Hernandez v. Prime Structure, Inc.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

ALEJANDRO RIVERA HERNANDEZ,

on behalf of himself, FLSA Collective

Plaintiffs, and the Class,

Plaintiff, MEMORANDUM & ORDER

23-cv-09487 (NCM) (LKE)

– against –

PRIME STRUCTURE, INC., PRIME

STRUCTURE NY, INC., MARATHON

BUILDERS, INC., BIG APPLE

DESIGNERS NY LLC, ISREAL STERN,

and SUBCONTRACTORS 1-50,

Defendants.

NATASHA C. MERLE, United States District Judge:

Alejandro Rivera Hernandez (“plaintiff”) on behalf of himself, putative FLSA

Collective Action plaintiffs, and a putative class, brings this action against Prime

Structure, Inc., Prime Structure NY, Inc., (“Prime defendants”), Isreal Stern, Marathon

Builders, Inc. (“Marathon”), Big Apple Designers NY LLC (“Big Apple”), and

Subcontractors 1-50 (“Subcontractor defendants”) (collectively “defendants”), for

violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq., New York

Labor Law (“NYLL”), N.Y. Lab. L. § 195, and breach of contract, or, in the alternative,

unjust enrichment based on defendants’ alleged failure to pay wages for all hours worked

and to provide wage notices and accurate wage statements. Second Am. Compl., ECF No.

38 (“SAC”). Before the Court is defendants’ Motion to dismiss pursuant to Federal Rules

of Civil Procedure 12(b)(1) and 12(b)(6).1 For the reasons stated below, defendants’

Motion is GRANTED in part and DENIED in part.

BACKGROUND

The following factual allegations are derived from plaintiff’s second amended

complaint, which the Court accepts as true for purposes of this Motion. In September

2016, plaintiff was hired by Isreal Stern, the owner and president of the Prime defendants,

to work as a laborer. SAC ¶ 47. Throughout his time there, plaintiff was scheduled to work

five days per week from 7:00 a.m. to 6:00 p.m., for a total of 11 hours per day or 55 hours

per week. SAC ¶ 48. From the start of his employment to December 2017, plaintiff was

paid $15 per hour. SAC ¶ 49. From January 2018 to February 2019, plaintiff was paid $19

per hour. SAC ¶ 49. From March 2019 to March 2021, plaintiff was paid $21 per hour.

SAC ¶ 49. From April 2021 until his termination in May 2022, plaintiff was paid $25 per

hour. SAC ¶ 49.

At Stern’s direction, the Prime defendants subcontracted work to Marathon, Big

Apple, and additional Subcontractor defendants, which are unknown to plaintiff at this

time. SAC ¶ 24. Stern, on behalf of the Prime defendants, loaned their employees to

defendants to complete the subcontracted work. SAC ¶ 24. Plaintiff was supervised by

foremen of the Prime defendants, Marathon, Big Apple, and Subcontractor defendants,

and he could see the logos of the subcontractors on clothing and equipment at worksites.

SAC ¶ 25. All defendants were required to approve the specific sums that plaintiff and

1 The Court hereinafter refers to the Memorandum of Law in Support of Defendants’

Motion to Dismiss the Complaint, ECF No. 46, as the “Motion”; Plaintiff’s Memorandum

of Law in Opposition to Defendants’ Motion, ECF No. 47, as the “Opposition”; and the

Reply Memorandum of Law in Further Support of Defendants’ Motion to Dismiss, ECF

No. 48, as the “Reply.”

others were being paid, and defendants collaborated to manage and track plaintiff’s and

other workers’ time records, scheduling, and compensation. SAC ¶¶ 26, 29.

Subcontractors

One example of this kind of subcontractor arrangement is the Prime defendants’

agreement with Marathon wherein Marathon agreed to “Cast in Place Concrete” at one of

the Prime defendants’ projects. See SAC, Ex. B, ECF No. 38-2 (“Subcontractor

Agreement”); SAC ¶ 22. The Subcontractor Agreement gave the Prime defendants and

Marathon joint responsibility for managing and supervising projects. SAC ¶ 22. Plaintiff

and other workers received paychecks processed by Marathon. SAC ¶ 26. Though

payment was received from Marathon, the funds originated from the Prime defendants

since they were acting as a general contractor outsourcing work to its subcontractor. SAC

¶ 26.

Prime defendants also had an agreement with Big Apple wherein plaintiff was

required to fill out time sheets provided by Big Apple for hours worked on the project. The

time sheets identified the Prime defendants as the general contractor and displayed the

email “billing@bigappledesigners,” indicating that the form was used to bill the Prime

defendants in their role as general contractor for the workers’ compensation. SAC ¶ 27;

see also SAC, Ex. D, ECF No. 38-4. To keep track of their hours, plaintiff and other

workers were required to download an HR and payroll management app called

Fingercheck that was tailored for Big Apple. SAC ¶ 28.

Defendants’ Wage and Hour Practices

When plaintiff worked more than 40 hours in a week, defendants failed to pay

plaintiff the required overtime premium. For example, plaintiff’s paystub beginning on

April 24, 2022, and ending on April 30, 2022, shows that he worked 60 hours, but he was

paid at $25 per hour for all 60 hours worked and thus was not paid the overtime premuim

of time and a half for each hour worked over 40. SAC ¶ 50; see also SAC, ECF No. 38-3.

