Procedural History a. Initial Filings On February 10, 2023, Potentia Management Group, LLC, (hereinafter referred to as Potentia Management and / or ‘plaintiff’) filed a summons and complaint against D. W. (hereafter referred to as Ms. W and or ‘defendant’) seeking a monetary judgment in the amount of $5,747.92 for the “overpayment of wages”. Specifically, the plaintiff asserts Ms. W. failed to adequately perform work related duties during her time of employment at Potentia Management and as such, monies paid to her should be refunded. The plaintiff also set forth in the original complaint that the defendant owes an additional $2,000.00 for “fees requested” on account of the defendant’s alleged breach of the employment contract between the parties. On April 4, 2023 an amended complaint was filed by the plaintiff and the monetary judgment for “fees” was withdrawn however, the $5,747.92 for the alleged overpayment of wages remained. On March 15, 2023 the defendant filed a verified answer denying each of the claims asserted and requested dismissal of the action. In particular, the answer states that on May 20, 2022 the plaintiff made false accusations against the defendant whereby, it was alleged the defendant had inaccurately reported time worked. The defendant claims that based upon these false allegations she was wrongfully terminated. The defendant also filed counterclaims based upon two separate causes of action. The first counterclaim asserts that the underlying lawsuit was retaliatory in nature due to the defendant having filed a wage claim with the New York State Department of Labor. To support this conclusion the defendant notes that on January 24, 2023 the Department of Labor held a preliminary conference in connection with the wage claim that had been filed, and within less than three weeks thereafter, the underlying proceeding was commenced against Ms. W. The defendant states that Potentia Management’s actions were retaliatory and unlawful pursuant to Labor Law §215. Therefore, a monetary award for liquidated damages in the amount of $20,000.00 should be awarded as a result of the plaintiff’s labor law violation. The defendant also sought $1,000.00 representing monies owed to her for work performed between May 16, 2022 and May 20, 2022.1 The defendant also requested a monetary award in the amount of $1,250.00 due to the defendant failing to provide wage statements in direct violation of Labor Law §195. On April 19, 2023 the plaintiff filed a “Reply to Counterclaims” arguing the submission filed by the defendant was not properly interposed, the defendant failed to state a cause of action, and Labor Law §215 does not apply in this matter as the defendant was fired “for cause”. The plaintiff further justified the defendant’s termination of employment claiming Ms. W. “took wages for work not performed”. The plaintiff also added a general statement that the defendant “breached” her contract with Potentia Management by leaving the work site, and then claiming payment for time spent away from the office. b. Post-Filing Motions for Consideration The defendant filed a “Notice of Motion to Dismiss” on April 19, 2023 arguing that New York State Law does not provide a remedy for employers to seek repayment of wages from employees. Rather, the sole remedy for an employer who is not satisfied with an employee’s work performance is to terminate the relationship and discharge the employee. The defendant further notes that while Potentia Management styles its claim under the theory of breach of contract, there is no ‘special agreement’ which would allow for the recovery of wages under this premise. Ms. W. asserts that without the plaintiff alleging there was a ‘special agreement’ in place, as required by the labor laws along with applicable case law, a claim to recover income paid due to a breach of contract is insufficient on its face. The defendant also states that any other attempt by the plaintiff to take away her salary runs contrary to Labor Law §193. The defendant further requests that upon the plaintiff’s claim being dismissed, the counterclaims filed herein must still be entertained as they are meritorious requiring an award of monetary damages. On May 25, 2023 the plaintiff filed responding papers to the defendant’s motion to dismiss. The plaintiff included affirmations from Anthony Vennero, president of Potentia Management along with Kristen Vennero who serves as Vice President of the company. The plaintiff argues in these filings that Potentia Management’s claim is not based upon Ms. W’s work being entirely deficient rather, there was a “deliberate scheme” to submit false documents along with time slips. Specifically, Ms. W. was hired to be a “inside sales person” and it is alleged she was not present on-site during work hours as required. The plaintiff further states that upon the defendant submitting “false pay vouchers”, for time spent away from the office, Ms. W. would be compensated which in turn, resulted in monies being unlawfully paid to and retained by the defendant. The plaintiff further