Healthcare System and its CEO Held Not Liable by New York District Court for Wage Claims at Single Hospital in the Hospital System
The issue of whether a hospital system (operating over 25 facilities) and its Chief Executive Officer can be held liable for wage claims by workers employed at a single entity within the system was decided by the Eastern District of New York in Wolman v. Catholic Health System of Long Island, Inc. Applying traditional tests to assess “joint employer” liability, the District Court concluded that plaintiffs did not plead the basic elements in the complaint to hold the hospital system and its CEO liable for alleged unpaid wages. The Court reached a similar conclusion regarding several underlying claims — failure to compensate employees for meal periods and for time spent pre- and post-shift — based on plaintiffs’ inadequate pleadings.
Three plaintiffs, who were employed at the Good Samaritan Hospital, commenced a putative class action against the Hospital, the entire Catholic Health System of Long Island and its CEO under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). They sought overtime and additional wages for which they were not compensated. On behalf of a putative class, they claimed they often worked through lunch yet were not paid because of an automatic timekeeping deduction for meal periods, they worked before and after their scheduled shifts and they were not compensated for attending training programs. The proposed class included up to 15,000 employees.
In moving to dismiss the complaint, the Hospital, the Health System and its CEO argued that the complaint did not adequately establish each defendant was part of the employer-employee relationship. Defendants further argued that plaintiffs were not entitled to the claimed compensation because the alleged work at issue was not compensable.
The Court, utilizing the “economic realities” test, considered whether any entity beyond Good Samaritan Hospital could be held liable as alleged in the complaint. This analysis requires scrutinizing the degree of formal control exercised over an employee. In the absence of formal control, the Court considered the degree of “functional control” exercised over the employee. The Court found unpersuasive plaintiff’s allegations that the Health System presented itself as a unified and integrated entity, utilized the same meal-deduction policy, had common ownership and was engaged in a joint venture. The Court also rejected arguments of agency or alter-ego relationship because the complaint merely asserted conclusory statements to support these theories.
The Court employed the same economic realities test to consider whether the CEO could be held liable. It concluded that his alleged responsibility to manage the Health System, to make decisions affecting staff benefits, Health System operations and significant functions and to create and/or implement policies failed to state a plausible claim against the CEO. In sum, the CEO did not “possess the power to control the workers in question.” The complaint did not claim the CEO had any direct involvement with the employees. Furthermore, the Court noted that the more numerous the employees the less the courts are likely to hold a senior executive individually liable.
Finally, the Court analyzed whether the lead plaintiffs properly asserted claims for denial of wages and concluded that they did not meet their burden for many of their claims. In some instances, the Court differentiated between viable claims asserted by one plaintiff and insubstantial claims asserted by other plaintiffs.
Analysis for Employers
Individual liability and corporate organization liability are often litigated. In some cases, courts have found senior executives to be potentially liable. The determination will depend on the extent of control exercised by the senior executives. Likewise, the mere identification of an entity as part of larger organization or system will not alone create liability of the larger entity for wage claims asserted against the smaller company or component. Gibbons attorneys in the Employment and Labor Department are available to assist employers with these matters.