Short v. Churchill Benefit Corp.

• Decision Date: 08 April 2016
• Docket Number: 14-CV-4561 (MKB)
• Parties: DANIEL SHORT and JOHN VOLNY, on behalf of themselves and all others similarly situated Plaintiffs, v. CHURCHILL BENEFIT CORPORATION d/b/a YURCOR and FRAMESTORE, INC., Defendants.
• Court: U.S. District Court — Eastern District of New York

DANIEL SHORT and JOHN VOLNY,on behalf of themselves and all others similarly situated Plaintiffs, v. CHURCHILL BENEFIT CORPORATION d/b/a YURCORand FRAMESTORE, INC., Defendants.

14-CV-4561 (MKB)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

April 8, 2016

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

On July 30, 2014, Plaintiffs Daniel Short and John Volny, on behalf of a putative class of similarly situated individuals, filed this action against eleven defendants, including Churchill Benefit Corporation d/b/a "Yurcor" ("Yurcor") and Framestore, Inc. ("Framestore"), asserting claims for (1) unlawful deductions from wages in violation of section 193 of the New York Labor Law ("NYLL"), N.Y. Lab. Law. § 193, (2) failure to provide proper wage notices in violation of section 195(1) of the NYLL, N.Y. Lab. Law. § 195(1), and (3) conversion of wages under New York state common law. (Compl. ¶¶ 44-59, Docket Entry No. 1.) Plaintiffs subsequently filed an Amended Complaint, asserting the same claims against only Framestore and Yurcor.¹ (Am. Compl. ¶¶ 44-59, Docket Entry No. 19.) Having completed the first phase of bifurcated individual and class discovery, Plaintiff Short, now the only remaining Plaintiff, as well as Defendants Yurcor and Framestore each move for summary judgment as to Plaintiff'sindividual claims.² (Pl. Mot. for Summ. J. ("Pl. Mot."), Docket Entry No. 73; Yurcor Mot. for Summ. J. ("Yurcor Mot."), Docket Entry No. 82; Framestore Mot. for Summ. J. ("Framestore Mot."), Docket Entry No. 69.) For the reasons set forth below, the Court denies the parties' motions for summary judgment.³

I. Background

a. The parties

Plaintiff is a graphic artist who worked as a "freelancer" in the New York visual effects ("VFX") industry from 2009 through 2014.⁴ (Pl. 56.1 ¶ 2; Fr. Opp'n 56.1 ¶ 2.) Framestore is an international VFX company with offices in New York, producing VFX for film, television, commercials and feature animations. (Fr. 56.1 ¶¶ 1, 23; POF 56.1 ¶¶ 1, 23.) Yurcor is a Florida-based corporation offering "employer of record" ("EOR") services. (Yur. 56.1 ¶¶ 2, 6; POY 56.1 ¶¶ 2, 6.)

b. Yurcor's work in the VFX industry

In the VFX industry, Yurcor's EOR services revolve around three parties: (1) Yurcor, (2) clients of Yurcor and (3) freelancers. (Pl. 56.1 ¶ 7; Yur. Opp'n 56.1 ¶ 7.) Yurcor's clients include VFX companies like Framestore, and freelancers include graphic artists like Plaintiff. (Pl. 56.1 ¶¶ 8-10; Yur. Opp'n 56.1 ¶¶ 8-10.) In practice, the VFX company engages freelancers to work on a particular VFX project. (Pl. 56.1 ¶¶ 8-10; Yur. Opp'n 56.1 ¶¶ 8-10.) Through Yurcor's services, the VFX company can "convert" a freelancer into a"W-2 employee" of Yurcor, rather than independent contractor of the VFX company. (Pl. 56.1 ¶¶ 12-13; Yur. Opp'n 56.1 ¶¶ 12-13.) As a W-2 employee of Yurcor, a freelancer performs work for the VFX company, and Yurcor bills the VFX company for the time worked. (Pl. 56.1 ¶¶ 19-20; Yur. Opp'n 56.1 ¶¶ 19-20.) In turn, the freelancers receive their payroll checks and employee benefits from Yurcor. (Pl. 56.1 ¶¶ 19-20; Yur. Opp'n 56.1 ¶¶ 19-20.)