explains there was in fact an agreement between the parties wherein Ms. W. was to be physically present at the plaintiff’s place of business and utilize company telephones for work related duties which she did not comply with. Potentia Management argues that since this contingency for payment of income was not adhered to, the defendant unlawfully received compensation. The plaintiff further notes in the responding papers, that upon the court entertaining a motion to dismiss pursuant to CPLR §3211(a)(7), the sole criterion is whether the pleading itself sets forth a cause of action and the allegations must be liberally construed in the light most favorable to the plaintiff. The plaintiff further argues that upon applying this legal standard to the claim filed, a meritorious cause of action is set forth and the motion to dismiss should be denied. The plaintiff also argues that the defendant’s motion is “in reality” one seeking summary judgment pursuant to CPLR §3212 along with §3211(c), and being there is no affirmation submitted by someone having knowledge of the underlying facts in this matter, the motion cannot be entertained. In addition, the plaintiff states that the defendant’s motion for “summary judgment” is premature as there are questions of fact to be resolved and discovery to be undertaken. The plaintiff also contemporaneously filed a “Notice of Motion to Amend Complaint” to allow for a cause of action based upon “unjust enrichment” to be advanced in this litigation against the defendant. Specifically, the plaintiff describes the defendant’s conduct as being “deceptive and fraudulent”, and the money paid during to Ms. W. during the time of employment has resulted in her being unjustly enriched. The amount sought under this legal theory is a money judgment in the amount of $5,747.92 representing all of the monies paid to Ms. W. during her period of employment with Potentia Management. In addition, on May 25, 2023, the plaintiff also filed a “Notice of Motion for Summary Judgment to Dismiss Defendant’s Counterclaims”. In the papers submitted, the plaintiff argues the defendant was not an employee at the time the action was commenced thereby, precluding a legal claim under Labor Law §215. In essence, the plaintiff submits that if a person was not an employee at the time of an alleged retaliatory action, there is no cause of action as prescribed by statute. The plaintiff further noted, the defendant was terminated some eight months prior to the time this action was commenced. On June 5, 2023 the defendant filed a “Memorandum of Law in Opposition to the Plaintiff’s Motion to Amend Complaint and in Further Support of Motion to Dismiss Complaint”. The defendant asserts the plaintiff incorrectly characterized the motion to dismiss as a motion for summary judgment. The defendant goes on to state that since a motion for summary judgment under CPLR §3212 is not pending, there is no merit to the plaintiff’s argument that the defendant’s pleadings were not properly filed i.e. they were premature and do not contain an affirmation from someone with knowledge of the underlying facts. The defendant also sets forth that the plaintiff’s application seeking to amend the complaint should be determined in conjunction with the motion to dismiss. The defendant further supports this contention by stating that if a proposed amendment lacks merit or is insufficient on its face, it is improper for the court to grant leave to amend. Counsel for the defendant goes onto argue that the second amended complaint “manifestly lacks merit” and for the same reasons as the first amended complaint is deficient, the motion to amend should be denied and motion to dismiss granted. As it relates to Potentia Management’s request to dismiss the counterclaims, the defendant argues a lawsuit based upon Labor Law §215 is still viable upon an employer or former employer taking retaliatory action. The defendant alleges that when the plaintiff realized that the Department of Labor was going to make an award in Ms. W.’s favor the underlying lawsuit was filed. Counsel further states that this is exactly the sort of conduct the legislature sought to prohibit as antiretaliation laws not only protect employees but also the integrity of administrative agencies enforcement procedures. The defendant concludes by adding that a claim for damages under §198(1- d) still remains as the failure to provide wage statements is separate and distinct cause of action other than a claim under §198(1-a) for back wages which has been resolved. c. Oral Arguments The matter came before the court on July 20, 2023 for further oral argument. At this time the attorney for the plaintiff argued that motions to amended are “freely granted” and the claims of unjust enrichment as well as breach of contract are meritorious in nature. Counsel for the defendant then re-iterated that the pending motion to dismiss along with the motion to amend are intrinsically intertwined as the initial pleading along with the proposed amended pleading fail to state a proper cause of action. Ms. W.’s