United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION & ORDER
Honorable Thomas M. Durkin United States District Judge.
Kim (“Plaintiff”) alleges to have begun his
career in journalism forty years ago in Korea. R. 1 ¶
51. He came to the United States in 2000 as the chief editor
of The Korea Times. Id. ¶ 52. He worked for
various Korean publications in the United States over the
next several years. Id. ¶¶ 53-54. During a
stint in Chicago with The Korea Times from 2006-2008,
Plaintiff met Defendant Robert Kim, a local travel agent.
Id. ¶ 55. Mr. Kim mentioned his interest to
Plaintiff in purchasing the Chicago Branch of The Korea
Times, which, at the time, was listed for sale at $2, 000,
000. Id. ¶ 56.
beginning of April 2014, the CEO of The Korea Times offered
to sell the Chicago Branch to Plaintiff at the deeply
discounted price of $500, 000. Id. ¶ 57. This
offer was made to Plaintiff exclusively, in light of his
longstanding relationship with the publication. Id.
Plaintiff did not have the funds to make the purchase, but he
contacted Mr. Kim, who, along with fellow travel agent and
co-defendant Andrew Huh, put up the funds to make the
purchase. Id. ¶¶ 58-61. Negotiating the
terms of the sale was allegedly contentious, and Plaintiff
claims to have worked eight to ten hours weekly over a period
of several months as a go-between between the buying and
selling parties. Id. ¶ 60. Plaintiff alleges
that Mr. Kim and Mr. Huh verbally agreed that in recognition
of Plaintiff having brought them the business opportunity and
negotiating the terms of sale on their behalf, he would be
given a 30% share of the corporation, with the remaining 70%
to be split equally between Mr. Kim's wife, co-defendant
Sook Kim, and Mr. Huh. Id. ¶ 62. Plaintiff alleges
that despite his successful consummation of the deal, that
promise was never fulfilled, and he was never otherwise
compensated for his efforts. Id. ¶¶ 10,
further alleges that once the deal was done, Mr. Kim asked
him to run the business of the paper, which Mr. Kim and Mr.
Huh incorporated as The Korean News of Chicago, Inc.
Id. ¶¶ 63-64. He alleges that Mr. Kim
promised to pay him $2, 000 per month for his work, to
provide him with his own apartment and vehicle, and to raise
Plaintiff's wages when the business stabilized.
Id. ¶ 64. Relying on those promises, Plaintiff
and his wife moved from New York to Chicago. Id.
¶ 65. When they arrived, they were not given their own
apartment, but rather “a corner of Kim's living
room to sleep” in. Id. ¶ 66. Plaintiff
was given a vehicle, but it was registered to the company,
not to him personally. Id. ¶ 68. Plaintiff
alleges he worked long hours for the paper seven days a week
from August 15, 2014 to February 4, 2015 at the direction and
under the supervision of Mr. Kim and Mr. Huh. Id.
¶¶ 11, 70. He was paid “a fixed amount per
week regardless of the number of hours he worked in a day or
the number of hours he worked in a workweek.”
October 2014, just a few months after the close of the sale,
Mr. Kim instructed Plaintiff to look for a purchaser for the
paper. Id. ¶ 71. He alleges he did so, though
apparently without success. Id. In January 2015,
Plaintiff received a letter from an attorney indicating that
he and his wife were to leave the Kims' home.
Id. In February 2015, Plaintiff received an email
from Mr. Kim stating that his employment had been terminated
by the company's board, on which Plaintiff alleges all
three of the individual defendants held seats as officers.
Id. ¶ 72.
has sued the Kims, Mr. Huh, and The Korean News of Chicago,
Inc. under the Fair Labor Standards Act (“FLSA”)
and Illinois Minimum Wage Law (“IMWL”), alleging
that the defendants failed to compensate him in accordance
with federal and state overtime pay and minimum wage laws.
Id. (Counts I-IV). He has also sued the defendants
for breach of the oral agreement to make him a 30% owner of
the company. Id. (Count V). The defendants move to
dismiss arguing that by alleging that he was promised a 30%
stake in the business and that he ran all of the
newspaper's major operations, Plaintiff has pled himself
out of court, because “business owners” who
engage in “management activities” are among the
“bona fide executives” exempt from the FLSA's
minimum and overtime wage requirements. R. 14 at 3-4. The
defendants also seek the dismissal of Mrs. Kim from the labor
claims on the basis that Plaintiff has failed to allege that
she is an “employer” within the meaning of the
FLSA. Id. at 5-6. Finally, the defendants argue that
Plaintiff has failed to allege sufficient detail to support
his breach of contract claim against Mrs. Kim and Mr. Huh.
