September 24, 2025|Franchise Frontlines
September 24, 2025 | United States District Court for the Southern District of New York | Published Opinion
Executive Summary
In a published decision, Judge Jennifer L. Rochon of the United States District Court for the Southern District of New York largely denied motions to dismiss brought by a utility company and several traffic control contractors in a wage-and-hour class action brought by workers who served as flaggers and spotters at utility worksites. The plaintiffs alleged violations of the Fair Labor Standards Act (“FLSA”), the New York Labor Law (“NYLL”), and the New York City Freelance Isn’t Free Act (“FIFA”), as well as common-law claims relating to prevailing wages. The defendants argued that the complaint relied on impermissible group pleading and failed to plausibly allege that the utility company or traffic control entities were the plaintiffs’ employers or joint employers. The court rejected those arguments, holding that the plaintiffs plausibly alleged that multiple entities jointly controlled their work and compensation. The court further concluded that the plaintiffs adequately alleged that the utility company could qualify as a “hiring party” under FIFA even if the workers were retained through subcontractors.
Relevant Background
The plaintiffs worked as flaggers and spotters at utility worksites operated by Consolidated Edison in New York City and Westchester County. According to the complaint, flaggers were responsible for directing traffic and securing jobsite perimeters, while spotters reserved parking areas for utility vehicles and ensured those vehicles could access the worksites safely. The plaintiffs alleged that they routinely worked long hours, often exceeding forty hours per week.
The complaint alleged that the utility company relied on a traffic control services provider that operated under blanket purchase agreements to supply workers for utility jobsites. That traffic control provider allegedly worked through a network of subcontractors that recruited, hired, and paid workers assigned to the utility projects. The plaintiffs alleged that the utility company, the traffic control companies, and the subcontractors collectively employed hundreds of workers who performed traffic control functions at utility worksites.
Although the workers were classified as independent contractors and paid through subcontractors using IRS Form 1099s, the plaintiffs alleged that this classification was improper. They asserted that the defendants jointly exercised control over their work schedules, assignments, supervision, discipline, and compensation. Based on those allegations, the plaintiffs brought claims under the FLSA and NYLL for unpaid wages and overtime, as well as claims under FIFA in the alternative if they were properly classified as independent contractors.
Several defendants moved to dismiss the second amended complaint, arguing that it relied on impermissible group pleading and failed to plausibly allege joint employer status or FIFA liability.
Decision
The court first addressed whether the complaint violated Federal Rule of Civil Procedure 8 by improperly lumping defendants together. The defendants argued that the pleading failed to differentiate among the numerous corporate entities involved in the traffic control operation. The court disagreed, explaining that Rule 8 requires only sufficient factual allegations to provide each defendant with fair notice of the claims against it. The court concluded that the amended complaint plausibly distinguished the roles of the various defendants by identifying the contractual relationships among them and by describing specific actions taken by the traffic control entities and the utility company with respect to hiring, scheduling, supervision, and payment.
The court next analyzed whether the complaint plausibly alleged that the defendants were employers or joint employers under the FLSA and NYLL. The court applied the Second Circuit’s economic reality framework, including the four “formal control” factors derived from Carter v. Dutchess Community College. Those factors consider whether the alleged employer had the power to hire and fire workers, supervised or controlled work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records. The court also acknowledged that courts sometimes evaluate additional functional control factors under the framework articulated in Zheng v. Liberty Apparel Co.
1 – Ortiz v Consolidated Edison…
Applying those principles, the court concluded that the complaint plausibly alleged that the traffic control entities exercised substantial control over the plaintiffs’ work. The complaint alleged that those entities interviewed and hired workers, assigned them to jobsite shifts, directed them to report to particular utility projects, monitored their performance, and disciplined workers for violations of company policies. The complaint also alleged that the traffic control companies helped determine hourly rates and coordinated payroll processing through subcontractors. Those allegations were sufficient to support an inference that the traffic control companies functioned as employers or joint employers under the FLSA and NYLL.
The court then addressed the plaintiffs’ allegations against the utility company. Although the utility company argued that it merely contracted for traffic control services and did not employ the workers directly, the court concluded that the complaint plausibly alleged that the utility company exercised meaningful control over the plaintiffs’ work. The complaint alleged that utility supervisors were physically present at worksites, directed workers’ tasks, determined when shifts began and ended, and could request that particular workers be removed from projects. The plaintiffs also alleged that the utility company participated in setting hourly rates and reviewed timesheets used to calculate payroll. These allegations, taken together, supported a plausible inference that the utility company functioned as a joint employer even though the workers were formally hired and paid by subcontractors.
1 – Ortiz v Consolidated Edison…
The court also considered the plaintiffs’ alternative claims under the New York City Freelance Isn’t Free Act. FIFA provides protections for freelance workers who are retained to perform services as independent contractors. The defendants argued that the utility company could not qualify as a “hiring party” because the workers were retained by subcontractors rather than hired directly by the utility company. The court rejected that argument, holding that the statutory definition of “hiring party” encompasses entities that retain or benefit from a worker’s services even if the worker was initially engaged through an intermediary. The complaint alleged that the workers performed services directly for the utility company’s projects and that the company exercised oversight over their work and compensation. Those allegations were sufficient at the pleading stage to plausibly allege FIFA liability.
Finally, the court addressed the plaintiffs’ claims relating to prevailing wages. The plaintiffs alleged that certain utility projects required the payment of prevailing wages under municipal regulations tied to street opening permits. The court concluded that the plaintiffs plausibly alleged breach of contract and unjust enrichment claims against the utility company based on agreements requiring payment of prevailing wages. However, the court dismissed certain prevailing wage claims against some traffic control entities that were not parties to those agreements while permitting the plaintiffs to amend their complaint to pursue alternative theories of liability.
Looking Forward
This decision illustrates how courts evaluate joint employment allegations in complex contracting and subcontracting arrangements. The court emphasized that joint employer determinations under the FLSA and NYLL focus on the economic realities of the relationship rather than the formal structure of the contracting chain. Even where workers are hired and paid by subcontractors, allegations that another entity directs their day-to-day work, influences discipline, establishes pay structures, or participates in maintaining employment records may support a plausible claim that the entity functions as a joint employer.
The opinion also highlights the increasingly expansive scope of worker-protection statutes aimed at nontraditional employment relationships. By allowing FIFA claims to proceed against an entity that allegedly retained workers’ services through subcontractors, the court signaled that companies benefiting from freelance or contractor labor may face statutory obligations even if they do not directly hire the workers performing those services.
For companies operating through layered contractor relationships, the decision underscores the importance of carefully structuring operational oversight and contractual relationships. Courts analyzing employment status will examine not only the written agreements among the parties but also the practical realities of how work assignments, supervision, and compensation are managed in practice. Where operational control is shared among multiple entities, courts may allow joint employment claims to proceed even at an early stage of litigation.
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 LLP 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.
