Where a counter-complaint has been filed alleging that a youth travel soccer club improperly classified coaches as independent contractors and team managers as “volunteers” in violation the Fair Labor Standards Act and the Michigan Workplace Opportunity Wage Act, summary disposition should be denied because the counter-complaint plausibly alleges the existence of an employment relationship.
“This matter comes before the Court on the Motion for Partial Summary Disposition pursuant to MCR 2.116(C)(8) filed by Counter-Defendant and Third-Party Defendant Union FC, Inc., doing business as Nationals (‘Nationals’). Nationals seeks dismissal, with prejudice, of the Counter-Complaint and Third-Party Complaint (collectively, the ‘Counter-Complaint’) filed by Mirnes Biscevic, Michael Joa, and Andrew Kaltsounis (collectively, the ‘Coaches’), and Paul Boehms (‘Boehms’ or ‘Third-Party Plaintiff’), who purport to bring their claims on behalf of themselves and other similarly situated individuals. …
“The underlying dispute arises from Nationals’ operation as a youth travel soccer club. The Coaches and Boehms allege that Nationals improperly classified coaches as independent contractors, and team managers as ‘volunteers,’ thereby violating the Fair Labor Standards Act (‘FLSA’), 29 USC 201 et seq., and the Michigan Workplace Opportunity Wage Act (‘WOWA’), MCL 408.411 et seq. They also assert a claim for fraudulent filing of information returns under 26 USC §7434 and seek a declaratory judgment. …
“Nationals argues that the Fair Labor Standards Act (‘FLSA’) and the Workforce Opportunity Wage Act (‘WOWA’) apply only to ‘employees,’ and that team managers are admitted parent volunteers who receive only a modest reduction in registration fees. Nationals emphasizes that Third-Party Plaintiff Boehms served in a voluntary capacity for personal purposes and received approximately a $200 fee reduction for his children’s participation, which Nationals characterizes as insufficient to establish an economic relationship. Applying the ‘economic reality’ test, Nationals contends that team managers are not economically dependent on the organization and therefore do not qualify as employees under the FLSA or WOWA.
“In response, Counter-Plaintiffs argue that the FLSA’s volunteer exception is narrow and expressly limited by 29 USC §203(e)(4)(A) to individuals performing services for public agencies or non-profit organizations. They assert that because Nationals is a for-profit Michigan corporation, it cannot characterize individuals as ‘volunteers’ to avoid statutory wage obligations. They therefore request entry of judgment under MCR 2.116(I)(2), arguing that FLSA’s volunteer carve-outs apply to public and charitable entities, not for-profit corporations.
“In reply, Nationals argues that the team managers’ alleged ‘volunteer’ status and receipt of only a nominal registration fee discount demonstrate the absence of any expectation of compensation under Acosta v Cathedral Buffet, Inc, 887 F3d 761 (6th Cir. 2018). …
“Applying these principles here, the Court cannot conclude as a matter of law that the team managers are volunteers outside the protections of the FLSA and the Workforce Opportunity Wage Act (‘WOWA’). …
“Accepting these allegations as true and construing them in the light most favorable to the nonmoving party, the alleged fee reduction plausibly constitutes a tangible economic benefit provided in exchange for services. …
“… Accepting all well-pleaded factual allegations as true and construing them in the light most favorable to the nonmoving party, the Court concludes that the Counter-Complaint plausibly alleges the existence of an employment relationship. The allegations of mandatory duties, organizational control, integration into Nationals’ operations, and a conditioned fee reduction are sufficient to state claims under the FLSA and WOWA.
“Accordingly, summary disposition under MCR 2.116(C)(8) is DENIED as to Counts I and II. …
“Section 7434 of the Internal Revenue Code creates a civil remedy where a person ‘willfully files a fraudulent information return with respect to payments purported to be made to any other person.’ 26 USC §7434(a) (emphasis added).
“Here, it is undisputed that Nationals issued Forms 1099 to the coaches. The issue is whether the alleged misclassification of the coaches as independent contractors, standing alone, is sufficient to render the Forms 1099 ‘fraudulent’ under §7434. …
“Here, the Counter-Complaint alleges that Nationals improperly classified the coaches as independent contractors and knowingly issued Forms 1099 despite concerns regarding the propriety of that classification. However, the Counter-Complaint does not allege that the Forms 1099 misstated or otherwise inaccurately reported the amounts paid to Counter-Plaintiffs. Accepting all well-pleaded factual allegations as true, the Court concludes that the Counter-Complaint challenges the legal characterization of the parties’ relationship rather than the accuracy of the payment information reported on the returns.
“Accordingly, Count III fails to state a claim under 26 U.S.C. §7434. Nationals’ Motion for Summary Disposition pursuant to MCR 2.116(C)(8) is therefore GRANTED as to Count III.”
Union FC, Inc. v. Biscevic; MiLW No. 10-110848, 22 pages; Oakland Circuit Court; Valentine, J.