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Acosta v. Central Laundry Inc.

United States District Court, E.D. Pennsylvania

July 29, 2019

R. ALEXANDER ACOSTA, Plaintiff,
v.
CENTRAL LAUNDRY, INC., GEORGE RENGEPES AND JAMES RENGEPES, Defendants.

          OPINION

          WENDY BEETLESTONE, J.

         This case is the second lawsuit filed by the Secretary of Labor against George and James Rengepes and their business Central Laundry, Inc. (collectively “Defendants”), asserting Defendants violated the Fair Labor Standards Act of 1938 (the “FLSA” or the “Act”), 29 U.S.C. § 201 et seq. Specifically, the Secretary claims that Defendants violated the minimum wage, overtime, recordkeeping, child labor, and anti-retaliation provisions of the FLSA between July 1, 2017 and August 28, 2018 (hereinafter “the relevant time period”). The Secretary now moves for summary judgment on twelve issues relating to those violations.

         For the reasons that follow, the motion will be granted in part and denied in part.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Undisputed Facts [1]

         James and George Rengepes operated a large industrial laundry facility in Lansdowne, Pennsylvania, which provided laundry services to restaurants and hotels. They employed a range of employees, including laundry workers, drivers, mechanics, and managers. Many of the workers pivotal to the purported FLSA violations in this case were Hispanic or Cambodian. Additionally, homeless workers who George recruited from the local shelter were an important part of Central Laundry's operations and are central to certain issues in this case.

         By way of background, in March 2015, the Secretary filed suit against Defendants in a related action, alleging they willfully violated the FLSA's minimum wage, overtime, and recordkeeping provisions. This Court granted summary judgment to the Secretary, concluding, inter alia, that: Central Laundry and George and James Rengepes violated the minimum wage, overtime, and recordkeeping provisions of the FLSA; that Defendants' minimum wage and overtime violations were “willful” and that their conduct was not in “good faith”; and that Defendants were therefore liable for both back wages and liquidated damages. Central Laundry I, No. 15-1502, ECF No. 56. The case proceeded to a bench trial on the amount of damages and injunctive relief, following which the Court entered judgment against Defendants for $239, 269.65 in back wages and another $239, 269.65 in liquidated damages, and granted the Secretary's request to enjoin Defendants from violating the minimum wage, overtime, and recordkeeping provisions of the FLSA. Central Laundry I, ECF No. 111; see also Acosta v. Central Laundry, 2018 WL 1726613, at *10-11 (E.D. Pa. Apr. 10, 2018). The monetary judgment has not been paid.

         In January 2018, the Secretary filed a new Complaint, which is at issue here. The Secretary again alleges that Defendants violated and continue to violate the FLSA, this time with respect to minimum wage, overtime, child labor, discrimination and retaliation against employees, and maintenance of records. Following a hearing to show cause why a preliminary injunction should not issue against Defendants, the Court enjoined Defendants from: selling or shipping in interstate commerce goods that were produced by child labor, or by employees not paid minimum wage and overtime compensation in violation of the FLSA; employing minors in violation of the FLSA; failing to pay minimum wage and overtime compensation; failing to make, keep, and preserve records of payment to employees, as required by the FLSA and its implementing regulations; and, threatening or intimidating employees who pursue their rights under the FLSA.

         Following the issuance of the preliminary injunction, the parties agree that on March 20, 2018, James Rengepes's wife Angeliki Rengepes incorporated a new business called GNNE, Inc., doing business as Liberty Linen and Laundry Service, and that Central Laundry sold its assets to GNNE on that day.[2]

         B. Key Disputed Facts

         The parties are at odds on a variety of factual matters. The principal dispute, however, concerns the relationship of GNNE to Central Laundry.[3] This relationship is critical to many of the issues in this case because, as discussed at length below, while Defendants concede liability for many of the violations alleged to have occurred pre-March 20, 2018, they assert that any liability ceased once Central Laundry closed and GNNE opened.

