff made his own hours and calls, without conferring with Wirth about his schedule. (Id. ¶ 34.) Plaintiff was not required to keep time sheets. (Id. ¶ 41.) Defendants further contend that plaintiff supervised numerous EWA employees and part-time workers.1 (Defs. Rule 56.1 Stmt. ¶ 43.) Lastly, defendants maintain that EWA never had twenty or more employees during any time period relevant to this action. (Id. ¶ 47.)

Plaintiff filed the present action under the FLSA based on defendants' alleged failure to pay overtime wages in violation of the FLSA and its implementing regulations and alleges that as a result of defendants' failure to comply with the FLSA overtime provisions, plaintiff suffered "loss of wages and interest thereon." (Complt. ¶¶ 34-36.) Plaintiff further asserts that defendants' failure to pay proper overtime wages for each hour worked over forty per week was willful within the meaning of the FLSA. (Id.) Additionally, plaintiff contends that defendants' failure to pay overtime wages was also in violation of New York Labor Law Articles 6 and 19 and its implementing regulations, that such failure to pay overtime wages for each hour worked over forty per week was willful within the meaning of N.Y. LABOR LAW § 663, and that defendants' failure to comply with the New York Labor Law overtime provisions, caused plaintiff to "suffer loss of wages and interest thereon." (Id. ¶¶ 37-39.) Plaintiff also alleges that defendants failure to pay plaintiff all pay and commission due constitutes a breach of his employment contract under New York common law and that such breach caused plaintiff "loss of income, employment and damages." (Id. ¶¶ 40-41.) Lastly, plaintiff alleges

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that defendants' failure "to provide notification of the plaintiff's right to continuation coverage under his employee health plan in violation of 29 U.S.C. § 1166(a)(4)" caused plaintiff "to suffer additional expenses associated with obtaining insurance" and defendants are liable under 29 U.S.C. § 1132(c)(1). (Id. ¶¶ 42-43.)

Consequently, following completion of discovery limited to the issue of defendants' liability under the FLSA, defendants moved for summary judgment dismissing the FLSA and state law claims on the ground that plaintiff...

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