Further, plaintiff did not ordinarily clock in and out with a system that kept precise

track of his hours. SAC ¶ 51. Instead, he wrote down the official beginning and end times

of his shifts on defendants’ timesheets. SAC ¶ 51. Because this system did not keep track

of when workers stopped working for lunch, defendants automatically deducted 30

minutes from plaintiff’s hours. SAC ¶ 51. But plaintiff alleges that he did not have a “free

and clear lunch,” as he was required to work through each meal break. SAC ¶ 52. As a

result of this practice, plaintiff worked at least 2.5 hours per week that were

uncompensated. SAC ¶ 52.

Additionally, plaintiff’s timesheets reflected that his scheduled shifts ended exactly

on the hour, or sometimes, half-hour. However, plaintiff’s actual work shifts ended about

15 minutes later than the time that he was scheduled because he was required to complete

the tasks he was working on before leaving for the day. SAC ¶ 53. As a result of this

practice, plaintiff alleges that he worked at least 1.25 hours per week that were

uncompensated. SAC ¶ 53. Plaintiff alleges that he and other workers would complain to

their foremen about defendants’ wage violations, specifically failure to pay for all hours

worked and failure to pay overtime premiums, and the foremen would agree to relay

plaintiff’s concerns to defendant Stern. SAC ¶ 17.

Reporting and Notice of Wages

Plaintiff and other workers of the Prime defendants were paid exclusively in cash

until November 2021. SAC ¶ 54. After November 2021, they were paid by check after

filling out a W-9 form. SAC ¶ 54. In 2021, plaintiff was paid a total of $725 by check and

was paid in cash for the remainder of the year. However, the Prime defendants and

Marathon submitted a Form-1099 for that year which represented that plaintiff was paid

$725, failing to report plaintiff’s cash wages. SAC ¶ 54. Plaintiff also alleges that

defendants misclassified him as a 1099 independent contractor when he was a bona fide

employee. SAC ¶ 57. Thus, defendants did not pay the employers’ share of Federal

Insurance Contributions Act (“FICA”) taxes, which plaintiff alleges left him liable for the

employer’s share of FICA taxes and reduced his eligibility for Social Security benefits. SAC

¶ 59. The second amended complaint also alleges that defendants failed to provide

plaintiff with wage notices and accurate wage statements that reflected the actual number

of hours worked. This allegedly allowed defendants to hide their responsibility and

deprived plaintiff of timely compensation and the ability to contest the pay provided by

defendants. SAC ¶ 67.

DISCUSSION

When deciding a motion to dismiss, a district court must “accept[] all factual

claims in the complaint as true, and draw[] all reasonable inferences in the plaintiff’s

favor.” Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 403 (2d Cir. 2014).

“Factual disputes are typically not the subject of the Court’s analysis, as Rule 12 motions

probe the legal, not the factual, sufficiency of a complaint.” Plastic Surgery Grp., P.C. v.

United Healthcare Ins. Co. of N.Y., Inc., 64 F. Supp. 3d 459, 468–69 (E.D.N.Y.

2014). That is, “the issue” on a motion to dismiss “is not whether a plaintiff will ultimately

prevail,” but instead whether a plaintiff is “entitled to offer evidence to support the

claims.” Sikhs for Just. v. Nath, 893 F. Supp. 2d 598, 615 (S.D.N.Y. 2012). Accordingly,

“[d]ismissal is inappropriate unless it appears beyond doubt that the plaintiff can prove

no set of facts which would entitle him or her to relief.” Fat Brands Inc. v. Ramjeet, 75

F.4th 118, 125 (2d Cir. 2023).

In order to survive a motion to dismiss pursuant to Rule 12(b)(6), a plaintiff must

state “a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim is

plausible when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Matson v.

Bd. of Educ. of City Sch. Dist. of N.Y., 631 F.3d 57, 63 (2d Cir. 2011) (quoting Iqbal, 556

U.S. at 678). Although the Court takes all factual allegations contained in the complaint

as true, it does not do so for legal conclusions or “[t]hreadbare recitals of the elements of

a cause of action, supported by mere conclusory statements” in a complaint. Iqbal, 556

U.S. at 678.2

I. FLSA AND NYLL Claims

Plaintiff alleges FLSA and NYLL violations arising from defendants’ failure to pay

wages for all hours worked, failure to pay the overtime premium, and failure to provide

wage notices and accurate wage statements. Plaintiff brings these claims against Prime

defendants, who hired plaintiff as a laborer, and defendants Marathon, Big Apple, and

Subcontractor defendants, each of whom he alleges exerted joint control over him as

employers. Defendants argue that plaintiff has failed to demonstrate the existence of an

employee-employer relationship under the FLSA and NYLL and instead, plaintiff was a

bona fide independent contractor. Reply 5.3 Thus, none of the defendants are his

employer, let alone his joint employer. Mot. 17. Defendants further contend that the

relationship between Prime defendants, Marathon, Big Apple, and the Subcontractor

2 Throughout this opinion, the Court omits all internal quotation marks, footnotes,

and citations, and adopts all alterations, unless otherwise indicated.

