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Spyridakis v. Riesling Group

October 14, 2009


The opinion of the court was delivered by: Yohn, J.


Plaintiff, Catherine Spyridakis, brings this action against The Riesling Group, Inc., doing business as CE Credits Online ("CEC"), her former employer, for wrongful discharge and other claims arising out of defendant's termination of its contractual relationship with plaintiff. Plaintiff brings these counts: Count I for wrongful discharge in violation of public policy; Count II for breach of contract arising out of defendant's breach of its duty of good faith; Count III for violations of the Wage Payment and Collection Law ("WPCL"), 43 Pa. Stat. Ann. §§ 260.5, 260.10 (2009); and Count IV for breach of contract arising out of unpaid compensation for services performed. Presently before the court is defendant's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for relief. For the reasons set forth below, the court will grant the motion and dismiss Counts I, II, and III and remand the action to the Philadelphia Court of Common Pleas for disposition of Count IV.

I. Facts and Procedural History*fn1

Plaintiff worked as an online continuing education instructor for defendant, which provided on-line, professional development courses for educators. In early 2004, plaintiff responded to defendant's on-line advertisement that sought a part-time, online teaching assistant. Following emails and discussions about the job with CEC owner and president Gail Hixon, defendant engaged plaintiff for the position in June 2004. After a brief training, plaintiff began working in July 2004. On August 18, 2004, plaintiff signed an Agreement and Fee Schedule with defendant outlining the parties' respective responsibilities concerning plaintiff's work. The agreement provided that: plaintiff would work as an independent contractor; plaintiff would receive fifteen dollars per hour for her work; plaintiff agreed to defendant's pre-set guidelines concerning work, invoicing, and compensation; and either party could terminate the agreement at will.

Plaintiff alleges that defendant exercised extensive control over plaintiff's work, despite plaintiff's designation as an independent contractor. As set forth in written policies in a teacher's manual defendant created, defendant required that all online instructors, such as plaintiff, make only "'cordial, professional, and accurate'" replies to student comments and refrain from using jargon or grammatical or spelling errors. The manual further required that in replying to students moderators must use CEC-created rubrics and, where necessary, follow preset responses from CEC moderators. As provided in the manual, CEC policy required plaintiff to respond to all student online comments within twenty-four hours or make alternative arrangements with a superior or face termination. The manual also provided instructions about the procedures for replying to student comments and for logging into the CEC's online system, including requirements for taking breaks.

Plaintiff also alleges that defendant exercised control through other unwritten policies and through active supervision of her work. Defendant required her, as training for working as an instructor, to go through training for each course plaintiff taught. According to plaintiff, defendant asked her to participate in training for at least five different courses, but did not compensate her for training time. Defendant enforced the requirements set forth in the manual by directing plaintiff to report to her supervisor via email every day when she completed her work. Defendant also reminded her of the mandatory twenty-four hour requirement for instructor replies to student postings. Periodically, plaintiff's supervisors provided explicit instructions about how plaintiff should reply to her students' on-line comments, including explaining to her students that CEC's rubrics limited her discretion in responding to their comments. In June 2006, Hixon explained to plaintiff the importance of instructors thoroughly understanding the courses they teach so that they can provide efficient instruction.

Noticing the control defendant exercised over her work, plaintiff doubted the accuracy of her designation as an independent contractor. In 2005, plaintiff sought advice regarding her work status from the Pennsylvania Department of Labor and Industry, Office of Unemployment Compensation Tax Services, Bureau of Employer Tax Operations ("Bureau"). Upon request from the Bureau, plaintiff completed and submitted a form regarding her employment status, along with supporting documentation, to the Bureau in July 2006. The Bureau investigated the matter and in doing so contacted defendant's owner and president, Gail Hixon, in July or early August, 2006.*fn2 On August 11, 2006, Hixon fired plaintiff over the phone. Although plaintiff submitted invoices for her final two paychecks on July 31, 2006 and August 15, 2006, respectively, defendant withheld payment until February 2007, over five months later.

