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Virginia Villareal, On Behalf of Herself and All Other Individuals v. El Chile

March 9, 2011

VIRGINIA VILLAREAL, ON BEHALF OF HERSELF AND ALL OTHER INDIVIDUALS SIMILARLY SITUATED, KNOWN AND UNKNOWN, ET AL., PLAINTIFFS,
v.
EL CHILE, INC., CALETA, INC., CALETILLA, INC., ROQUETA, INC., TIMOTEO MANJARREZ, AND MARIA MANJARREZ, DEFENDANTS.



The opinion of the court was delivered by: Jeffrey T. Gilbert Magistrate Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Virginia Villareal and other named plaintiffs, on behalf of themselves and all other individuals similarly situated, filed this lawsuit against defendants El Chile Inc., Caleta Inc., Caletilla, Inc., Roqueta Inc., and Timoteo and Maria Manjarrez alleging defendants failed to pay their employees overtime and minimum wages in violation of the Illinois Minimum Wage Law ("IMWL"), 820 ILCS 105/1, et seq., and the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. This matter is before the Court on plaintiffs' motion for partial summary judgment on liability with respect to Counts I and II of the third amended complaint [184].*fn1

For all of the reasons set forth in this Memorandum Opinion and Order, the motion for partial summary judgment is granted in part and denied in part.*fn2

BACKGROUND*fn3

Defendants El Chile Inc., Caleta Inc. and Roqueta Inc. are restaurants and Caletilla Inc. is a banquet hall (collectively referred to herein as "the corporate defendants"), all of which are located in Chicago, Illinois and loosely operate under the name "La Condesa." (Defs' Resp. to Pls' SOF ¶¶2, 3, 4, 5, 32). The Roqueta restaurant, however, ceased operations in August 2008. (Defs' Resp. to Pls' SOF ¶5). Defendants Timoteo and Maria Manjarrez (together referred to herein as "the individual defendants") are a married couple who own the corporate defendants.*fn4 (Defs' Resp. to Pls' SOF ¶¶ 8, 9, 12). The employees whose wages are at issue in this case currently work or have worked at one or more of the corporate defendants. On October 19, 2007, Judge Darrah certified a class comprised of "all persons employed by Defendants between December 18, 2003 and present, who were paid on an hourly rate or day basis rate, and who worked in excess of 40 hours in an individual week, but who were not paid overtime at one and one half their regular pay." See [Dkt.#19].

The individual defendants resided in Mexico for a substantial portion of the class period. (Defs' Add'l SOF ¶¶1, 2). Although it is disputed how many times Timoteo and Maria returned to the United Stated and how much contact they had with and how much control they had over their employees, including the managers of each of the corporate defendants, during the period in which they lived in Mexico, it is not disputed that Timoteo resided in Mexico from 2002 through 2010, and Maria resided in Mexico from 2003 through 2006. (Defs' Add'l SOF ¶¶1, 2).

Timoteo Manjarrez is the president of each of the corporate defendants. (Defs' Resp. to Pls' SOF ¶7). He controls their finances and is the only person who is authorized to sign checks for any of the corporate defendants. (Defs' Resp. to Pls' SOF ¶17). Timoteo Manjarrez hired the managers for each of the restaurants and the banquet hall, and he admitted that he directed the individual managers to avoid scheduling employees to work overtime. (Defs' Resp. to Pls' SOF ¶¶16, 17).

Although the parties dispute how much contact Maria had with the managers when she resided in Mexico, it is not disputed that she reviewed and initialed payroll records throughout that period of time. (Defs' Resp. to Pls' SOF ¶15). The parties, however, dispute the substance of her review of the payroll records and the significance of her having done so. (Id.) When Maria returned to the United States in 2007 (Defs' Add'l SOF ¶1), she became one of the supervisors of the corporate defendants beginning in March 2007 (Defs' Resp. to Pls' SOF ¶12). Her duties after March 2007 included paying employees, calculating sales tax and paying bills on behalf of the corporate defendants. (Defs' Resp. to Pls' SOF ¶13).*fn5