3 Throughout this opinion, page numbers for docket filings refer to the page

numbers assigned in ECF filing headers.

defendants is a legitimate general-subcontractor relationship in the construction industry

involving separate, independent entities. Reply 7–8. This is the predominate focus of

defendants’ challenge to plaintiff’s FLSA and NYLL claims. Defendants’ arguments fail

for the reasons discussed below.

A. Joint Employer Status

To be held liable under the FLSA, an entity must qualify as an employer. Hugee v.

SJC Grp., Inc., No. 13-cv-00423, 2013 WL 4399226, at *3 (S.D.N.Y. Aug. 14, 2013).

FLSA’s definition of employer is broad, and includes “any person acting directly or

indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d).

The NYLL is similarly broad, defining an employer as “any person, corporation, limited

liability company, or association employing any individual in any occupation, industry,

trade, business or service.” NYLL § 190(3). Courts apply the same tests to determine

whether an individual or entity is an employer under the FLSA and the NYLL. Weng v.

New Shanghai Deluxe Corp., No. 19-cv-09596, 2022 WL 5434997, at *4 (S.D.N.Y. Oct. 7,

2022).

Because the definition of employer is broad, there are circumstances where a

worker is simultaneously employed by two or more ostensibly separate employers. This

creates a question of whether the two employers are so entangled as to create a “joint

employment” relationship whereby, for FLSA and NYLL purposes, they are treated as one

entity, jointly and severally liable for wages due to an employee. See Martin v. Sprint

United Mgmt. Co., 273 F. Supp. 3d 404, 421 (S.D.N.Y. 2017) (quoting 29 C.F.R. §

791.2(a)).

There are several types of business relationships traditionally prone to joint-

employment: (1) companies that use staffing agencies to provide additional workers, see

Barfield v. N. Y. C. Health & Hosps. Corp., 537 F.3d 132, 143 (2d Cir. 2008), (2) franchise

relationships, see Olvera v. Bareburger Grp. LLC, 73 F.Supp.3d 201, 207 (S.D.N.Y. 2014),

and (3) subcontracting relationships, see Zheng v. Liberty Apparel Co., 355 F.3d 61, 63–

66 (2d Cir. 2003).

In determining whether there is an employment relationship, courts evaluate the

“economic reality” of the relationship, “looking beyond rigid corporate constructs to

consider the functional realities facing employees.” Newman v. ASA Coll., Inc., 754 F.

Supp. 3d 521, 537 (S.D.N.Y. 2024). The economic reality test is a flexible concept to be

determined case-by-case based on the totality of the circumstances. Barfield, 537 F.3d at

141–42; see also Dias v. Cmty. Action Project, Inc., No. 07-cv-05163, 2009 WL 595601,

at *6 (E.D.N.Y. Mar. 6, 2009) (finding that whether two entities are joint employers is

“essentially [a] factual question[] that cannot be disposed of on a motion to dismiss.”).

There is no independent test under the FLSA for joint employment, rather an entity

is a joint employer if it meets the FLSA’s definition of employer and another entity also

meets the definition as it relates to a single worker. New York v. Scalia, 490 F. Supp. 3d

748, 776 (S.D.N.Y. 2020). “Joint employment exists when the facts establish that

employment by one employer is not completely disassociated from employment by the

other employer.” Id. at 758. When evaluating whether separate but closely affiliated legal

entities should be treated as a single employer, the query centers on whether the

employers “handle certain aspects of their employer-employee relationships jointly.”

Clinton’s Ditch Co-op Co. v. N.L.R.B., 778 F.2d 132, 137 (2d Cir. 1985).

There are two aspects of the economic reality test: (1) whether a formal

employment relationship existed between the workers and the alleged employer, as to

distinguish between independent contractors and employees, and (2) whether an entity

lacking “formal control” nevertheless could be considered a joint employer due to the

“functional control” exercised over workers. Newman, 754 F.Supp. 3d at 537 (citing

Barfield, 537 F.3d at 143). The Second Circuit has identified four core factors to assess

formal control over employees: whether the alleged employer “(1) had the power to hire

and fire the employees, (2) supervised and controlled employee work schedules or

conditions of employment, (3) determined the rate and method of payment, and (4)

maintained employment records.” Carter v. Dutchess Cmty. Coll., 735 F.2d 8, 12 (2d Cir.

1984). “No one of the four factors standing alone is dispositive.” Herman v. RSR Secret

Servs Ltd., 172 F.3d 132, 139 (2d Cir. 1999). Satisfying the Carter factors is sufficient to

establish joint employment under the FLSA and NYLL, but it is not necessary. See

Newman, 754 F. Supp. 3d at 537. Even in the absence of formal control, a joint

employment relationship will be found where an alleged employer exercises functional

control over the workers in question. Id.

i. Formal Control Over Plaintiff

Contrary to defendants’ arguments, plaintiff has plausibly alleged facts indicating

defendants’ formal control over plaintiff in light of the totality of the circumstances,

satisfying the formal control test for joint employment under the FLSA and NYLL.

As to the first Carter factor—power to hire and fire—defendants argue that

plaintiff’s allegation that he was originally hired by Prime defendants contradicts his

allegation that he was hired by all defendants in September 2016. Reply 5. Plaintiff alleges

that he was hired by the Prime defendants in September 2016 and was loaned to the

Subcontractor defendants to complete subcontracting work. SAC ¶ 24. Plaintiff alleges

that the subcontractors consented to having plaintiff work on their project. Opp’n 10.