         The Secretary asserts that GNNE “was essentially Central Laundry . . . with a new name.” The Secretary claims that GNNE did “the exact same work” used “the same laundry machines, ” “stored materials in the same warehouse, ” “kept many of the same employees, ” and “had the same operations, equipment [and] customers” as Central Laundry. The Secretary further claims that business carried on uninterrupted during the time that the worksite transitioned from Central Laundry to GNNE, that Defendants “assured Central Laundry employees that they would have continued employment with GNNE, if they wanted it, ” that George and James “were at the worksite every day from March through August 2018, ” that “James Rengepes continued to supervise, assign, and direct the work of GNNE, Inc's floor-workers . . . just as he had for Central Laundry[, ]” and that “George Rengepes remained in charge of the restaurant customer accounts that he had developed over many years for Central Laundry [and] continued to recruit, hire, supervise, direct, pay, and keep cursory records of the homeless people he hired as day-laborers.” In sum, the Secretary asserts that GNNE continued the same FLSA violations that Central Laundry had been enjoined by the Court from committing, and that GNNE was “a transparent attempt to continue business as usual, while avoiding the consequences of the Court's judgment in Central Laundry I and the preliminary injunction in the present case.”

         Defendants deny this contention. They state that many of the facts asserted by the Secretary are false, and instead claim that “George and James merely helped [Angeliki] and were hardly employees within the meaning of the FLSA on or after March 20, 2018[.]” They also emphasize that Angeliki “owned, operated and managed” GNNE, that she entered a commercial lease agreement with George and Ourania Rengepes (George's wife) for the worksite, that GNNE “entered into an asset sale agreement with Central to buy its assets, ” and that Angeliki “wanted full and total control of the laundry and made sure that George and James were out of the business.”

         II. LEGAL STANDARD

         Summary judgment must be granted if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Radich v. Goode, 886 F.2d 1391, 1395 (3d Cir. 1989). Materiality of facts is determined by reference to the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute “exists if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” U.S. ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 93 (3d Cir. 2018) (internal quotation marks omitted). “[A]ll reasonable inferences” must be drawn in the non-moving party's favor. Burton v. Teleflex Inc., 707 F.3d 417, 425 (3d Cir. 2013).

         III. DISCUSSION

         The Secretary seeks summary judgment against Defendants on the following twelve issues relating to conduct during the “relevant time period”: (1) George and James are employers under the FLSA and therefore jointly and severally liable for FLSA violations, 29 U.S.C. § 203(d); (2) Central Laundry is a covered enterprise under the FLSA, id. at § 203(s)(1); (3) Defendants violated the minimum wage provisions of the FLSA, id. at § 206(a); (4) Defendants violated the overtime provisions of the FLSA, id. at § 207(a)(1); (5) Defendants violated the child labor provisions of the FLSA, id. at § 212(c); (6) Defendants violated the recordkeeping provisions of the FLSA, id. at § 211(c);[4] (7) Defendants violated the anti-retaliation provisions of the FLSA, id. at § 215(a)(3); (8) Defendants are liable to various employees for $133, 335 in minimum wage and overtime back wages, id. at § 216(b); (10) Defendants are liable for an additional $133, 335 in liquidated damages, id.; (11) Defendants owe former employee Adam Nickels $57, 967.50 in front pay as a result of James Rengepes's retaliatory firing in violation of the anti-retaliation provisions of the FLSA, id. at § 216(b); and, (12) Defendants' violations warrant permanent injunctive relief, id. at § 217.

         A. Covered Employers under the FLSA

         In order for George and James to be individually liable under the FLSA, they must be “employers” as defined by the Act; the Secretary contends that there is no genuine dispute of material fact as to whether they qualify as employers under the statute.

         The FLSA defines an employer as: “any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). To determine whether a defendant is a covered employer under the Act, the Third Circuit has adopted an “economic realities” test, which requires analysis of whether the purported employer has “(1) authority to hire and fire employees; (2) authority to promulgate work rules and assignments, and set conditions of employment, including compensation, benefits, and hours; (3) day-to-day supervision, including employee discipline; and (4) control of employee records, including payroll, insurance, taxes, and the like.” In re Enterprise Rent-A-Car Wage & Hour Emp't Practices Litig., 683 F.3d 462, 469 (3d Cir. 2012). These factors, however, are not “exhaustive” and should not be “blindly applied”-“[i]f a court concludes that other indicia of ‘significant' control are present to suggest that a given employer was a joint employer of an employee, that determination may be persuasive[.]” Id. (internal quotation marks omitted).