The individual defendants assert that Adela Salazar, who also is class member, was and is the general manager in charge of administration for all of the corporate defendants. (Defs' Add'l SOF ¶19). The individual defendants assert that Adela made the decisions about the operation of the corporate defendants while they were in Mexico. (Defs' Add'l SOF ¶19). Although plaintiffs deny that Adela had the authority to make any decision without seeking direction, approval or consent from either of the individual defendants (Pls' Resp. to Defs' Add'l SOF ¶19), plaintiffs do not dispute that Adela had certain payroll and administrative responsibilities for each of the corporate defendants (Pls' Resp. to Defs' Add'l SOF ¶21). Specifically, Adela performed bookkeeping and payroll functions and collected money from each of the corporate defendants. (Defs' Add'l SOF ¶21). She made deposits into the corporate checking accounts and calculated the cash payments to employees. (Defs' Add'l SOF ¶21). When a new employee was hired by one of the managers, Adela called Corporate Accounting Inc., the accounting company used by the corporate defendants, and added the new employee to the payroll. (Defs' Add'l SOF ¶21). Employees Rosa Camarena and Olivia Vertin also worked at the central office performing payroll and another administrative duties for the corporate defendants. (Defs' Resp. to Pls' SOF ¶19).

Each restaurant and the banquet hall has or had a kitchen manager and a dining room manager, and those managers hire and fire the employees that work at each establishment, assign hours, set the schedule, complete inventory, place orders for supplies and/or food and have the authority to discipline employees.*fn6 (Defs' Add'l SOF ¶17). Each corporate defendant purchases its own supplies and food and is invoiced separately for those purchases. (Defs' Add'l SOF ¶34). The corporate defendants, however, use the same menu and collectively advertise as "La Condesa." (Defs' Resp. to Pls' SOF ¶32).

Each corporate defendant maintains its own separate checking account, and there is no commingling of funds among the corporate defendants. (Defs' Add'l SOF ¶35). Capital expenditures, such as equipment, are billed and invoiced to each corporate defendant separately. (Defs' Add'l SOF ¶34). The corporate defendants, however, each use Corporate Accounting Inc. to administer the payroll and accounting for each of the defendants (Defs' Resp. to Pls' SOF ¶11) while the cash payroll for each of the defendants is processed by Adela Salazar from a central office (Defs' Resp. to Pls' SOF ¶18).

The parties have submitted extensive briefing on the this motion, and the Court conducted a hearing on January 18, 2011. This matter is ripe for decision.

STANDARD OF REVIEW

Summary judgment is appropriate when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56 ©; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The moving party bears the initial burden of identifying "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting FED. R. CIV. P. 56©). Once the moving party has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings but must "must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); see Smith v. Shawnee Library Sys., 60 F.3d 317, 320 (7th Cir. 1995) (non-moving party "must come forward with evidence of a genuine factual dispute").

Although we must read the facts in a light most favorable to the non-moving party (Cuddington v. Northern Ind. Public Serv. Corp., 33 F.3d 813, 815 (7th Cir. 1994)), the non-moving party cannot simply create any factual dispute in order to stave off summary judgment. Tolle v. Carroll Touch, Inc., 23 F.3d 174, 178 (7th Cir. 1994). Rather, there must be a genuine dispute over those facts that could actually affect the outcome of the lawsuit. Tolle, 23 F.3d at 178. "By its very terms, this standard provides that the mere existence of some alleged factual disputes between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-248 (emphasis in original).*fn7

DISCUSSION

This matter is before the Court on plaintiffs' motion for partial summary judgment on liability only with respect to Counts I and II of the third amended complaint. Count I alleges a class claim under the IMWL on behalf of plaintiffs and all similarly situated current and former employees for defendants' alleged failure to pay overtime wages, and Count II alleges individual FLSA claims for defendants' alleged failure to pay overtime wages to the named plaintiffs. The FLSA and the IMWL both require employers to pay their employees one and one-half times their regular hourly wage for hours worked beyond forty hours in one week. 29 U.S.C. § 207(a)(1); 820 ILCS § 105/4a(1). The FLSA defines an "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The IMWL similarly defines an "employer" as "any individual, partnership, association, corporation, limited liability company, business trust, governmental or quasi-governmental body, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee." 820 ILCS 105/3©.

