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Sherwood v. Cook Out, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

August 22, 2019

COOK OUT, INC., et al., Defendants.

          OPINION & ORDER

          Robert E. Wier, United States District Judge.

         Justin Sherwood (Plaintiff), initiated this putative individual and collective action against Defendant Cook Out, Inc., and one of its franchisee restaurants (collectively “Defendants” or “Cook Out”) on behalf of himself and other Cook Out employees. DE 1 (Complaint); DE 55 (Second Amended Complaint). Plaintiff asserts violations of state and federal wage laws as well as an alternative KRS 446.070 theory. For the reasons fully explained below, the Court finds the current operative pleading deficient, dismisses the state law claims, but grants a limited period of discovery on the FLSA claim.

         I. BACKGROUND

         Sherwood bases his claims on the following allegations:[1] From September through November 2014, Defendants employed Sherwood as a Manager in Training at the Richmond, Kentucky, Cook Out location. Defendants regularly scheduled Sherwood to work at least 50 hours per week. Plaintiff actually worked over 60 hours per week. Cook Out failed to pay Sherwood 1.5 times his regular rate for hours he worked over 40. Sherwood “harbored no understanding” that he would not be paid time-and-a-half for overtime hours. Cook Out paid Sherwood $8 per hour, so-called “Appreciation Pay, ” for worked hours exceeding 52.5 in a given workweek. Sherwood contends such additional payments constituted “hours-based bonuses” that caused his salary to vary. Per Sherwood, such variance violates a proper “fluctuating workweek pay practice, which [ ] Defendants used here for Plaintiff[.]” DE 55 at ¶ 37.

         Plaintiff alleges (as denominated) violations of the Fair Labor Standards Act (“FLSA”), the Kentucky Wage Payment Collection Law, and the Kentucky Remedies Law. DE 55 at ¶¶ 57-77. Defendants pursue Rule 12 dismissal of all claims. DE 55 (Motion). The motion stands fully briefed and ripe for review. DE 56 (Response); DE 59 (Reply).

         A. Dismissal Standard

         To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. However, “a formulaic recitation of a cause of action's elements will not do[.]” Twombly, 127 S.Ct. at 1965. Courts “must construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys, 684 F.3d at 608. Yet, courts need not accept “legal conclusion[s] couched as [ ] factual allegation[s].” Papasan v. Allain, 106 S.Ct. 2932, 2944 (1986).

         Hinging on Rule 8's minimal standards, Twombly and Iqbal require a plaintiff to “plead facts sufficient to show that her claim has substantive plausibility.” Johnson v. City of Shelby, 135 S.Ct. 346, 347 (2014). Where plaintiffs state “simply, concisely, and directly events that . . . entitle[ ] them to damages, ” the rules require “no more to stave off threshold dismissal for want of an adequate statement[.]” Id.; El-Hallani v. Huntington Nat. Bank, 623 Fed.Appx. 730, 739 (6th Cir. 2015) (“Although Twombly and Iqbal have raised the bar for pleading, it is still low.”).

         II. ANALYSIS

         The FLSA requires every covered “employer” to pay its employees “not less than one and one-half times the regular rate” for all hours worked in excess of forty in a given workweek. 29 U.S.C. § 207(a)(1). The Sixth Circuit has not (post-Twombly) squarely addressed the standard for pleading a plausible FLSA overtime claim.[2] However, the Fourth Circuit recently summarized the majority view:

[T]o make out a plausible overtime claim, a plaintiff must provide sufficient factual allegations to support a reasonable inference that he or she worked more than forty hours in at least one workweek and that his or her employer failed to pay the requisite overtime premium for those overtime hours. Under this standard, plaintiffs seeking to overcome a motion to dismiss must do more than merely allege that they regularly worked in excess of forty hours per week without receiving overtime pay.
[T]he standard . . . does not require plaintiffs to identify a particular week in which they worked uncompensated overtime hours. Rather, this standard is intended to require plaintiffs to provide some factual context that will nudge their claim from conceivable to plausible. . . . Thus, to state a plausible FLSA overtime claim, plaintiffs “must provide sufficient detail about the length and frequency of their unpaid work to support a reasonable inference that they worked more than forty hours in a given week. . . . A plaintiff may meet this initial standard by estimating the length of her average workweek during the applicable period and the average rate at which she was paid, the amount of overtime wages she believes she is owed, or any other facts that will permit the court to find plausibility.

Hall v. DIRECTV, LLC, 846 F.3d 757, 777 (4th Cir. 2017) (citations and quotation marks omitted), cert. denied, 138 S.Ct. 635 (2018); accord Landers v. Quality Commc'ns, Inc., 771 F.3d 638, 644 (9th Cir. 2014); Davis v. Abington Memorial Hospital, 765 F.3d 236 (3d Cir. 2014); Lundy v. Catholic Health System of Long Island Inc., 711 F.3d 106, 114 (2d Cir. 2013); Pruell v. Caritas Christi, 678 F.3d 10, 13-15 (1st Cir. 2012). As a sister court explained: “The emphasis in all these cases is plausibility per Twombly and Iqbal, not the creation of a novel pleading requirement.” Anderson v. GCA Servs. Grp. of N. Carolina, Inc., No. 1:15-CV-37-GNS, 2015 WL 5299452, at *4 (W.D. Ky. Sept. 9, 2015). The Court considers Sherwood's allegations in light of these principles.