         George and James concede that they were employers at Central Laundry prior to March 20, 2018-the day Angeliki incorporated GNNE-but they argue that they were no longer employers after that date and therefore that they cannot be held responsible for any subsequent violations. But even as to the period of time following March 20, Defendants do not make any affirmative argument as to why George and James would not qualify as employers covered by the FLSA. Rather, Defendants employ two strategies: they attempt to undermine the individual pieces of evidence that the Secretary puts forward, and they advance a separate legal theory squarely rejected by binding precedent.

         Beginning with the record evidence supporting employer status, the Secretary identifies numerous pieces of evidence that show that George and James were-and continue to be- employers under the FLSA even after GNNE's incorporation. First, the Secretary points to his First Request for Admissions, where he requested Defendants admit that “during the relevant time period”:[5] George and James were “employers” as defined by the FLSA; they “made decisions relating to the compensation policies affecting laundry floor workers, mechanics, drivers, and drivers' helpers[;]” they were “responsible for hiring, firing, scheduling, setting pay rates for, assigning work to, and/or supervising employees at Olympic Linen[;]” and James “made decisions relating to Central Laundry's policy regarding hours worked by Central Laundry employees[.]” Defendants never responded to the First Request for Admissions.

         Under Federal Rule of Civil Procedure 36(a)(3), the “[e]ffect of [n]ot [r]esponding” to a request for admission is that the “matter is admitted.” It is “well settled that admissions obtained under Rule 36, including matters deemed to be admitted by a party's failure to respond to a request for admissions, can form the basis for granting Summary Judgment” and that “failure to respond to a request for admissions will permit entry of a summary judgment if the facts admitted are dispositive of the case.” Sony Corp. of Am. v. D S Audio, Inc., 1988 WL 119601, at *1 (E.D. Pa. Nov. 7, 1988) (citing Moosman v. Joseph P. Blitz, 358 F.2d 686 (2d Cir. 1966)); O'Campo v. Hardisty, 262 F.2d 621 (9th Cir. 1958)); see also Sec'y U.S. Dep't of Labor v. Kwasny, 853 F.3d 87, 91 (3d Cir. 2017) (“Matters deemed admitted due to a party's failure to respond to requests for admission are ‘conclusively established' under Federal Rule of Civil Procedure 36(b), and may support a summary judgment motion.”) (footnotes omitted). Defendants do not engage with this “well settled” law, Sony Corp., 1988 WL 119601, at *1, but instead simply declare-without legal argumentation-that reliance on the First Request for Admissions “should be rejected out of hand” and that it is “unworthy of consideration by this Court[.]” Absent legal argument, these assertions have no currency. Accordingly, Defendants are deemed to have admitted both the legal conclusion that George and James were “employers” under the FLSA and the various supporting facts about George and James's conduct while working at Central Laundry and/or GNNE.

         Second, the Secretary points to Angeliki's sworn statement, which states that George “supervised and directed the work of all drivers and drivers' helpers at GNNE” and that James “supervised and directed the work of the floor workers who operated the various laundry and ironing machines at GNNE[.]” Defendants contest the admissibility of Angeliki's statement on grounds of spousal privilege. Federal Rule of Evidence 501 states that “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Defendants argue that under Pennsylvania law, in the usual course “neither husband nor wife shall be competent or permitted to testify against each other, ” 42 Pa. C.S.A. § 5924(a), and that “neither husband nor wife shall be competent or permitted to testify to confidential communications made by one to the other, ” unless privilege is waived by the nontestifying spouse, id. at § 5923. Pennsylvania law, however, does not govern here. Rule 501 makes clear that state privilege law applies only where “state law supplies the rule of decision” for the underlying claim, and that otherwise (subject to exceptions not relevant here), “[t]he common law . . . governs a claim of privilege.” In this case, the FLSA-a federal statute-provides the rule of decision, and thus common law applies. Under federal common law, “one spouse may . . . voluntarily testify against the other.” In re Grand Jury Matter, 673 F.2d 688, 691 (3d Cir. 1982) (citing Trammel v. United States, 445 U.S. 40, 53 (1980) (concluding that “the witness spouse alone has a privilege to refuse to testify adversely; the witness may be neither compelled to testify nor foreclosed from testifying”)). Consequently, Angeliki's testimony is not excluded on the basis of spousal privilege.