However, plaintiff does not allege that the subcontractors played a role in hiring him as a

laborer, nor had the authority to terminate his employment. Further, plaintiff does not

allege any facts that would allow the Court to reasonably infer that because the

subcontractors acquiesced to plaintiff working on a project, they also had the power to

hire or fire him. Thus, the first factor weighs against finding that plaintiff has plausibly

alleged joint employment.

As to the second factor—supervision and control—defendants argue that the

supervision plaintiff alleges he received from the defendants was to facilitate the

completion of projects in a timely manner; thus, defendants’ supervision was related to

construction site operations as opposed to the general responsibilities of the job. Mot. 13–

14. See Hugee, 2013 WL 4399226, at *6 (“To satisfy the joint employer inquiry, [p]laintiff

should have alleged that the supervision he received from [the alleged employer] was in

relation to the general responsibilities of his job, and not merely operations”). In the

context of subcontracting relationships, “extensive supervision of a plaintiff’s work is

indicative of an employment relationship,” however, “such extensive supervision weighs

in favor of joint employment only if it demonstrates effective control of the terms and

conditions of the plaintiff’s employment.” Zheng, 355 F.3d at 74–75; see Rutherford Food

Corp. v. McComb, 331 U.S. 722, 726 (1947) (suggesting the slaughterhouse owner’s close

scrutiny of the boners’ work played a role in setting the boners’ schedule).

Plaintiff plausibly alleges that defendants collectively supervised him and that such

supervision amounted to control over the terms and conditions of his employment.

Specifically, Stern supervised individual workers, including plaintiff. SAC ¶ 16. Not only

did Stern have the power and authority to supervise and control all workers on the Prime

defendants’ construction projects as the general contractor, he also delegated this

supervisory authority to Marathon, Big Apple, and the Subcontractor defendants, making

plaintiff functionally indistinguishable from the workers directly hired by the

subcontractors. SAC {1 15, 25. Indeed, plaintiff alleges that Prime defendants and

Marathon had a subcontractor agreement which stated that the parties had joint

responsibility to supervise projects. SAC {| 22.

The subcontractors oversaw the state of the project to ensure that it would be

completed in a timely manner. See SAC 4 16, 22. Plaintiff alleges that he was supervised

by Prime defendants’ foremen, as well as subcontractors’ foremen. SAC {| 24-25.

Foremen are in charge of worksites, and their “time is divided between [labor] and

supervision.”4 It is reasonable to infer that in this role, the foremen provided plaintiff, as

a laborer on a project, with directives related to his job responsibilities on-site.

Plaintiff also alleges defendants effectively controlled his work schedule.

Specifically, plaintiff could not leave worksites until certain tasks were completed for the

day, often resulting in his shift ending about 15 minutes later than scheduled. SAC 4] 53.

In essence, the complaint alleges that the subcontractors could, and did, extend plaintiffs

work day to ensure he completed his job responsbilities. See Antenor v. D & S Farms, 88

F.3d 925, 934 (11th Cir. 1996) (noting growers exercised control over farmworkers when

their supervision of the workers affected the workers’ schedule).

Moreover, plaintiff alleges that he and his fellow workers would complain to the

subcontractor’s foremen about defendants’ failure to pay for all hours worked, and the

foremen would promise to relay workers’ concerns to Stern. SAC 4 17. Though plaintiff

alleges that Stern was ultimately responsible for defendants’ pay policies, SAC 4] 17, it is

notable that plaintiff directed his complaints to the subcontractors, demonstrating that

4 Foreman, Oxford English Dictionary, https://www.merriam-

webster.com/dictionary/foreman.

11

Stern and defendants jointly controlled the conditions of workers’ employment. See

Raymond v. Mid-Bronx Haulage Corp., No. 15-cv-05803, 2017 WL 1251137, at *8

(S.D.N.Y. Mar. 31, 2017) (complaints regarding hours that were directed to alleged

employer suggest supervision and control over workers conditions of employment). Thus,

the second factor weighs in favor of finding that plaintiff has plausibly alleged joint

employment.

As to the third factor—rate and method of payment—defendants argue that

plaintiff cannot identify any terms in the Subcontractor Agreement that support his

allegation that Prime defendants funded payroll for Marathon employees working on

Prime construction projects. Mot. 16. Regardless of the contractual obligations in the

Subcontractor Agreement, plaintiff alleges that defendants shared compensation

responsibilities, evidenced by the cash payments received from Prime defendants, checks

received from Marathon, and timesheets from Big Apple. See SAC ¶¶ 26, 51, 54; SAC, ECF

No. 38-1, ECF No. 38-2, ECF No. 38-3. All defendants were required to approve the

specific sums that plaintiff and others were being paid, and defendants collaborated to

manage and track plaintiff and other workers’ time records, scheduling, and

compensation. SAC ¶¶ 26, 29.