The FLSA is relevant to plaintiffs' IMWL claims because the IMWL parallels the FLSA, and the same analysis generally applies to both statutes. See Condo v. Sysco Corp., 1 F.3d 599, 601 n. 3 (7th Cir.1993); Ladegaard v. Hard Rock Concrete Cutters, Inc., 2004 U.S. Dist. LEXIS, at *12 (N.D. Ill. 2004) (citing Haynes v. Tru-Green Corp., 154 Ill. App. 3d 967, 507 N.E.2d 945, 951 (4th Dist.1987)); O'Brien v. Encotech Constr., 2004 U.S. Dist. LEXIS 4696, at *13 (N.D. Ill. 2004). The Illinois Administrative Code also provides that the FLSA regulations are to be used as guidance in interpreting the IMWL(Ill. Admin. Code tit. 56, pt. 210.120 (2009)), and courts have recognized that federal decisions interpreting the FLSA also apply to claims asserted under the IMWL. See In re Aon Corp. Wage & Hour Employment Practices Litigation, 2011 U.S. Dist. LEXIS 7288, at *5 (N.D. Ill. 2011). For purposes of this Memorandum Opinion and Order, we rely on federal cases that discuss and analyze IMWL claims in the context of the FLSA to determine whether plaintiffs are entitled to judgment as a matter of law.

Plaintiffs argue that defendants did not pay overtime wages when employees worked in excess of forty hours in an individual work week. They contend that all defendants are employers as defined by the IMWL and FLSA and are jointly liable for the alleged violations. With regard to this motion, the Court must address three issues: (1) whether the individual defendants are "employers" as defined by the IMWL and the FLSA so that they are individually liable for the alleged failure to pay overtime wages; (2) whether the corporate defendants constitute a single enterprise as defined by the FLSA so that they are subject to the FLSA; and (3) whether defendants are joint employers so that they are jointly and severally liable for the alleged violations. The Court will address each issue in turn.

I. Individual Defendants as Employers under the IMWL and the FLSA

Plaintiff Villareal and the Class Members argue that Timoteo and Maria Manjarrez are "employers" as defined by the IMWL and the FLSA and therefore are individually liable for the failure to pay overtime wages. As stated above, the FLSA defines "employer" to include "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The FLSA is remedial in nature and must be construed to effect Congress' purpose to protect the nation's workers. Donovan v. Grim Hotel Co., 747 F.2d 966, 971 (5th Cir. 1984). The United States Supreme Court has held that the FLSA must be construed liberally to apply to the furthest reaches consistent with congressional direction. See Dole v. Simpson, 784 F. Supp. 538, 545 (S.D. Ind. 1991) (citing Mitchell v. Lublin, McGaughy & Assoc., 358 U.S. 207 (1959)). The FLSA contemplates several simultaneous employers who may be responsible for compliance with the FLSA. Falk v. Brennan, 414 U.S. 190, 191 (1973). Whether a person or entity is an "employer" under the FLSA is a question of law. Karr v. Strong Detective Agency Inc., 787 F.2d 1205, 1206 (7th Cir. 1985).

With these preliminary factors in mind, the Supreme Court has said that the "economic reality" of the employment relationship controls rather than formalistic labels or common law concepts of agency. Goldberg v. Whitaker House Coop., 366 U.S. 28, 33 (1961). The analysis must focus upon the totality of the circumstances, underscoring the economic reality of the employment relationship. Donovan v. Sabine Irrigation Co., Inc., 695 F.2d 190, 194 (5th Cir.1983). Courts have found that a determination of whether an individual is liable under the FLSA depends not upon whether the individual controlled every aspect of the employees' conduct, but upon whether the individual had control over the alleged FLSA violation. Grim Hotel, 747 F.2d at 972; Simpson, 784 F. Supp. at 545. In Dole v. Simpson, the district court explained: "[T]his is really a question of duty: Based upon their control over decisions causing the violations of the [FLSA], which persons had a duty as a statutory employer not to violate the Act?" 784 F. Supp. at 545.*fn8

In this case, there is no dispute that Timoteo and Maria Manjarrez own the corporate defendants, that Timoteo is the president of each corporate defendant and controls the purse strings of the corporate defendants, and that Maria currently is a supervisor of the corporate defendants and has been since March 2007. (Defs' Resp. to Pls' SOF ΒΆΒΆ7, 8, 12, 17). Timoteo also ...


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