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Wolfe v. AGV Sports Group, Inc.

United States District Court, D. Maryland

November 3, 2014

ROSS M. WOLFE, et al.,
v.
AGV SPORTS GROUP, INC., et al.

MEMORANDUM

CATHERINE C. BLAKE, District Judge.

Plaintiff Ross M. Wolfe filed this putative class action on behalf of himself and others against AGV Sports Group, Inc. ("AGV") and its founder and president, Michael Parrotte (collectively, "defendants"), alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., the Maryland Wage and Hour Law ("MWHL"), Md. Code, Lab. & Empl. § 3-401 et seq., the Maryland Wage Payment and Collection Law ("MWPCL"), Md. Code, Lab. & Empl. § 3-501 et seq., and Maryland common law.[1] Wolfe contends that defendants misclassified Wolfe and others like him as unpaid interns when they were actually employees entitled to wages. Defendants have moved to dismiss Wolfe's complaint for failure to state a claim.[2] For the reasons stated below, defendants' motions will be denied.

BACKGROUND

Wolfe's complaint alleges the following facts. AGV is a company based in Buckeystown, Maryland, that designs, develops, and produces motorcycle safety clothing for the road race and sportbike markets. (Compl. ¶ 23, ECF No. 1.) Michael Parrotte is AGV's founder, president, and sole paid employee. (Compl. ¶¶ 15-16.) AGV has an "intern program" that it advertises throughout the nation and globe, and for which Parrotte interviews, hires, and supervises interns. (Compl. ¶ 3, 16, 24.) AGV has a policy of classifying the "significant majority" of its program participants as "Unpaid Interns." (Compl. ¶ 1.) Accordingly, AGV pays no wages to them. (Compl. ¶ 1.) Yet AGV used these unpaid interns to perform AGV's core business functions, including: sales and marketing, fashion design, graphic arts, information technology, legal, management, social networking, supply chain management, web development, and video production-all of which are functions typically performed by regular employees. (Compl. ¶ 6.) Indeed, because AGV has no paid employees other than Parrotte, "absent [the] Unpaid Interns, AGV would have no day-to-day business operations...." (Compl. ¶ 7.) This intern program is, in other words, a "sham" intended to circumvent federal and state wage and hour laws. (Compl. ¶¶ 3-4.)

Wolfe worked as one of AGV's unpaid interns from approximately May 15, 2012, to approximately July 2012. (Compl. ¶ 4.) During that time, Wolfe worked in AGV's law department, where he logged 28 or more hours per week. (Compl. ¶ 14.) Wolfe's job responsibilities included performing document review, conducting research, and crafting deposition questions-all in connection with a lawsuit in which AGV was a plaintiff. (Compl. ¶ 33.) Wolfe neither reported to, nor received training from, any supervising attorney while working in the law department. (Compl. ¶ 35.)

Wolfe was not AGV's only unpaid intern-there were at least fifty others. (Compl. ¶ 49.) The story for them was the same: instead of receiving academic or vocational training, these interns were responsible for AGV's daily operations. (Compl. ¶ 28.) In other words, the unpaid interns carried out tasks directly related to, and primarily benefiting, AGV and its day-to-day operations. (Compl. ¶ 37.) For example, interns in the video department created promotional videos to market AGV's products, while other interns carried out search engine optimization to increase AGV's online presence. (Compl. ¶ 38.) Had Wolfe and the other unpaid interns not done their work, AGV would have had to hire actual employees. (Compl. ¶ 40.)

AGV and Parrotte carried out this practice in willful violation of both federal and state labor laws. (Compl. ¶ 41.) Defendants did not make a good faith effort to comply with the FLSA's minimum wage provisions. (Compl. ¶ 69.) As evidence of this willfulness, defendants did not keep accurate or adequate records of the hours worked by Wolfe and the other interns. (Compl. ¶ 43.) Moreover, AGV failed to post required notices under the FLSA. (Compl. ¶ 44.)