Moreover, contrary to defendants’ argument, the contractual obligations in the

Subcontractor Agreement alone are not outcome determinative. At this stage, since the

economic reality of an alleged employment relationship is determined based on the

totality of the circumstances, “any relevant evidence may be examined so as to avoid

having the test confined to a narrow legalistic definition.” Herman, 172 F.3d at 139. Thus,

the Subcontractor Agreement, which delineates legal obligations, does not end the

inquiry, and the Court may consider additional relevant circumstances. See Red Apple

Media, Inc. v. Batchelor, 729 F. Supp. 3d 350, 373 (S.D.N.Y. 2024) (noting that the mere

fact a contract labels an employment relationship “is not, by itself, dispositive[.]”).

Accordingly, the third factor weighs in favor of finding that plaintiff has plausibly alleged

joint employment.

As to the fourth and final Carter factor—retention of employment records—

defendants argue that Prime defendants’ timesheets, Big Apple’s timesheets, and

Marathon’s paystubs cover different periods with no alleged connection to each entity

collectively. Reply 7. However, whether the dates of the paystubs overlap is beside the

point. The central issue is whether each defendant maintained any portion of plaintiff’s

employment records as to indicate that defendants handle certain aspects of their

employment-employer relationship, including compensation and time-keeping, jointly.

Plaintiff received paystubs and timesheets from one defendant for work done to

benefit all defendants. Despite the dates reflected on each defendant’s timesheets and

paystubs, at all times plaintiff worked to advance the defendants’ collective interests by

helping them complete joint construction projects. See Chang Yan Chen v. Lilis 200 W.

57th Corp., No. 19-cv-07654, 2020 WL 7774345, at *3 (S.D.N.Y. Dec. 30, 2020) (“Under

a joint-employer theory, an employee, employed by one entity . . . is at the same time

constructively employed by another entity[.]”).

Plaintiff has sufficiently alleged that each defendant maintained some portion of

his employment records. Indeed, plaintiff has provided exhibits of such records including

timesheets from Prime defendants, see SAC ¶ 20; SAC, Ex. A, ECF No. 38-1, timesheets

from Big Apple, see SAC ¶ 27; SAC, Ex. D, ECF No. 38-4, as well as paychecks from

Marathon, see SAC ¶ 26; SAC, Ex. C, ECF No. 38-3. Plaintiff also kept track of his hours

on Fingercheck, a payroll management app tailored for Big Apple. SAC ¶ 28. Thus, the

fourth factor weighs in favor of finding that plaintiff has plausibly alleged joint

employment.

* * *

Accepting all of plaintiff’s allegations as true and drawing all reasonable inferences

in his favor, plaintiff has sufficiently pled that defendants exercised formal control over

him and thus were his joint employer for purposes of his FLSA and NYLL claims.

B. Defendant Stern as Employer

Relatedly, defendants argue that plaintiff has not sufficiently alleged that

defendant Stern was his employer under the FLSA and NYLL. Mot. 18. “Once an entity is

found to be an employer within the meaning of the FLSA, a Court must also consider

whether individual defendants associated with the employer-entity are individually

liable[.]” Li v. Chinese Nail Salon Ass’n of E. Am. Inc., No. 20-cv-6390, 2024 WL 866248,

at *4 (E.D.N.Y. Feb. 28, 2024). Individual liability is similarly grounded in the “economic

reality” of the employer-employee relationship, but also takes into account an individual’s

“operational control,” or the degree to which the individual possesses “control over a

company’s actual operations in a manner that relates to a plaintiff’s employment.” Id.

Here, plaintiff alleges that defendant Stern is the owner and president of the Prime

defendants. SAC ¶ 14. In this role, he manages the daily operations and compensation

structures of the Prime defendants. SAC ¶ 15. Additionally, he would visit worksites to

discuss the state of the project and pick up and drop off equipment, and also supervised

plaintiff when on-site. SAC ¶ 16. Therefore, plaintiff has sufficiently alleged that defendant

Stern, in his role as president and operator of Prime defendants, was associated with the

employer-entities, and thus he was also plaintiff’s employer and individually liable under

the FLSA and NYLL.

C. Failure to Provide Proper Wage Notices and Statements

Defendants present an additional argument challenging plaintiff’s NYLL claim.

Defendants argue that plaintiff lacks standing to challenge violations of the wage notice

and wage statement requirements pursuant to NYLL because he fails to allege the

requisite concrete harm or injury in fact stemming from the purported violations.

Specifically, defendants contend that plaintiff’s alleged underpayment injury does not

flow from the lack of accurate wage statements and notices, but instead from defendants’

alleged illegal pay practices and failure to pay overtime. Mot. 8.

NYLL § 195 requires that employers provide a wage notice upon the hiring of an

employee and regular wage statements throughout an individual’s employment. See

NYLL §§ 195(1), (3). When raised in federal court, claims for violation of these statutory

provisions are subject to Article III standing requirements. See TransUnion LLC v.

Ramirez, 594 U.S. 413, 426 (2021). To establish standing, a plaintiff must demonstrate

that (1) he has “suffered an injury in fact that is concrete, particularized, and actual or

imminent;” (2) “the injury was likely caused by the defendant[s];” and (3) judicial relief

would likely redress plaintiff’s injury. Id. at 423.