Soon after plaintiff's termination, the Bureau determined that she had been an employee of defendant based on plaintiff's submitted form and documentation. As a result, plaintiff applied for and received unemployment benefits. Defendant appealed the Bureau's decision to give unemployment benefits to plaintiff. On November 21, 2006, the Pennsylvania Department of Labor and Industry, Bureau of Unemployment Compensation Benefits and Allowances found plaintiff eligible for benefits as an employee who "was not free from direction or control in the performance of the job." (Pl.'s Compl. ¶ 33 (quotation source unidentified).) A Pennsylvania Department of Labor and Industry referee affirmed this determination and the basis for it on February 6, 2007. On June 8, 2007, the Unemployment Compensation Board of Review ("UCBR") affirmed the referee's determination. On April 24, 2008, however, the Commonwealth Court of Pennsylvania reversed that determination, holding that defendant did not control plaintiff as an employee and therefore plaintiff did not qualify for unemployment benefits. On May 7, 2009, the Pennsylvania Supreme Court denied plaintiff's petition, as an intervenor, for allowance of appeal of that decision.

Following the Commonwealth Court's decision, plaintiff initiated this action in the Philadelphia Court of Common Pleas via a praecipe for writ of summons*fn3 on July 30, 2008 and filed her complaint on March 12, 2009. On April 10, 2009, defendant filed a notice of removal to this court pursuant to 28 U.S.C. § 1441(a). Defendant then filed the present motion to dismiss.

Plaintiff responded and defendant replied.

II. Standard of Review

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980) (citation omitted). "[U]nder Rule 12(b)(6) the defendant has the burden of showing no claim has been stated." Kehr Packages, Inc. v. Fidelcor, 926 F.2d 1406, 1409 (3d Cir. 1991). When evaluating a motion to dismiss, the court must accept as true all well-pleaded allegations of fact in the plaintiff's complaint, and any reasonable inferences that may be drawn therefrom must be viewed in the light most favorable to the plaintiff. See Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008); Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996).

The complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This statement must "'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957)). In ruling on a motion to dismiss, "[t]he issue is not whether [the claimant] will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997).

III. Discussion

Defendant moves to dismiss plaintiff's complaint on the ground that plaintiff has failed to state any claim for which plaintiff would have a legal right to relief. Defendant argues that due to the preclusive effect of the Commonwealth Court's determination that plaintiff worked for defendant as an independent contractor, plaintiff cannot bring claims for wrongful discharge and violations of the WPCL, as these claims are available to employees, not independent contractors. Defendant further argues that plaintiff has not set forth a cognizable violation of public policy as the basis of her wrongful termination claim. Defendant finally argues that plaintiff cannot bring a separate breach of contract claim for breach of the duty of good faith and that, assuming the court dismisses the above claims, the court lacks jurisdiction over plaintiff's remaining breach of contract claim for unpaid compensation.

Plaintiff responds that because collateral estoppel does not apply in the context of unemployment proceedings, the Commonwealth Court's decision does not have preclusive effect. As a result, according to plaintiff, independent contractors can bring wrongful discharge claims, just as employees can, and that plaintiff's termination occurred in contravention of constitutional and statutory policies. Finally, plaintiff contends that in terminating plaintiff in violation of public policy defendant breached its contractual duty of good faith and that the court has discretion to retain jurisdiction over the remaining breach of contract claim.

Because the issue of the preclusive effect of the Commonwealth Court's decision touches several of the parties' other disputes, the court will begin its analysis there and then address the remaining issues.

A. Collateral Estoppel (Issue Preclusion)

Defendant argues that this court must afford preclusive effect to the Commonwealth Court's determination that plaintiff worked for defendant as an independent contractor, not an employee. Plaintiff argues that under Pennsylvania law, this court can determine on its own plaintiff's status because ...

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