January 21, 2026|Franchise Frontlines
January 21, 2026 | United States District Court for the Southern District of New York | Reported Decision
Executive Summary
In a reported decision, Judge Katherine Polk Failla of the United States District Court for the Southern District of New York granted in part and denied in part defendants’ second partial motion to dismiss in a wage-and-hour case under the Fair Labor Standards Act and New York Labor Law. Plaintiff Melissa Galvez alleged that InvestCloud and Motive Capital Management, LLC employed her as a sales executive and failed to pay overtime, commissions, provide wage statements, and provide a written commission plan. Defendants moved to dismiss Motive from the case and to dismiss plaintiff’s wage-statement claim. Plaintiff argued that Motive qualified as her employer under joint-employer and single-integrated-enterprise theories because Motive allegedly invested in, managed, and embedded personnel within InvestCloud. The Court dismissed Motive with prejudice, holding that plaintiff failed to plead facts showing that Motive controlled her employment or that Motive and InvestCloud constituted a single integrated enterprise. The Court allowed the wage-statement claim to proceed against InvestCloud.
Relevant Background
Plaintiff alleged that InvestCloud develops and sells a no-code software platform for the financial industry and that Motive is an equity investment platform, investor, and managing operator of InvestCloud. Plaintiff claimed that Motive was responsible for InvestCloud’s daily operations, that Motive personnel were embedded in InvestCloud, and that Motive personnel directed operations, including recommendations about human resources, compensation policies, and decisions involving hiring, firing, and promotion.
Plaintiff alleged that she was hired in July 2021 as a sales executive, worked primarily from InvestCloud’s New York office and from home, and was supposed to receive a salary plus commissions. She alleged that defendants never provided her with a written sales commission plan, required her to work beyond a regular 40-hour schedule, failed to pay her overtime, and failed to pay commissions allegedly earned from Digital Swiss Gold-related sales. Plaintiff also alleged that, after her termination, a severance agreement conditioned severance pay on a waiver of wage-and-hour claims and commission entitlement.
This was not the first motion to dismiss. In an earlier oral decision, the Court dismissed plaintiff’s FLSA and NYLL overtime claims, dismissed all claims against Motive because plaintiff had not adequately alleged that Motive employed her, and dismissed the wage-statement claim for lack of standing and failure to state a claim. The Court granted leave to amend. Plaintiff then filed a First Amended Complaint, and defendants moved again to dismiss Motive and the wage-statement claim.
Decision
The Court first addressed whether plaintiff adequately alleged that Motive was her employer under the economic reality test. The Court explained that, under both the FLSA and NYLL, whether an entity is an employer requires a flexible, case-specific analysis focused on whether the alleged employer possessed the power to control the workers in question. Courts generally consider whether the alleged employer had the power to hire and fire employees, supervised and controlled work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records.
Plaintiff’s amended allegations did not satisfy that standard. Although plaintiff alleged that Motive was responsible for InvestCloud’s daily operations and that Motive personnel were embedded in InvestCloud and recommended policies involving human resources, compensation, hiring, firing, and promotion, the Court found those allegations too general. The amended complaint did not identify specific facts showing that Motive had the power to control plaintiff herself, supervised her work, controlled her schedule, made decisions about her employment, determined her pay, or maintained employment records relating to her.
The Court then considered the single integrated enterprise theory. Unlike the economic reality test, which asks whether the alleged employer had power over the plaintiff’s employment, the single integrated enterprise test asks whether two entities together constitute a single enterprise. Relevant factors include interrelated operations, common management, centralized control of labor relations, and common ownership. The Court noted that no single factor controls, but control of labor relations remains the central concern.
Plaintiff’s allegations were stronger under that theory, but still insufficient. The Court found that allegations about Motive’s responsibility for daily operations and embedded personnel related to interrelated operations and common management. But plaintiff alleged only that Motive was “an investor” in InvestCloud, not the sole owner or majority owner, so she did not adequately plead common ownership. The Court also noted that plaintiff effectively acknowledged she had not alleged centralized control of labor relations, the most important factor. Because plaintiff failed to plead sufficient facts on two of the four factors, including the central factor, the Court dismissed Motive from the case.
The dismissal was with prejudice. The Court had already given plaintiff an opportunity to cure the deficiencies in her original pleading, and the amended complaint still failed to allege enough facts showing that Motive employed her under either theory. The Court therefore concluded that further amendment would be futile.
The Court reached a different result on the wage-statement claim. Plaintiff alleged in the amended complaint that defendants failed to provide wage statements, that proper wage statements would have put her on notice that she was not being paid for all hours worked, and that the failure prevented her from timely identifying and advocating over the alleged underpayment. The Court found those allegations sufficient to establish standing under Second Circuit authority because they alleged a causal connection between the missing wage statements and downstream harm. The Court also found, though “barely,” that plaintiff stated a wage-statement claim because she alleged that she did not receive wage statements at all and that the failure was intentional.
Looking Forward
This decision provides a useful defense-side reminder that generalized operational influence does not necessarily make an investor, parent, franchisor, brand affiliate, or management-level stakeholder an employer. Plaintiffs often try to expand wage-and-hour cases by alleging that an entity had broad influence over a company’s operations, policies, systems, or strategic decisions. Galvez shows that courts may require more. The relevant inquiry remains tied to the plaintiff’s actual employment relationship and to concrete facts showing control over hiring, firing, supervision, schedules, compensation, and employment records.
For franchisors, the case is useful by analogy. A franchisor may impose brand standards, provide technology platforms, require reporting, issue compliance expectations, or influence systemwide practices without necessarily becoming the employer of a franchisee’s workers. The distinction matters. General allegations that a brand, investor, or affiliated entity shaped business operations should not substitute for allegations that the entity controlled the specific plaintiff’s employment.
The decision also reinforces the value of entity separateness. Motive allegedly invested in and helped operate InvestCloud, but the Court did not accept labels such as “investor,” “managing operator,” or “embedded personnel” as enough. For franchisors, private equity sponsors, platform companies, and multi-entity systems, that reasoning supports careful documentation of each entity’s role. Agreements, policies, and operating practices should identify who employs personnel, who supervises them, who controls schedules, who sets compensation, who maintains employment records, and who has authority over hiring and firing.
The single integrated enterprise analysis provides another helpful caution. The Court looked for common ownership and centralized control of labor relations, and it treated centralized labor control as the central concern. Franchise systems and affiliated company groups should avoid blurring labor-relations authority unless there is a specific business reason to do so. Where one entity provides advice, resources, or optional guidance, the documents and conduct should reflect that the direct employer retains responsibility for employment decisions.
The wage-statement portion of the decision carries a separate compliance lesson for employers. The Court allowed that claim to proceed because plaintiff alleged that missing wage statements prevented her from identifying alleged underpayment and advocating for timely correction. Employers should treat wage statements as more than administrative paperwork. Accurate wage statements can help reduce disputes, support transparency, and avoid statutory claims that survive even when broader claims are narrowed.
The decision should not be overstated. It did not involve a franchise system, and it did not hold that investors, franchisors, or affiliated entities can never be joint employers or part of a single integrated enterprise. It held that this plaintiff’s amended allegations were not specific enough to keep Motive in the case after a prior opportunity to amend. For franchisors and employer-side clients, that is the practical value: courts may reject employment-status theories that rely on broad assertions of influence rather than facts connecting the defendant to the worker’s actual employment conditions.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