attorney argued that his client was an hourly employee at Potentia Management who received compensation on a weekly basis. Based upon this employment relationship the plaintiff’s only recourse was to terminate the defendant if her job performance was sub-par or not meeting expectations. The plaintiff’s attorney then countered by arguing that while Ms. W. was not subject to any disciplinary action during the course of employment, she was immediately terminated when it was discovered the employment agreement was not being adhered to. It is noted, that during the course of oral argument, the court inquired as to whether the defendant served the New York State Attorney General with notice of the counterclaim in accordance with Labor Law §215. The defendant acknowledged that such notice had not been provided however, this matter was subsequently addressed as proof was submitted demonstrating that on July 20, 2023 a PDF of all filed pleadings and briefs were served upon the Attorney General’s Office. The court finds and agrees with the defendant, that providing notice of the action is not a condition precedent requiring dismissal of the action. (Kubersky v. Cameron Indus., Inc. 173 AD3d 541 [1st Dept. 2019]) The defendant has cured any defect in this regard and may proceed with the counterclaim based upon unlawful retaliation. Upon conclusion of the proceedings, the court permitted the parties to submit further memoranda of law on or before August 10, 2023. On August 8, 2023 counsel for the defendant filed a “Supplemental Memorandum of Law” along with a “Supplemental Attorney Affirmation”. On August 10, 2023 the attorney for Potentia Management filed a “Further Argument Submission”. Such filings will be considered in the findings of fact and conclusions of law as set forth herein. Findings of Fact and Conclusions of Law a. Motion to Dismiss Plaintiff’s Complaint / Motion to Amend Complaint The defendant’s initial complaint and first amended complaint contain one cause of action against the defendant, that is the defendant breached her employment contract with the plaintiff. Based upon this breach the sum of $5,747.92 is sought as a result of an “overpayment of wages”. The plaintiff further seeks leave to amended the original filing by including a second cause of action citing the defendant has been “unjustly enriched” and in “fairness and good conscience” monies paid to Ms. W. should be returned. The court notes, the proposed amended complaint also sets forth a purported third cause of action however, contained within, there is only a mere resuscitation of the factual allegations in dispute. The allegations in this regard, consists of the defendant being absent from the plaintiff’s offices and charging Potentia Management for services being rendered during said time period. There is no actual cause of action articulated therein, and as such, the information set forth will be considered upon determining whether the plaintiff may pursue the claims under breach of contract or unjust enrichment. Initially, the court finds that logic and case law support the contention that when considering a motion to dismiss a complaint, that any proposed amendment must also be considered simultaneously as a plaintiff is “not entitled to amend the complaint where…. they failed to demonstrate the merit of the proposed amendment.” (Di Matteo v. Gray, 280 AD2d 929 [4th Dept., 2001]) Being that there is a motion to dismiss and motion to amend pending, such will be considered together as if a claim is not legally sufficient, leave to amend should be denied. (Ricci v. New Era Cap Co., Inc., 224 AD2d 963 [4th Dept. 1996]) The court further finds the defendant has properly filed and articulated a motion to dismiss pursuant to CPLR §3211(a)(7) to be considered despite plaintiff’s contentions. The defendant set forth that dismissal is being sought based upon Potentia Management’s failure to state a valid cause of action upon which relief maybe granted. As it relates to the breach of contract claim, the procedural history of the case supports this conclusion. The defendant has consistently argued there is no ‘special agreement’ between the parties to support an action to collect wages which have been paid. Absent this requirement, a viable cause of action seeking recoupment of monies paid to an employee based on a breach of contract cause of action cannot be maintained. This holds true even if an employee was not performing required tasks, or if they were utilizing their time of employment to pursue unrelated business. The same analysis applies to the plaintiff’s claims under the theory of unjust enrichment or that of fraud as alluded to in the proposed amended complaint. The defendant has maintained that the plaintiff, or any employer, may not file a lawsuit seeking repayment of wages as this type of attempt to “claw back” wages is not permissible under any legal theory asserted. Therefore, the court finds the plaintiff’s request to consider the defendant’s motion for dismissal, as one for summary judgment is misplaced. In making such