         Third, the Secretary points to George's sworn testimony that: “[f]or GNNE, ” he would “tell [drivers] what linens to pick up or deliver” and “how much money or checks to pick up;” that for the homeless people GNNE employed, George “kept the same records for GNNE that [he] kept when [he was] doing that for Central;” that George “directed” the work of the homeless employees just as he had at Central Laundry; and that when Angeliki was not at GNNE, George would pay the homeless employees.

         Fourth, the Secretary points to James's sworn testimony that even after this Court's injunctions, he continued paying employees in cash and had “no record” of those cash payments. Angeliki confirmed in her sworn statement that James continued paying cash wages to workers after GNNE was incorporated, and she also indicated that James “would manipulate GNNE, Inc. employees' time records to make it appear that they worked few[er] hours than they really did, and to reduce or eliminate the amount of any overtime they were due.” Each piece of evidence relied upon by the Secretary is probative of employer status under the “economic realities” test: Defendants admit that George and James had “hir[ing] and fir[ing]” authority; sworn testimony shows that they “set conditions of employment, including compensation, ” engaged in “day-to-day supervision” of employees, and were responsible for “control of employee records.” More broadly, the extensive evidence presented by the Secretary represents “indicia of ‘significant' control [that] suggest” that George and James were employers. Enterprise Rent-A-Car, 683 F.3d at 469.

         Beyond their attempts to cast doubt on the admissibility or probative value of certain pieces of evidence (namely the Request for Admissions and Angeliki's sworn statements), Defendants also advance the theory that Angeliki was an “employer, ” and therefore by implication that Defendants were not “employers.” They rely in large part on two sworn declarations made by former drivers for GNNE, Dimitrious Karagiannis and Thomas Fisher. Those declarations both state that the declarants believed that Angeliki owned GNNE, that Angeliki hired them, that they “reported to [Angeliki] the entire time [they] worked for GNNE, ” that Angeliki “directed [their] work as a driver at GNNE and would tell [them] which customers and which routes [they] would take on the days that [they] worked at GNNE, ” and that Angeliki “paid [them] on a weekly basis during the time that [they] worked at GNNE.” In addition, Defendants rely on Angeliki's own testimony that she engaged in activity probative of “employer” status, such as hiring and firing certain employees. This approach fails because whether Angeliki was an “employer” and whether Defendants were “employers” are two independent questions; one does not determine the answer to the other in that, under the FLSA, an employee may have “multiple employers that are simultaneously responsible for compliance with [the Act].” Davis v. Abington Mem'l Hosp., 817 F.Supp.2d 556, 563 (E.D. Pa. 2011); Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 148 (3d Cir. 2014); 29 C.F.R. § 791.2(b). Thus, even if Angeliki were also an employer, that would not undercut the Secretary's evidence that George and James were also employers.

         In sum, the Secretary points to undisputed evidence that, even after GNNE was incorporated and operating, James and George met the factors of the “economic realities” test described in Enterprise Rent-A-Car. Defendants have raised no genuine question of material fact as to whether James and George were employers. Therefore, summary judgment will be granted; James and George were covered employers under the FLSA for the full “relevant time period.”

         B. Central Laundry was a Covered Enterprise prior to March 20, 2018

         The Secretary also seeks summary judgment as to Central Laundry's responsibility for FLSA violations throughout the “relevant time period, ” i.e., both before and after GNNE was incorporated. Only certain defined “enterprises” are covered by the FLSA: In order to be a “covered enterprise” for purposes of the FLSA, the enterprise must, inter alia, have a “gross volume of sales made or business done . . . not less than $500, 000[.]” 29 U.S.C § 203(s)(1)(A)(ii). Defendants do not contest that Central Laundry was an enterprise covered by the FLSA prior to March 20, 2018. However, they appear to contest whether Central Laundry was covered by the statute, and therefore responsible for any violations, after March 20. The Secretary, for his part, offers no argumentation specific to the post-March 20 time period.

         While unclear due to the parties' lack of argumentation on the issue, it appears that Central Laundry sold all of its assets to GNNE on March 20, 2018, and from that point forward Central Laundry made no “sales” and did no “business;” consequently, from March 20, 2018 forward, Central Laundry would not have had a “gross volume of sales made or business done . . . not less than $500, 000[.]” Id. In any event, the Secretary does not point to specific evidence in the record that would indicate Central Laundry satisfied the criteria for a “covered enterprise” during the post-March 20 period; and, as GNNE is not a party to this case, its sales do not help satisfy the gross sales ...


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