New Case Establishes Liability for Boston Restaurant Owners with Multiple Locations

by James L. Rudolph, Esq. and Robert P. Rudolph, Esq.

In a first of its kind ruling by a Massachusetts Superior Court judge providing guidance on the applicability of the integrated enterprise and joint employer theories to Massachusetts Wage Act claims, the Honorable Bruce R. Henry has held that restaurant managers who worked for the same chain, but at different, separately incorporated locations, could bring a class action lawsuit against the parent corporation and all of the restaurants for state Wage Act violations.

Alleged Violations

In the matter of Fitzgerald, et. al. v. The Chateau Restaurant Corporation, et. al., the Defendant, the Chateau Restaurant Corporation, Inc. (the “Parent Corporation”) is the parent company of eight Italian restaurants located in Massachusetts. Each location is incorporated separately. The Plaintiff, Kevin Fitzgerald (“Fitzgerald”) worked as a restaurant manager at the Burlington and Andover locations until his termination.

The Chateau managers were paid on an hourly basis and automatically had thirty minutes of pay deducted for a meal break for each shift they worked. Hourly managers were prohibited from leaving the site for meal breaks if they were the only manager on site, which frequently was the case, and were similarly required to be immediately available at all times for issues which may require oversight or intervention. As a result, the hourly managers were often unable to take their meal break time, but their pay was still automatically deducted to include a half-hour meal break.

Fitzgerald filed a class action lawsuit on behalf of all hourly managers employed at any Chateau location during the six-year period prior to commencement of the action. The lawsuit was filed against the Parent Corporation, the entities owning the two locations where Fitzgerald worked, the entities owning the other Chateau locations (the “Sister Entities”) and Joseph Nocera, who was the President and Treasurer of the Parent Corporation and all of the other Chateau entities. Fitzgerald alleged violations of the Massachusetts Wage Act, the Massachusetts Overtime Act, breach of contract and unjust enrichment.

Single Integrated Enterprise and Joint Employment Standards

The Parent Corporation and the Sister Entities brought a Motion to Dismiss arguing that Fitzgerald had failed to establish the existence of an employment relationship with these parties. Fitzgerald opposed the Motion to Dismiss, arguing he sufficiently asserted an employment relationship through either a “single integrated employer” or a “joint employment” theory.

Under the “single integrated enterprise” theory, nominally separate entities may be found liable when they are so interrelated that they constitute a single employer. Courts examine four factors to assess single-employer status: (1) interrelation of operations; (2) common management; (3) centralized control of labor relations; and (4) common ownership. All four factors are not necessary for single-employer status to be found. Instead, courts apply the factors flexibly, placing emphasis on the control of employment decisions.

Under the “joint employment” theory, separate legal entities may be found liable when there is a significant link between the actual employer and the alleged separate entity. Courts consider four factors for this analysis as well, whether the alleged employer: (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.

Court’s Analysis

In his decision, Judge Henry gave deference to Joyce v. Upper Crust, LLC, a 2012 Massachusetts Federal District Court case in which the Federal Court found that it was reasonable to infer that the corporations in that case were so integrated with one another that the management company was liable for the conduct as a joint employer or under similar theories of liability.

Based on the factual allegations in the complaint, Judge Henry denied the Motion to Dismiss and found it was reasonable to infer that the Parent Corporation and the Sister Entities were sufficiently integrated to impose liability on all of the parties. Specifically, he noted that (1) the same person was President and Treasurer of the Parent Corporation and all Chateau restaurant locations; (2) all of the entities were incorporated in Massachusetts with a principal office located at the same address in Waltham; (3) the Complaint alleged that all of the hourly managers were subjected to the same policy concerning the meal break; and (4) the Parent Corporation was a self-described “holding company” with a stated business purpose of “conduct[ing] a restaurant business.” He found basis to believe there was common management, common ownership, and at least to some degree, centralized control of each of the Chateau restaurants significant to establish the potential for single integrated enterprise liability.

Importance of Decision

This case creates Massachusetts legal precedent making it easier for employees from multiple restaurant locations to collectively assert claims for violations of their rights, exposing the assets of all locations. If a company’s restaurants are run in a way that could satisfy the factors to be a single integrated enterprise or joint employer, the company may be more exposed than management may think. Massachusetts has liberal wage laws and they must be strictly complied with. Restaurateurs that have more than one location should be on notice of this new case law and adjust their operations accordingly. If you have questions on Wage Act claims contact an experienced Boston Restaurant Lawyer at the Rudolph Friedmann Law Firm 617.723.7700.