Wolfe filed this lawsuit on May 15, 2014. Defendants have filed motions to dismiss.

ANALYSIS

When ruling on a motion under Rule 12(b)(6), the court must "accept the well-pled allegations of the complaint as true, " and "construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). "Even though the requirements for pleading a proper complaint are substantially aimed at assuring that the defendant be given adequate notice of the nature of a claim being made against him, they also provide criteria for defining issues for trial and for early disposition of inappropriate complaints." Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). "The mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6)." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "[A] plaintiff need not forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements.... [and] advance the plaintiff's claim across the line from conceivable to plausible.'" Walters, 684 F.3d at 439 (citations omitted) (quoting Twombly, 550 U.S. at 570).

I. FLSA Claim

Wolfe alleges facts that plausibly support his claim for relief under the FLSA. Though both sides focus their briefing on whether Wolfe meets the definition of an "unpaid intern" under guidance provided by the Wage and Hour Division of the U.S. Department of Labor ("DOL"), see Wage and Hour Div., U.S. Dep't of Labor, Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act (Apr. 2010), http://www. dol.gov/whd/regs/compliance/whdfs71.pdf ("Fact Sheet #71"), that focus is too limited. Analysis exclusively under Fact Sheet #71 would not be dispositive because that fact sheet is merely persuasive authority. See Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000) (noting that agency interpretations in opinion letters, policy statements, agency manuals, and enforcement guidelines "lack the force of law" and are only "entitled to respect" under Skidmore v. Swift & Co., 323 U.S. 134 (1944), and not " Chevron -style deference"); accord Reich v. Parker Fire Prot. Dist., 992 F.2d 1023, 1027 (10th Cir. 1993) (declining to grant Chevron deference to DOL's six criteria and finding the criteria "relevant but not conclusive" to analysis of whether trainees were employees). Moreover, the fact sheet itself states that its "publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations." Fact Sheet #71.

Instead, the dispositive issue here is whether Wolfe was an "employee" of AGV's within the meaning of the FLSA. To state his FLSA claim, Wolfe "bear[s] the initial burden of proving that an employer-employee relationship exists...." Benshoff v. City of Virginia Beach, 180 F.3d 136, 140 (4th Cir. 1999); see also Rutherford Food Corp. v. McComb, 331 U.S. 722, 727-28 (1947) (beginning FLSA inquiry by deciding whether employer-employee relationship existed). Because the defendants do not deny they were "employers" under the FLSA, all Wolfe must do at this stage is allege facts supporting the inference that he was an "employee" of AGV's. If so, AGV was required to pay him minimum wage for the time during which AGV employed him. See 29 U.S.C. §§ 206, 215. The court concludes that Wolfe has met his burden.

The FLSA defines an "employee" as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). And an individual is employed when he is "suffer[ed] or permit[ted] to work" by his employer. 29 U.S.C. § 203(g). Because Congress intended the FLSA to "provide a remedy to employees for their employers' wage and hour violations[, ]" Gionfriddo v. Jason Zink, LLC, 769 F.Supp.2d 880, 890 (D. Md. 2011) (emphasis added), its definition of "employ" has "striking breadth[, ]" Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (citing Rutherford Food Corp., 331 U.S. at 728). But that definition has limits. Relevant here, the Supreme Court has held that trainees, under certain circumstances, are not "employees" during their training period. See Walling v. Portland Terminal Co., 330 U.S. 148, 153 (1947). Although the circuits differ in their understanding of Portland Terminal 's impact on the employee analysis, [3] the Fourth Circuit unequivocally applies a "primary beneficiary" test. See McLaughlin v. Ensley, 877 F.2d 1207, 1209 (4th Cir. 1989). This test considers "whether the employee or the employer is the primary beneficiary of the trainees' labor." Id. The focus is on "the nature of the training experience"-what interns do, what they learn, and what guidance they receive. Id. at 1210. Notably, the Fourth Circuit in Ensley expressly declined to rely on the ...


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