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Wage & Hour Law Update

Two New York Courts Rule FLSA Defendants Can Proceed with Counterclaims

Suing one’s employees—current or former—is fraught with expense, risk and the very real possibility of obtaining no relief whatsoever. For these reasons, employers typically do not contemplate or if contemplated decide not to sue employees (outside of the context of restrictive covenants and trade secrets) unless forced into a customary corner: as the defendant in a lawsuit brought by an employee or employees. Counter-claims in wage and discrimination lawsuits have become a vehicle for assertion of claims against employees, an otherwise underdeveloped area of the law. Attorneys representing employees are quick to portray such allegations as retaliatory and meritless—nothing more than “sour grapes” at having been sued in the first place. However, in recent weeks, two New York federal courts have permitted employers to proceed to discovery and/or trial on claims that plaintiff/former employees conduct violated the law. Gortat v. Capala Bros., 2011 U.S. Dist. LEXIS 149731 (E.D.N.Y. Dec. 30, 2011); Zu Guo Yang v. Shanghai Cafe Inc., S.D.N.Y., 10-cv-08372, 2/8/12. 

In Gortat the wage-and-hour plaintiffs were accused by defendant, through its counter-claim, of having “threatened defendants’ employees with physical harm if they continued their employment at Capala Brothers or aided defendants in any respect with this ligation.” These threats, in defendants’ view violated the law because it “caused their employees to suffer from low morale impairing their employees’ productivity and ultimately causing damage to defendants’ business through the loss of contracts that they would have obtained had their employees been more productive.”    Federal Judge Leo Glasser agreed that this constituted a cognizable claim under the law, finding that defendants could proceed to trial on this theory because there was a “triable issue of fact concerning whether the counter-defendants used wrongful means to injure defendants’ relationship with their employees.”

More recently, in Yang, plaintiffs—former employees at defendants’ Chinese restaurant who engaged in a lengthy and vociferous campaign against the restaurant and its owner, including distribution of flyers and in-person protests—were accused by defendants through their counter-claim of making defamatory statements. While Judge Louis Stanton of the Southern District ruled that many of plaintiffs’ statements were protected from a defamation claim as statements of pure opinion (which cannot support a claim for defamation), the individual owner-defendant was entitled to proceed on his claim regarding the alleged defamatory statement by plaintiffs that he “stole tips” from the workers. This statement “alleged theft” and thus “went beyond what is alleged [in the wage lawsuit].”   

It remains to be seen whether the wage-and-hour defendants (i.e., the employers) in Gortat or Yang can establish liability at trial and, just as importantly, any damages flowing from the alleged interference and alleged defamation. However, as employment litigation and particularly wage litigation continue unabated, available counter-claims should always be considered as possible leverage in litigating and seeking to resolve such claims. Of course, the pros and cons of filing such counterclaims should be fully explored with counsel.