In Guthrie v. Rainbow Fencing Inc., the Second Circuit clarified the necessary

showing for NYLL § 195 claims to satisfy the Article III standing requirement of a

concrete injury in fact. 113 F.4th 300 (2d Cir. 2024). The Guthrie court held that “a

plaintiff must show some causal connection between the lack of accurate notices and the

downstream harm” to demonstrate concrete injury. Id. at 308. There are a range of

“possible injuries” that can result from violations of NYLL  § 195. Id. These injuries

include the inability to: apply for public benefits, bank loans, and credit cards due to lack

of documentation; seek redress based on a determination that “they are being robbed by

the employer;” or ensure that the correct tax, insurance, and other deductions are made

on an employee’s behalf. Id. at 310.

A plaintiff can demonstrate injury by showing that they “would have avoided some

actual harm or obtained some actual benefit if accurate notices had been provided.”

Id. at 308. Further, courts have found sufficient injury to demonstrate standing for NYLL

195 claims where plaintiffs “aver[red] that [d]efendants’ alleged failure to provide wage

notices and wage statements caused [them] to endure uncertainty regarding [their] wages

and prevented [them] from taking action to correct [d]efendants’ wage and hour

violations.” Rosas v. M & M LA Solucion Flat Fixed Inc., No. 23-cv-01212, 2024 WL

4131905, at *12 (E.D.N.Y. Sept. 10, 2024), report and recommendation adopted, ECF

Order (Sept. 30, 2024); see also Barbosa v. Phoenix Sutton Str. Inc., 2025 WL 1078877,

at *3 (E.D.N.Y. Apr. 10, 2025) (finding standing where plaintiffs plausibly alleged that not

being provided accurate documentation which informed them of their hours worked,

wage, overtime rates, and the identity of their employers caused them concrete harm).

While a “plaintiff need not . . . establish an injury that is greater than or different

from the loss of wages or overtime pay alleged in their lawsuit,” the plaintiff must show

“some causal connection between” the wage notice and statement violations “and the

alleged downstream harm.” Ramos v. Allied Concrete Indus. Inc., No. 2:23-cv-03366,

2024 WL 5168766, at *1 (E.D.N.Y. Dec. 19, 2024); see e.g., Roma v. David Carmili,

Physician, P.C., 761 F. Supp. 3d 481, 490 (E.D.N.Y. 2024) (finding plaintiff demonstrated

standing by, among other things, alleging that defendants’ failure to provide wage

statements prevented her from “correcting issues with deductions and discrepancies” in

her pay).

Here, plaintiff alleges that defendants’ failure to provide him with wage notices and

accurate wage statements that reflected the total number of hours worked and rates of

pay, including overtime hours and overtime rates, deprived him of the ability to contest

underpayment and deprived him of timely compensation. SAC ¶ 67. However, this is

inconsistent with plaintiff’s allegation that he would “complain about [d]efendants’ wage

violations (failure to pay for all hours worked and failure to pay overtime premiums . . .)

to their foremen” who would then agree to share plaintiff’s concerns with defendant Stern.

SAC ¶ 17. Thus, from plaintiff’s own allegations, he knew that defendants were engaged

in wage violations, the type of violations they were engaged in, and raised those concerns

with a supervisor who agreed to share it with his alleged employer. See In re Livent, Inc.

Noteholders Sec. Litig., 151 F. Supp. 2d 371, 405 (S.D.N.Y. 2001) (“[A] court need not feel

constrained to accept as truth conflicting pleadings. . . that are contradicted [] by

statements in the complaint itself[.]”).

Accepting plaintiff’s allegations as true, that he was not paid for all hours worked

and overtime, plaintiff was nevertheless aware of this and raised it with, at least, the

foremen. Thus, these allegations do not support a reasonable inference that his alleged

employers were able to “hide” their wage violations and therefore cause informational

harm. See Castillo v. Hollis Delicatessen Corp., No. 22-cv-5476 , 2024 WL 4107258, at *1

n.1 (E.D.N.Y. Sept. 6, 2024); see also Lock v. Costco Wholesale Corp., No. 23-cv-07904,

2024 WL 4728594, at *5 (E.D.N.Y. Nov. 8, 2024) (rejecting plaintiffs’ allegation as

contradictory where plaintiffs asserted that defendant’s inaccurate wage statements

hindered their ability to challenge wage violations because plaintiffs were aware that they

worked more than 40 hours per week). Even viewing the allegations in the light most

favorable to plaintiff, plaintiff has failed to demonstrate that defendants’ failure to provide

wage statements or notice caused him to not be able to assess and raise the wage

violations.5 Accordingly, defendants’ Motion to dismiss is granted with respect to

plaintiff’s NYLL §§ 195(1) and (3) claims.

II. Fraudulent Filing of Information Returns

Section 7434 provides a private cause of action for individuals harmed by the filing

of a fraudulent information return. 26 U.S.C. § 7434(a). It provides: “If any person

willfully files a fraudulent information return with respect to payments purported to be

made to any other person, such other person may bring a civil action for damages against

the person so filing such return.” Id. Defendants contend that Section 7434 was not

intended to impose liability for submitting an amount less than an individual’s wages,

rather the statute was intended to impose liability for over-reporting of wages that results

in additional tax liability. Mot. 26–27. Plaintiff argues that regardless of whether the

amount paid to plaintiff is under-reported or over-reported, the central issue in deciding

whether plaintiff has stated a claim under Section 7434 is whether defendants

intentionally submitted a fraudulent information return that listed an inaccurate amount

of wage payments made to plaintiff. Opp’n 21–23. The Court agrees.