Id. at 7-8. The Court addresses each argument in
Whether Plaintiff is exempt is a question for summary
burden is on the employer to prove that an employee is exempt
under FLSA . . . and such exemptions are to be narrowly
construed against the employer seeking the exemption.”
Deschepper v. Midwest Wine & Spirits, Inc., 84
F.Supp.3d 767, 777 (N.D. Ill. 2015) (citing Schmidt v.
Eagle Waste & Recycling, 599 F.3d 626, 631 (7th Cir.
2010)). “The application of an exemption under the FLSA
is a matter of affirmative defense, ” and “[a]
plaintiff need not plead around potential affirmative
defenses.” Id. (internal brackets omitted)
(quoting Corning Glass Works v. Brennan, 417 U.S.
188, 196-97 (1974)); see also Schaefer-LaRose v. Eli
Lilly & Co., 679 F.3d 560, 571 (7th Cir. 2012)
(citing Corning Glass). However, if Plaintiff pleads
facts that “irrefutably” demonstrate that an
exemption applies, dismissal on the pleadings may be
appropriate. See id.
“business owner” exemption applies to “any
employee who owns at least a bona fide 20-percent equity
interest in the enterprise in which the employee is employed
. . . and who is actively engaged in its management.”
29 C.F.R. § 541.101. Plaintiff has not pled himself out
of court by alleging that he was promised but not given 30%
ownership of the company. Indeed, Plaintiff expressly alleges
that while he should have been a 30% owner, he was not (on
account of the defendants' breach of contract). Unless
the defendants come forward with affirmative evidence
establishing that Plaintiff was actually part-owner, the
facts as alleged actually preclude application of the
business owner exemption. Moreover, ownership is not the
whole of the requirement for the exemption to apply. Rather,
to be exempt, an employee must have a bona fide equity
interest “and [be] actively engaged in [the
company's] management.” 29 C.F.R. §
541.101 (emphasis added). “Management” is defined
by the regulations as including, but not being limited to,
activities such as:
interviewing, selecting, and training of employees; setting
and adjusting their rates of pay and hours of work; directing
the work of employees; maintaining production or sales
records for use in supervision or control; appraising
employees' productivity and efficiency for the purpose of
recommending promotions or other changes in status; handling
employee complaints and grievances; disciplining employees;
planning the work; determining the techniques to be used;
apportioning the work among the employees; determining the
type of materials, supplies, machinery, equipment or tools to
be used or merchandise to be bought, stocked and sold;
controlling the flow and distribution of materials or
merchandise and supplies; providing for the safety and
security of the employees or the property; planning and
controlling the budget; and monitoring or implementing legal
29 C.F.R. § 541.102. Clearly, deciding whether Plaintiff
actively engaged in the management of the company is a
complicated issue of fact to be decided by reference to an
array of factors not yet developed in the record. Contrary to
the defendants' arguments, Plaintiff has not made
admissions such that the exemption irrefutably applies simply
by alleging that he worked as a publisher and attempted to
find a buyer for the company. Questions remain as to both
prongs of the “business owner” exemption. It is
therefore not appropriate to resolve the issue at this stage
in the proceedings.
The complaint plausibly alleges that Mrs. Kim was an
defendants cite to two cases which consider, based on
affidavits and other evidence at summary judgment, whether
certain individuals met the definition of employer set forth
in the FLSA. See R. 14 at 5 (citing Villareal v.
El Chile, Inc., 776 F.Supp.2d 778 (N.D. Ill. 2011)
(denying summary judgment for Plaintiff where a question of
fact remained as to whether either or both of the defendants
were employers within the meaning of the FLSA); Alvarez
v. Downtown Food Enterprises, Inc., 2010 WL 5158122, at
*1 (N.D. Ill.Dec. 13, 2010) (granting summary judgment where
the defendant's affidavit regarding her lack of authority
over the plaintiffs' employment was apparently
uncontested); see also R. 19 at 4 (relying on the
“ample precedent” cited in their opening brief).
Neither of the cases is particularly persuasive in the
context of a motion to dismiss, where the standard is not
proof, but plausibility.
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 contemplates several simultaneous
employers who may be responsible for compliance with the
FLSA.” Villareal, 776 F.Supp.2d at 784 (citing
Falk v. Brennan, 414 U.S. 190, 191 (1973)). Courts
have held that a determination of whether an individual is
liable under the FLSA “must focus upon the totality of
the circumstances, underscoring the economic reality of the
employment relationship.” Id. at 785 (citation
omitted). Whether an individual is liable as an employer
“depends not ...