c. Relationship between Framestore and Yurcor

In 2009, Framestore began searching for a way to "bring down the cost of freelancers," and believed that an EOR service was a "legitimate" way of accomplishing that goal. (Pl. 56.1 ¶ 25; Fr. Opp'n 56.1 ¶ 25; see also Email dated July 31, 2009 from J. Collins to K. Barnes at FS 438, annexed to Declaration of Steven Libicki ("Libicki Decl.") as Ex. 6.) As understood by Keith Barnes, Framestore's Financial Controller, by using an EOR service, the EOR could "hire [Framestore's] freelancers as employees of their company and invoice [Framestore] for their time." (Undated email from K. Barnes at FS 440, annexed to Libicki Decl. as Ex. 7.) As to Yurcor's EOR service, Barnes explained that Yurcor would charge Framestore four percent "ofthe freelancers' gross pay." (Id.) According to Barnes' example, "if a freelancer's daily rate [was] $200 per diem, [Framestore] pa[id] $208 ($200 + 4%)" to Yurcor for each day worked by the freelancer. (Id.) Barnes noted that although freelancers normally paid employer taxes as "traditional 1099" independent contractors, using an EOR service, those employer taxes were "withheld from [freelancers'] pay." (Id.)

In August of 2009, Framestore and Yurcor negotiated a contract for Yurcor's EOR services. (Yur. 56.1 ¶ 6; POY 56.1 ¶ 6.) In an email exchange between Barnes and Alanna Williams, Yurcor's Director of Sales, the parties discussed certain aspects of the Framestore-Yurcor relationship and their prospective agreement. (Email dated Aug. 4, 2009 from A. Williams, annexed to Libicki Decl. as Ex. 8; Pl. 56.1 ¶ 31; Fr. Opp'n ¶ 31.) Barnes explained his understanding that under the agreement, while freelancers would be employees of Yurcor and not Framestore, the freelancers would work "under [Framestore's] supervision and direction." (Id.)

On August 5, 2015, Framestore and Yurcor executed a Client Agreement (the "Client Agreement"). (Client Agreement 1, annexed to Libicki Decl. as Ex. 4; Pl. 56.1 ¶ 32.) The Client Agreement stated that Yurcor would provide Framestore with "temporary staffing" to perform "consulting services" such as computer graphics or programming work. (Client Agreement 1.) Pursuant to the Client Agreement, Framestore agreed to pay Yurcor a "bill rate," which was the rate at which Framestore would pay Yurcor "for th[e] individual [freelancer]" and Yurcor's services (the "Bill Rate"). (Pl. 56.1 ¶ 54; Yur. Opp'n ¶ 54; Fr. Opp'n ¶ 54; Yur. 56.1 ¶ 14.) The Bill Rate could vary from freelancer to freelancer. (Yur. 56.1 ¶ 6; POY 56.1 ¶ 6.) In addition to the Bill Rate, Yurcor would charge Framestore four percent of the Bill Rate as a fee "for services rendered." (Yur. 56.1 ¶ 6; POY 56.1 ¶ 6.) The agreement stated that Framestore "w[ould] notmake any deductions from the fees paid to Yurcor . . . for any federal, state or local taxes," as it was "Yurcor's obligation to make all income tax and other tax withholdings and payments." (Client Agreement 1.) As stated in Schedule A of the Client Agreement, "[t]he employer as well as the employee side of the taxes [would] be deducted from the Freelancer[s'] account at time of payroll."⁵ (Schedule A annexed to Client Agreement; Pl. 56.1 ¶ 32; Fr. Opp'n 56.1 ¶ 32; Yur. Opp'n 56.1 ¶ 32.)