         Plaintiffs claims flow entirely from the premise that Cook Out failed to comply with or meet the requirements for a “fluctuating workweek pay practice, which [ ] Defendants used here for Plaintiff[.]” See DE 55 at ¶ 37. Nonetheless, Sherwood urges that his complaint is sufficient without regard to his fluctuating workweek (“FWW”) allegations. See DE 59 at 8-10. Sherwood also contends that, structurally, he had no obligation to plead an FWW violation. Finally, Sherwood contends that he has plausibly alleged FWW noncompliance and, consequently, an FLSA violation. Defendant contests each point. The Court addresses each argument in turn.

         The Court must judge the pleading before it. Sherwood stakes his overtime theory on fluctuating workweek noncompliance by Cook Out. He stakes noncompliance on two allegedly unmet (or transgressed) required elements of the FWW model-one related to Appreciation Pay and one related to the understanding between employer and employee. The Court thus must assess plausibility within the specific context of the theory Plaintiff espouses.

         FWW Framework

         Subject to certain requirements, the FWW structure (as an FLSA compliant pay system) allows employers to pay employees a “[f]ixed salary for fluctuating hours[, ]” plus an overtime premium at “one-half” times the standard rate, “in addition to such salary”; this structure is one method of complying with the 1.5x regular rate payment generally required for overtime. 29 C.F.R. §§ 778.114 & 778.107 (“The general overtime pay standard in section 7(a) requires that overtime must be compensated at a rate not less than one and one-half times the . . . regular rate[.]”). Undergirding the FWW method is the idea that flat salary accounts for the ‘time' aspect of ‘time-and-a-half' for overtime. See Id. (“Payment for overtime hours at one-half such rate in addition to the salary satisfies the overtime pay requirement because such hours have already been compensated at the straight time regular rate.”).

         Non-FWW Pleading Sufficiency

         Sherwood, in arguing he pleaded a viable FLSA claim without regard to the FWW issues, ignores the complaint's clear terms. Plaintiff explicitly claimed that Cook Out “used” an FWW “pay practice[.]” Id. at ¶ 37. Sherwood, though disputing whether it was fixed, concedes that Cook Out paid him a salary. See DE 55 at ¶ 35 (discussing the “salar[y] of Plaintiff”). Further, Plaintiff alleges that Cook Out paid him $8, in addition to his salary, for certain overtime hours. Id. at ¶ 34. Sherwood is not claiming wholly unpaid overtime but underpaid overtime. See, e.g., DE 59 at 15 (“Cook Out was paying a salary, half-time for some overtime hours worked, and then an additional/time-based bonus payment for hours worked beyond 52.5 in a workweek[.]”).[3] The FWW theory is the only plausible route Plaintiff alleges for entitlement to relief for such underpayments. See DE 59 at 8 (Cook Out “should have paid Managers 1.5 times their regular hourly rate for all hours worked beyond 40 in workweeks as overtime pay, rather than the lower overtime rate that it paid.”). Sherwood pleads no valid non-FWW theory to explain his otherwise threadbare allegation that Cook Out, e.g., failed “to pay proper overtime wages[.]” DE 55 at ¶ 39.

         The foundation of any FLSA overtime claim is the plaintiff's “regular rate, ” which is “a rate per hour.” 29 U.S.C. § 207; 29 C.F.R. § 778.109. “To calculate overtime pay, the Act requires employers to divide total pay by total hours to determine an employee's regular rate, and to multiply that rate by 150%. ‘Total pay' takes on different meanings depending on each pay arrangement.” Acosta v. Min & Kim, Inc., 919 F.3d 361, 364 (6th Cir. 2019). Sherwood does not allege his (or any manager's) regular rate. Nor does Sherwood plead any facts from which the Court could begin to divine such rate-e.g., approximate salary or total wages. Pruell, 678 F.3d at 15 (“Plaintiffs . . . presumably know how much they were paid as wages[.]”).

         Instead, Sherwood's allegations regarding pay adequacy largely are in the vein of “those borderline phrases that while not stating an ultimate legal conclusion, [are] nevertheless so threadbare or speculative that [they] fail[ ] to cross the line between the conclusory and the factual.” Dejesus v. HF Mgmt. Servs., LLC, 726 F.3d 85, 89 (2d Cir. 2013) (quotation marks omitted). For example, Plaintiff contends he “regularly worked” 40 “hours per workweek without being paid all overtime wages required” and that he “was not paid 1.5 times his regular rate of pay for each hour over 40[.]” DE 55 at ¶¶ 31- 32. These allegations are “little more than a paraphrase of the statute.” Pruell, 678 F.3d at 13. Such bald conclusions are entitled to no presumption of truthfulness. Cf. Landers, 771 F.3d at 646 (“[P]laintiffs in these types of cases . . . should be able to allege facts demonstrating there was at least one workweek in which they worked in excess of forty hours and were not paid overtime wages.” (emphasis added)). Thus, Sherwood failed to “nudge” any non-FWW theory “from conceivable to plausible[.]” Hall, 846 F.3d at 777; see also Simpson v. Baskin, No. 3:17-CV-01077, 2018 WL 1070897, at *8 (M.D. Tenn. Feb. 26, 2018) (dismissing complaint that alleged “a specific weekly and monthly rate of pay” but failed to ...

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