a determination, the court finds it imperative to further draw the distinction between a request for dismissal and one that seeks summary judgment. It has long been held that a party seeking relief for summary judgment must provide sufficient proof to establish a cause of action to “warrant the court as a matter of law in directing judgment” (CPLR §3212(b); Zuckerman v. City of New York, 49 NY2d 557 [1980]. Here, defendant asserts there is no valid cause of action at all to allow for recovery, and dismissal is the appropriate remedy. Thus, any argument by the plaintiff that the defendant has not complied with CPLR§ 3212(b), governing a summary judgment demand, is not relevant and need not be considered. Turning to the merits of the defendant’s motion to dismiss, the court will consider whether any valid cause of action has been pled in the initial filings or is further articulated in the plaintiff’s proposed amended complaint. In the various submissions, the plaintiff categorizes the monies paid to the defendant during her time of employment as an “overpayment of wages”, of which they seek repayment based upon the defendant’s breach of an employment contract. The plaintiff does not attach a written contract to any of the pleadings submitted, instead sets forth there was a verbal agreement with Ms. W. as to when, where and the manner in which work duties were to be performed. In turn, compensation was to be paid weekly based upon the number of hours worked by Ms. W. Pursuant to Anthony Vennero’s affirmation, who is the President of Potentia Management Group, LLC, the defendant’s job duties were to contact prospective customers by telephone or electronic mail in an effort to obtain business. Such activities were to be conducted at the plaintiff’s place of business and not offsite. Mr. Vennero further re-iterated that the defendant did not have any work related functions outside of the office, as she was an “inside sales person”. Upon review of the pleadings, the court finds that even if the plaintiff’s account of events are true and accurate that the terms of employment are not beyond any ordinary agreement to perform work for wages. In essence, there is no special agreement as it relates to the employment relationship between the parties. As such, without pleading there was a “special agreement” between the parties, recovery of back wages is prohibited and the plaintiff’s cause of action for breach of contract is not plausible and lacks merit. (Cerciello v. Admiral Ins. Brokerage, Corp., 90 AD3d 967 [2nd Dept. 2011]) In addition, the plaintiff has dismissed and ignored the overwhelming amount of case law to support the premises that a “sole remedy under New York law for an employee’s poor performance is termination”. (Gortat v. Capala Bros., Inc., 585 F. Supp.2d 372 [EDNY 2008]) The analysis governing employment matters of this nature is not simple, and must begin with the review of Labor Law §193. This statute provides for the protection of an employee’s wages and in particular, sets forth that an employer may not deduct or garnish compensation except for certain distinct purposes or as authorized by an employee for their benefit. While the plaintiff attempts to argue that recoupment of wages paid is appropriate under a breach of contract cause of action, such a claim also runs contrary to the intent of Labor Law §193. In other words, while the recovery of monies paid to an employee premised on a breach of contract claim may not appear to be an attempt at wage deduction, the failure to treat such claims in this manner would circumvent the purpose of Labor Law §193. (Cohen v. Stephen Wise Free Synagogue, 1996 WL 159096 [SD NY 1996]) While the court is not making any determinations as to the defendant’s work performance as even if there were deficiencies, as alleged, the recourse for the plaintiff would be ending the employment relationship. The court in Guepet v. International TAO Sys., 110 AD Misc.2d 940 [Sup. Ct., Nassau County 1981] confronted a similar situation where an employer sought $5,600.00 for wages previously paid to an employee as part of a counterclaim and held: “To allow the defendant the right to recover the return of wages already paid (first counterclaim), or a money judgment (second counterclaim) based upon plaintiff’s alleged lack of performance would be permitting defendant to do indirectly and retroactively that which the law specifically prohibits it from doing directly. Such behavior has not been sanctioned by the courts, for to do so would vitiate the special protections for which this section of the Labor Law was designed.” As such, the plaintiff can not relieve themselves from their obligation to ensure an employee is performing in the manner as expected during the course of a regular work hours. Potentia Management had an affirmative duty to approach the defendant during her time of employment if business was not be conducted in a manner as expected. An employer cannot merely pay an individual for several months without instituting any disciplinary action, and then expect a