d. Framestore's use of Yurcor's EOR services generally

After executing the Client Agreement, Framestore began using Yurcor's EOR services in its freelancer retention process. In practice, Framestore contacted freelancers with dates and details for a project and solicited the freelancer's interest and availability. (Fr. 56.1 ¶ 12; POF 56.1 ¶ 12.) When a freelancer was interested in the work offered, the freelancer confirmed his or her availability via email, which, according to Framestore, constituted the "booking" of the freelancer. (Fr. 56.1 ¶ 12; POF 56.1 ¶ 12.) Thereafter, Framestore presented prospective freelancers with two options: (1) freelancers who maintained their own corporate structures — running their own payroll, paying their taxes and Workers' Compensation Insurance and meeting other criteria — were eligible to work as independent contractors of Framestore; and (2) freelancers who did not qualify under the first option would be referred to, and engaged through, Yurcor as the EOR. (Fr. 56.1 ¶ 8; POF 56.1 ¶ 8.) Under the second option, the freelancer would establish an employment relationship with Yurcor "for payroll and benefits purposes." (Fr. 56.1 ¶ 13; POF 56.1 ¶ 13.)

After the referral, the freelancer's Bill Rate was then agreed upon. (Fr. 56.1 ¶ 14; POF 56.1 ¶ 14; Yur. 56.1 ¶ 9; POY 56.1 ¶ 9.) The parties dispute whether the freelancer was a party to the agreement setting the Bill Rate. According to Framestore, the Bill Rate was "the amount communicated to the freelancer" at the time of the freelancer's booking and was agreed upon between Framestore, Yurcor and the freelancer. (Fr. 56.1 ¶ 14.) According to Yurcor, the Bill Rate was agreed upon between Yurcor and Framestore only. (Fed. R. Civ. Proc. 30(b)(6) deposition of Alanna Williams on behalf of Yurcor ("Yurcor Dep.") 101:6-18, annexed to Libicki Decl. as Ex. 34.)

Once the Bill Rate was determined, Yurcor and the freelancer would agree to a "Pay-Rate." (Yur. 56.1 ¶ 11; POY ¶ 11; Fr. 56.1 ¶ 15; POF 56.1 ¶ 15.) The Pay Rate was what Yurcor paid to the freelancer, and was equal to the Bill Rate less the amount Yurcor labeled "Administrative Overhead Costs." (Yurcor Dep. 101:25-102:6; Yur. 56.1 ¶¶ 11, 18; POY 56.1 ¶¶ 11, 18; Fr. 56.1 ¶ 15; POF 56.1 ¶ 15.) It is undisputed that the Administrative Overhead Costs were the "employer taxes" that Yurcor was "responsible for," specifically "FICA, FUTA, SUI, [and] workers comp[ensation]" taxes. (Yurcor Dep. 102:15-22; Pl. 56.1 ¶ 57; Yur. Opp'n 56.1 ¶ 57.)

e. Plaintiff's relationship with Framestore and Yurcor

In early 2012, Framestore contacted Plaintiff about working on Framestore projects as a VFX compositor.⁶ (Pl. 56.1 ¶ 41; Fr. Opp'n 56.1 ¶ 41; Fr. 56.1 ¶ 21; POF 56.1. ¶ 21.) In April2012, Evan Reinhard, a Human Resources Specialist for Framestore, and Alex Lemke, the VFX supervisor of Framestore's film department, interviewed Plaintiff at Framestore's Manhattan offices. (Pl. 56.1 ¶ 42; Fr. Opp'n 56.1 ¶ 42.) Although Plaintiff was not hired into the film department at that time, Reinhard, who had authority to hire freelancers, asked Plaintiff to consider working in Framestore's commercial department. (Pl. 56.1 ¶¶ 42-43; Fr. Opp'n 56.1 ¶¶ 42-43.)

On June 6, 2012, Reinhard "booked" Plaintiff to work on a project from June 8, 2012 through July 3, 2012. (Pl. 56.1 ¶ 43; Fr. Opp'n 56.1 ¶ 43.) Reinhard sent Plaintiff an email (the "June 6, 2012 Booking Email"), stating "[w]e would like to confirm your booking with us for the date[s] below," listing dates of June 18, 2012 through July 3, 2012. (Email dated ...