United States District Court, E.D. Tennessee, Knoxville Division
MEMORANDUM OPINION AND ORDER
PAMELA L. REEVES, District Judge.
The plaintiffs in this proposed class action allege the defendants have violated the Fair Labor Standards Act (the "FLSA"), 29 U.S.C. § 205 et seq., by failing to compensate them and other similarly situated plaintiffs for all hours worked. The defendants allegedly accomplished this by, among other things, requiring employees to work while "off the clock" for breaks and closing, by failing to compensate employees for time spent attending staff meetings, and by altering time records so that employees were not paid for work actually performed. In addition to the FLSA claims, the plaintiffs assert conversion, civil conspiracy, breach of contract, and unjust enrichment claims.
The plaintiffs have moved for conditional class certification [R. 12], and the magistrate judge has issued a report and recommendation (the "R&R") on that motion. [R. 41]. The defendants filed a timely objection to the R&R, and they have filed motions to dismiss the plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6). [R. 43, 9, 22]. For the reasons stated below, the defendants' motions to dismiss will be granted in part and denied in part. Their objections to the R&R will be overruled, and the plaintiffs' motion for conditional certification will be granted.
The plaintiffs in this case are non-managerial employees at the defendants' Subway restaurants. While the defendants are organized as several separate restaurants, the plaintiffs contend they are actually interrelated and constitute a single employer for the purposes of the FLSA. The defendants share common offices, common record keeping, common management, and allegedly even common ownership. The defendants use a standard employee handbook that applies to all of the plaintiffs at the defendant Subway locations. The employee handbook contains a single "main telephone number" for employees to call, regardless of which location they work for, for emergencies or "for reporting employment issues."
According to the plaintiffs, they have been forced to work while "off the clock, " and the defendants have even gone as far as to manipulate time records to reduce the amount of their employees' compensation. The plaintiffs contend that these are wilful alterations made by managers for the purpose of reducing labor costs and qualifying themselves for performance bonuses. This bonus system allegedly incentivizes managers to cut hours from the employees' time worked, thereby denying the plaintiffs fair pay for their work performed as well as denying them minimum wage and overtime pay under the FLSA.
At this early stage in the case, the defendants strenuously maintain that they operate separate and distinct restaurants, and are not a joint employer for the purpose of the FLSA. The defendants have moved to dismiss the plaintiffs' claims under Federal Rule of Civil Procedure 12(b)(6), and they oppose conditional class certification as recommended by the magistrate judge.
II. Standard of Review
Rules 8(a) and 12(b)(6) of the Federal Rules of Civil Procedure require the complaint to articulate a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This requirement is met when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). A motion to dismiss under Rule 12(b)(6) requires the court to construe the complaint in the light most favorable to the plaintiff, accept all the complaint's factual allegations as true, and determine whether the plaintiff can prove no set of facts in support of the plaintiff's claims that would entitle the plaintiff to relief. Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir. 1990), cert. denied, 498 U.S. 867 (1990).
The court may not grant a motion to dismiss based upon a disbelief of a complaint's factual allegations. Lawler v. Marshall, 898 F.2d 1196, 1198 (6th Cir. 1990); Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995) (noting that courts should not weigh evidence or evaluate the credibility of witnesses). The court must liberally construe the complaint in favor of the party opposing the motion. Id. However, the complaint must articulate more than a bare assertion of legal conclusions. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.3d 434, 436 (6th Cir. 1988). "[The] complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Id. (citations omitted). The magistrate judge's report and recommendation will be reviewed under the "clearly erroneous" standard. This standard of review is quite deferential. It requires the reviewing court, based on all the evidence, to be "left with the definite and firm conviction that a mistake has been made." Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985). Even if this court views the evidence differently, it must defer to the magistrate's conclusion unless there is a firm conviction that a mistake has been made. Id. at 573-74.
A. Motions to Dismiss
i. FLSA Preemption
The defendants move to dismiss the plaintiffs' breach of contract and unjust enrichment claims to the extent they seek overtime compensation because they contend such claims are preempted by the FLSA. Both parties rely on Judge Greer's decision in Cannon v. Citicorp Credit Servs., Inc., 2014 WL 1267279 (E.D. Tenn. March 26, 2014), to support their arguments regarding preemption. In Cannon, Judge Greer surveyed the district court decisions of this circuit and found that breach of contract and unjust enrichment claims are not preempted by the FLSA. Id. at 9 (citing Woodall v. DSI Renal, Inc., 2012 WL 1038626, at *3-6 (W.D. Tenn. Mar. 27, 2012), and Carter v. Madison County Hosp. Dist., 2011 WL 1256625 (W.D. Tenn. Mar. 31, 2011)). However, Judge Greer noted that, "[i]f, at a later time, ...