repayment of wages. The plaintiff further claims that recovery is warranted by alluding to the fact that the defendant engaged in fraudulent activities. However, it has long been held that a “cause of action to recover damages for fraud does not lie where, as here, the only fraud claimed relates to an alleged breach of contract”. (Ricchio v. Biondi, 40 AD 3d 615 [2nd Dept. 2007]) The same scenario applies in this matter, as the plaintiff alleges the employee’s conduct itself constituted a breach of the employment contract between the parties. Being that the plaintiff does not have a valid cause of action for a breach of contract against the defendant, one that is based upon fraud is also not valid and as such is not applicable. As it relates to unjust enrichment, “Generally, courts will look to see if a benefit has been conferred on the defendant under mistake of fact or law, if the benefit still remains with the defendant, if there has been otherwise a change of position by the defendant, and whether the defendant’s conduct was tortious or fraudulent”[internal citations omitted] (Paramount Film Distributing Corp. v. State, 30 NY2d 415 [1972]) Once again, the plaintiff is making a further attempt to skirt the plain meaning of New York State Labor Laws and reduce or “claw back” wages which the defendant is rightfully entitled to. In conclusion, the court finds the plaintiff’s attempt to recover wages paid by asserting traditional causes of action such as unjust enrichment, breach of contract, and fraud are not legally permissible. As such, the plaintiff’s complaint along with amended complaint are dismissed with prejudice for failing to state a cause of action and the motion seeking to amend is denied as the cause of action under the premise of unjust enrichment is without merit. b. Motion to Dismiss Defendant’s Counterclaim filed under Labor Law 215 and 198(1-a) The plaintiff argues that to establish a retaliation claim under Labor Law §215, an individual must demonstrate they made a complaint about their current employer’s violation of the law, and as a result of that complaint being lodged they were terminated or otherwise penalized, discriminated against or subjected to an adverse employment action while still employed. In short, it is argued the individual subject to adverse conduct must be currently be an employee in order to receive labor law protections. The plaintiff additionally asserts the filing of a wage claim by the defendant was not protected activity under the law and even if it was, there was no connection between commencement of this litigation and Ms. Ms. W.’s efforts to collect unpaid wages. The court notes that effective February 19, 2023, Labor Law §215 sets forth the following: 1. (a) No employer or his or her agent, or the officer or agent of any corporation, partnership, or limited liability company, or any other person, shall discharge, threaten, penalize, or in any other manner discriminate or retaliate against any employee (i) because such employee has made a complaint to his or her employer, or to the commissioner or his or her authorized representative, or to the attorney general or any other person, that the employer has engaged in conduct that the employee, reasonably and in good faith, believes violates any provision of this chapter, or any order issued by the commissioner (ii) because such employer or person believes that such employee has made a complaint to his or her employer, or to the commissioner or his or her authorized representative, or to the attorney general, or to any other person that the employer has violated any provision of this chapter, or any order issued by the commissioner (iii) because such employee has caused to be instituted or is about to institute a proceeding under or related to this chapter, or (iv) because such employee has provided information to the commissioner or his or her authorized representative or the attorney general, or (v) because such employee has testified or is about to testify in an investigation or proceeding under this chapter, or (vi) because such employee has otherwise exercised rights protected under this chapter, or (vii) because the employer has received an adverse determination from the commissioner involving the employee, or (viii) because such employee has used any legally protected absence pursuant to federal, local, or state law. As to the pertinent facts the following is without controvert (1) on June 1, 2022 the defendant filed a “Labor Standards Complaint Form” for the non-payment of wages between May 16, 2022 and May 20, 2022 (2) on January 24, 2023, prior to the filing of underlying lawsuit, the parties engaged in a settlement conference with a Department of Labor representative about the wage claim (3) On April 4, 2023 Senior Labor Standards Investigator Shaun Abrilz directed the plaintiff to pay $1,250.00 to resolve the outstanding claim and this was subsequently paid accordingly. Initially, the court finds the proceeding initiated by the defendant, with the labor department, was in fact protected activity under