To state a claim under Section 7434, plaintiff must allege that “(1) the defendant

issued an information return; (2) the information return was fraudulent; and (3) the

5 Plaintiff also alleges that if defendants had provided wage statements and wage

notice it would have impacted defendants’ conduct or improve plaintiff’s litigation

position. Specifically, that defendants would have had to increase plaintiff’s wages to

correspond to the hours actually worked or acknowledge, by way of the wage statement,

that plaintiff’s wages did not correspond to the hours the worked. AC 68–69. However,

such speculation is not adequate to confer Article III standing. See Quieju v. La Jugueria

Inc., No. 23-cv-264, 2023 WL 3073518, at *2 (E.D.N.Y. Apr. 25, 2023) (“This speculative

chain of possibilities does not establish that plaintiff’s injury was fairly traceable to

defendants’ alleged violations[.]”).

defendant willfully issued the fraudulent information return.” Sarr v. VEP Assocs. LLC,

No. 22-cv-04386, 2024 WL 1251600, at *5 (E.D.N.Y. Mar. 25, 2024).

A Section 7434 claim can only be brought “where there is a falsehood made to the

IRS with respect to payments made to the plaintiff bringing the action.” Pacheco v.

Chickpea at 14th St. Inc., No. 18-cv-06907, 2019 WL 2292641, at *4 (S.D.N.Y. May 30,

2019), report and recommendation adopted, 2019 WL 3749318, at *2 (Aug. 8, 2019).

“Information return” means any statement described in section 26 U.S.C. § 6724(d)(1)(A),

which includes “any statement of the amount of payments to another person” with respect

to income tax withheld. Id. at *3. This includes a Form 1099 which is used to report

payments to non-employee independent contractors. See, e.g., Browning v. Ceva Freight,

LLC, 885 F. Supp. 2d 590, 594 (E.D.N.Y. 2012).

In Katzman v. Essex Waterfront Owners, LLC, the Second Circuit assessed what

is required to state a claim for relief under Section 7434. 660 F.3d 565 (2d Cir. 2011). The

Court focused on the plain text of the statute while acknowledging its legislative history.

The Court held the private right of action created by Section 7434 applies only if a person

willfully files a fraudulent information return. Id. at 568 (“[A]n allegation that a person

intentionally failed to file a required information return does not state a claim

under [Section] 7434”). Further, the Court reasoned that this conclusion is consistent

with the “overall statutory scheme,” in that 26 U.S.C. § 6721(a)(2)(A) of the Internal

Revenue Code (“IRC”) establishes penalties for failure to file an information return and

26 U.S.C. § 6722 of the IRC establishes penalties for failure to furnish payee statements.

Id. at 569 (“These provisions, however, do not create a private right of action. It is

therefore apparent that Congress knows how to distinguish between the failure to file an

information return and the willful filing of a fraudulent information return.”). Therefore,

the central question is whether an information return was actually submitted, and if so,

was it fraudulent.

By the plain text of the statute, plaintiff has plausibly alleged a claim. Specifically,

plaintiff alleges that (1) defendant issued an information return, a Form 1099; SAC ¶ 54,

(2) the information contained in the 1099 was fraudulent, in that it inaccurately stated

the wages earned, and (3) defendant intentionally issued the fraudulent information

return; SAC ¶ 54. Nevertheless, defendants argue that this is inadequate to state a claim

for relief because the fraudulent information submitted to the IRS reported that plaintiff

was paid less, rather than more, income.

Defendants rely on Pacheco v. Chickpea 14th St. Inc. to support the proposition

that Section 7434 is applicable only in scenarios involving alleged over-reporting of

plaintiff’s wages that result in additional tax liability. 2019 WL 3749318, at *1 (S.D.N.Y.

Aug. 8, 2019). However, defendants’ reliance on Pacheco is misplaced and conflates

under-reporting of payments with the failure to report payments altogether. Pacheco

concerned an outright failure to submit an information return, rather than submitting

fraudulent, inaccurate information regarding a particular plaintiff’s wages. Id. at *2.

There, defendants reported the wages of some, but not all, of their employees. One of the

employees for which they omitted income was plaintiff. The Court found that omitting the

full amount of one employee from a Form 941 was equivalent to failure to submit a tax

form, which is not actionable under the IRC. Id.; see also Francisco v. NYTex Care, Inc.,

No. 19-cv-04606, 2019 WL 6716634, at *2, *4 (E.D.N.Y. Dec. 10, 2019).

Here, defendants are alleged to have affirmatively submitted an information return

as to plaintiff, and that information return contained inaccurate, fraudulent information.

Specifically, plaintiff alleges Prime defendants and Marathon submitted a Form 1099 in

2021 that only reflected the $721 that plaintiff was paid by check, and defendants

intentionally omitted the payments made in cash. See Cano v. Tremson Recycling LLC,

No. 24-cv-01612, 2025 WL 964552, at *12 (S.D.N.Y. Mar. 14, 2025) (finding allegations

that defendants knowingly submitted information returns reflecting only the wages paid

to plaintiff by check and omitting those paid to him in cash were sufficient to establish a

violation of Section 7434); see also Rosario v. Fresh Smoothies LLC, No. 20-cv-05831,

2021 WL 5847633, at *6 (S.D.N.Y., Dec. 9, 2021) (same).

Moreover, the complaint alleges that defendants intentionally misclassified

plaintiff as an independent contractor to reduce their FICA tax liability. SAC ¶ 57; see also

Czerw v. Lafayette Storage & Moving Corp., No. 16-cv-06701, 2018 WL 5859525, at *3

(W.D.N.Y., Nov. 9, 2018) (finding that the plausibility of plaintiff’s Section 7434 claim of

willful fraud was bolstered by the fact that defendants misclassified plaintiff as an

independent contractor instead of an employee for the entirety of his employment).

