## Facts

- Plaintiffs were Chinese immigrant garment-factory workers who worked in factories owned and operated by Jen Chu Apparel Inc. and Jen Jen of New York, Inc., which were owned by Calvin Chen and Winnie Young Chen (collectively, the Chens).
- Plaintiffs alleged they regularly worked about 80 hours per week, were paid less than the minimum wage, and received no overtime premium.
- The factories manufactured clothing for Donna Karan International, Inc. (Donna Karan), among other companies.
- Plaintiffs alleged that 60% to 100% of the garments produced at the Chens’ factories were for Donna Karan and that, at times, all production was for Donna Karan.
- Plaintiffs alleged Donna Karan’s representatives were present in the factories on a daily basis in connection with monitoring and inspecting production.
- Plaintiffs alleged Donna Karan set the prices paid for garments and required high production volumes and tight delivery schedules.
- According to plaintiffs, Donna Karan’s low prices and output/deadline demands effectively dictated the workers’ hours and wages because the factories could not meet those demands without paying subminimum wages and avoiding overtime.
- Plaintiffs brought a putative class action against the Chens and Donna Karan for unpaid minimum wages, unpaid overtime, and related damages under the Fair Labor Standards Act (FLSA) and New York wage law, alleging Donna Karan and the factory defendants were joint employers.
- Donna Karan moved to dismiss under Rule 12(b)(6), arguing the amended complaint did not adequately plead that Donna Karan was a joint employer.

## Issues

1. Whether the amended complaint alleged enough facts, under the FLSA/New York economic-realities approach, to plausibly treat Donna Karan as a joint employer liable for minimum-wage and overtime violations.

## Decision

- The court denied Donna Karan’s Rule 12(b)(6) motion to dismiss.
- Taking the pleaded facts as true and drawing reasonable inferences for plaintiffs, the court held the allegations were sufficient at the pleading stage to support a joint-employer theory against Donna Karan.
- The wage-and-hour claims against Donna Karan were allowed to proceed alongside the claims against the factory owners and entities.

## Legal Principles

- Joint-employer status under the FLSA and New York wage law depends on the “economic reality” of the relationship, not on formal contracting labels or who issues paychecks.
- Courts assessing economic reality consider functional control indicators, commonly including: (1) power to hire and fire, (2) supervision and control of work schedules or conditions, (3) determination of the rate and method of payment, and (4) maintenance of employment records.
- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and dismisses only if the plaintiff can prove no set of facts that would entitle relief (the governing pleading standard at the time).
- A company that is not the direct payroll employer may still qualify as a joint employer if it exercises sufficient control, including by setting prices, production volume, and delivery requirements that effectively determine workers’ hours and pay.
- Allegations that a buyer’s pricing and delivery demands make lawful payment practically impossible, combined with frequent on-site monitoring, can support a reasonable inference of joint employment at the pleading stage.

## Conclusion

The court held that the garment workers’ allegations—heavy dependence on Donna Karan’s orders, daily presence of Donna Karan representatives in the factories, and Donna Karan’s control over prices and production demands that allegedly drove unlawful hours and pay—were enough to plausibly plead that Donna Karan acted as a joint employer under the economic-realities test, so dismissal at the pleading stage was not warranted.


Zeng Liu v. Donna Karen, Inc., 00 Civ. 4221 (2001)