Labor Law §215(1)(a)(iii). To find otherwise would contradict the spirit and plain reading of the statutory provisions of Section 215 which was adopted to ensure employees the ability to afford themselves to agency benefits along with protections without the fear of retaliation. Clearly, employees should have access to as many remedial agencies in the event wages have been withheld without having the angst or worry of being subject to legal proceedings by their employer. In addition, in interpreting New York Labor Laws it has been held that a former employee’s attempt to recover overtime wages qualifies as protected activity along with former employees being specifically protected by Labor Law §215 (Fei v. WestLB AG, 2008 WL 594768 [SDNY 2008]; Oram v. SoulCycle LLC, 979 F. Supp.2d 498 [SDNY 2013]) As such, a valid cause of action under Labor Law §215 exists. Turning to whether a retaliatory action may be brought subsequent to the employment relationship being severed, the court must undergo an analysis similar to that conducted herein as it pertained to Labor Law §193. That is, upon a plain reading of the law it would appear that a civil action under this statute is only available to an employee when there is an existing employment relationship. However, given the lack of specificity in this regard, the courts have been left to determine whether a former employee is afforded the same rights, as a current employee, to pursue a civil action against an former employer on the grounds of retaliation. It is clear the vast majority of court rulings support the conclusion that Labor Law §215 “was clearly intended to provide employees with a cause of action against their current and former employer”. (Wigdor v. SoulCycle LLC, 139 AD3d 613 [1st Dept. 2016]) In addition, it has been held that Section 215 of the Labor Law should be construed “to prohibit retaliatory discrimination against former employees”. (Liverpool v. Con-Way, Inc., 2009 WL 1362965 [EDNY 2009]) This court agrees and adopts such holdings, as any other result would be counterintuitive to the legislative purpose, as it would allow former employers to engage in retaliatory conduct and leave the former employee without any recourse. In particular, the defendant in this case would be left without recourse against the plaintiff for exercising her rights to recover wages through the process developed by the Board of Labor. However, while not asserted by the plaintiff, the court would be remiss to ignore the critical provision of Labor Law Section §215(2)(a) pertaining to damages which states: 2. (a) An employee may bring a civil action in a court of competent jurisdiction against any employer or persons alleged to have violated the provisions of this section. The court shall have jurisdiction to restrain violations of this section, within two years after such violation, regardless of the dates of employment of the employee, and to order all appropriate relief, including enjoining the conduct of any person or employer; ordering payment of liquidated damages, costs and reasonable attorneys’ fees to the employee by the person or entity in violation; and, where the person or entity in violation is an employer, ordering rehiring or reinstatement of the employee to his or her former position with restoration of seniority or an award of front pay in lieu of reinstatement, and an award of lost compensation and damages, costs and reasonable attorneys’ fees. Liquidated damages shall be calculated as an amount not more than twenty thousand dollars. The court shall award liquidated damages to every employee aggrieved under this section, in addition to any other remedies permitted by this section. While the law allows an employee to bring a civil action in a court of ‘competent jurisdiction’, city court cannot make an award as to the defendant’s counterclaim unless it has jurisdiction to do so. Labor Law §215(2)(a) further states that a court of jurisdiction shall have the authority to restrain the commission of violations, along with ordering relief including enjoining conduct and rehiring of the employee. It is clear any such remedies are outside the scope of city court’s jurisdiction which is limited to the entry of money judgments amongst others. (Uniform City Ct. Act §202) This leads the court to find it is without subject matter jurisdiction to make an award in this matter given the nature of the relief sought and provisions of the law which apply. In addition, the same holds true as it relates to the cause of action based upon Labor Law §195(3). Upon making this determination, a review of the applicable penalty provision of Labor Law Section §198(1-d) which applies to Section 195(3) has been undertaken. Upon such, the court finds the allowance of injunctive and declaratory relief as a penalty precludes this court from making final determination on the defendant’s counterclaim in this regard. As such, the defendant’s counterclaims are hereby dismissed, without prejudice, with the right to re-file in a court of competent jurisdiction. Dated: December 1, 2023