Accordingly, plaintiff has plausibly alleged a violation under Section 7434 and defendants’

Motion is denied.

III. Breach of Contract

Plaintiff alleges that when he accepted an offer of employment from defendant

Stern, the parties entered into a contract, and the covenant of good faith and fair dealing

implicitly required defendants to pay plaintiff in accordance with all applicable laws,

which imposed a duty to abide by the IRC and pay all required FICA taxes. SAC ¶ 110.

Plaintiff contends that defendants breached this duty by paying plaintiff in cash without

withholding proper deductions. SAC ¶ 111. Defendants also allegedly misclassified

plaintiff as an independent contractor and did not file proper W-2 forms. SAC ¶ 111.

“[T]he implied covenant [of good faith] can only impose an obligation consistent with

other mutually agreed upon terms in the contract and cannot add to the contract a

substantive provision not included by the parties.” Childers v. N.Y. & Presbyterian Hosp.,

36 F. Supp. 3d 292, 312 (S.D.N.Y. 2014) (emphasis added). Plaintiff has failed to plausibly

allege the existence of an agreement between plaintiff and any defendant, express or

implied. In fact, plaintiff’s second amended complaint does not identify any mutually

agreed upon terms of the alleged contract sufficient to infer an intention on the part of

any defendant to be bound in a contractual relationship with plaintiff. See id. at 312–13;

see also Ancile Inv. Co. v. Archer Daniels Midland Co., 784 F.Supp.2d 296, 304–06

(S.D.N.Y. 2011) (dismissing breach of contract claim where the plaintiff did not allege

facts suggesting that the defendant intended to be bound to the terms of the alleged

implied contract). Accordingly, plaintiff’s breach of contract claim is dismissed.

IV. Unjust Enrichment

In the alternative, plaintiff alleges that defendants unjustly enriched themselves by

not paying FICA taxes for employees to reduce their tax liability, which will result in

plaintiff being liable for the employer’s share of FICA taxes and, upon retirement,

diminished Social Security benefits because he did not pay enough into the system. SAC

¶ 114.

Unjust enrichment is a New York common law quasi-contract cause of action

requiring the plaintiff to establish: (1) that the defendant benefited; (2) at the plaintiff’s

expense; and (3) that equity and good conscience require restitution. Myun-Uk Choi v.

Tower Rsch. Cap. LLC, 890 F.3d 60, 69 (2d Cir. 2018). The exclusive remedy for a tax

refund is an action against the United States, thus a state law claim seeking a federal tax

refund is preempted. See McNeely v. Metro. Life Ins. Co., 376 F. Supp. 3d 225, 230

(S.D.N.Y. 2019). “[T]he IRC does not explicitly create a private cause of action whereby

an employee may sue an employer for a failure to make a required contribution.” Id.

(quoting Ferro v. Metro. Ctr. for Mental Health, No. 13 -cv-02347, 2014 WL 1265919, at

*5 (S.D.N.Y. Mar. 27, 2014)).

In McNeely, the plaintiffs argued that the defendant unjustly enriched itself

because it did not collect or pay any FICA taxes to the IRS for employees who were

mischaracterized as independent contractors, which resulted in plaintiffs paying the

combined employer and employee amount of FICA taxes. Id. at 230. The Court reasoned

that the employer’s share of FICA taxes was paid to the IRS, not to defendants, and

therefore plaintiffs’ unjust enrichment claims essentially sought a disguised tax refund.

Id. at 230–31. As such, their state law claim for unjust enrichment on additional tax

liability was preempted. Id. at 230 (“To allow these claims to move forward would

undermine the IRS’s administrative scheme, which allows individuals to file claims for

tax refunds that they believe they need not have paid.”).

Here, plaintiff similarly alleges that he overpaid FICA taxes to the IRS, therefore

his unjust enrichment claim essentially seeks a disguised tax refund. See Lehman v.

USAIR Grp., Inc., 930 F. Supp. 912, 916 (S.D.N.Y. 1996). The proper avenue for plaintiff

to recover the employer’s share of FICA taxes is to file a claim for a tax refund through the

IRS’s administrative process. Accordingly, plaintiff’s unjust enrichment claim is

preempted by federal law and is therefore dismissed.

CONCLUSION

Defendants’ Motion to dismiss is GRANTED as to plaintiff’s breach of contract,

unjust enrichment, and NYLL Sections 195 wage notice and statements claims, and is

DENIED as to plaintiff’s FLSA, Section 7434, and remaining NYLL claims. This case is

referred to Magistrate Judge Lara K. Eshkenazi for pre-trial supervision.

SO ORDERED.

/s/ Natasha C. Merle

NATASHA C. MERLE

United States District Judge

Dated: June 27, 2025

Brooklyn, New York