Functional Control at the Pleading Stage: New York’s Second Department Lowers the Barrier to Alleging Joint-Employer and Single-Enterprise Liability

Introduction

In Shujing Yu v. Mask Pot, Inc. (2025 NY Slip Op 04673), the Appellate Division, Second Department, affirmed the denial of a CPLR 3211(a)(7) motion to dismiss in a putative wage-and-hour class action. The plaintiff, a food preparer, alleged violations of the Fair Labor Standards Act (FLSA), New York’s Labor Law (NYLL) including the Wage Theft Prevention Act (WTPA), the Minimum Wage Act, and the Minimum Wage Order for Miscellaneous Industries and Occupations, against two corporate entities operating different restaurant locations under a common brand—Mask Pot, Inc. (Flushing) and BK Spice World, Inc. (Brooklyn)—and individual managers/owners.

The decision clarifies the pleading standards in New York for alleging:

• Joint-employer status under FLSA/NYLL via the “economic reality” framework, including “functional control” when “formal control” is not alleged;
• “Single integrated enterprise” liability between related corporate entities; and
• Personal liability of individual owners/managers under FLSA/NYLL, with the court acknowledging Business Corporation Law § 630 as an additional potential avenue of wage liability for top shareholders.

The court held that detailed allegations of cross-location work assignments, shared branding, staff, management, and operations suffice at the pleading stage—even where the plaintiff worked at one of the locations only a handful of times. This makes the decision particularly important for multi-location businesses and franchise-like structures that share personnel or operations.

Summary of the Judgment

The Second Department affirmed the trial court’s order denying the motion by BK Spice World, Hui Fang, and Wei Zhao to dismiss the complaint for failure to state a cause of action (CPLR 3211[a][7]). Key holdings include:

• Joint-Employer (Functional Control): Although the complaint did not allege that BK Spice exercised “formal control” over plaintiff (no power to hire/fire, set schedules, pay rates, or maintain records), it sufficiently alleged “functional control” because plaintiff worked at BK Spice’s premises on at least three occasions, performing integral restaurant tasks typical of her role. This was enough to plausibly plead joint employment under the FLSA/NYLL.
• Single Integrated Enterprise: Detailed allegations of common branding, shared staff and managers, cross-location transfers, joint advertising, consolidated supplies/warehouse, and common ownership/management were enough to plausibly plead that Mask Pot (Flushing) and BK Spice (Brooklyn) operated as a single enterprise for FLSA/NYLL purposes.
• Individual Liability: Allegations that Hui Fang and Wei Zhao had the power to hire/fire, supervise schedules and conditions, determine pay, and keep records at both locations were sufficient to plead they were “employers” under the FLSA/NYLL. The court also noted BCL § 630(a) (personal wage liability of the ten largest shareholders) as pled.
• Standard Applied: The court applied CPLR 3211(a)(7)’s liberal construction and CPLR 3013’s notice-pleading principles, emphasizing that non-conclusory factual allegations are accepted as true and afforded every favorable inference.
• Waiver: Appellants’ remaining argument was rejected as improperly raised for the first time on appeal.

Analysis

Precedents Cited and Their Influence

• Pleading standards: CPLR 3013 and CPLR 3211(a)(7) (see Sternberg v Wiederman; Godfrey v Spano). The court reiterated that a complaint survives if facts, taken as true, fit within any cognizable legal theory, but bare legal conclusions are insufficient. This frames the entire inquiry.
• Definition of “employer” under FLSA/NYLL: The court adopted the federal approach and read NYLL coextensively with FLSA’s broad definition (see Cho v Osaka Zen Spa; Señal v Lynch; Harris v Structuretech N.Y., Inc.; Bonito v Avalon Partners, Inc.; Costello v Curan & Ahlers, LLP; Lomeli v Falkirk Mgt. Corp.). This alignment ensures a uniform standard in New York state courts.
• Economic reality test: Barfield v NYC Health & Hospitals Corp.; Goldberg v Whitaker House Cooperative, Inc.; Herman v RSR Sec. Servs. Ltd. The “overarching concern” is control in economic reality, not labels or formalities.
• Formal control: Carter v Dutchess Community College (power to hire/fire, set schedules/conditions, determine pay, maintain records). The court acknowledged the absence of such allegations against BK Spice—but held that lack of formal control is not dispositive.
• Functional control: Zheng v Liberty Apparel Co.; Fernandez v HR Parking Inc.; Abuladze v Apple Computer Inc. Six nonexclusive factors focus on how work is carried out and controlled operationally. The court leaned on this line of cases to find functional control sufficiently alleged based on plaintiff’s work on BK Spice’s premises doing integral tasks, despite sporadic assignments.
• Single integrated enterprise (corporate-group liability): Huang v Shanghai City Corp.; Quino v Heburechnaya I.S., Inc.; Lockwood v CBS Corp.; Benzinger v Lukoil Pan Ams.; Brown v Daikin America; Khereed v West 12th St. Rest. Group; Flores v 201 W. 103 Corp.; Cui v East Palace One, Inc. These authorities established a four-factor test (interrelation of operations; centralized control of labor; common management; common ownership/financial control) and illustrative facts (common branding, shared staff, centralized payroll/supplies) that the complaint tracked.
• BCL § 630(a): The court recited the statute imposing personal liability on the ten largest shareholders for unpaid wages and noted the complaint’s allegation that Hui Fang and Wei Zhao fell into that class, before ultimately holding that their alleged day-to-day control independently sufficed to plead “employer” status under FLSA/NYLL.

Legal Reasoning

The court’s reasoning proceeds in three coordinated steps:

1) Coextensive FLSA/NYLL “Employer” and the Economic Reality Framework

Reaffirming that NYLL’s definition of “employer” tracks FLSA, the court applied the federal “economic reality” framework. It recognized two complementary paths:

• Formal control (Carter factors): Absent as to BK Spice—no pleading that it hired/fired plaintiff, set schedules/conditions, set pay, or kept records.
• Functional control (Zheng factors): Plausibly alleged—plaintiff worked on BK Spice’s premises multiple times, performing duties integral to restaurant operations. That, coupled with the broader integration allegations, allowed the court to infer BK Spice’s functional control at the pleading stage.

Crucially, the court held that the absence of formal control does not defeat a well-pled functional control theory at the 3211(a)(7) stage. That is the core doctrinal point.

2) Single Integrated Enterprise Between the Two Corporate Defendants

Applying the four-factor “integrated enterprise” test, the court found the complaint pled:

• Interrelation of operations: Shared branding (“doing business as Xiang Hot Pot”), shared staff and managers, transfer of employees between locations, shared warehouse and supplies, and coordinated advertising.
• Centralized control of labor relations (most critical factor): Allegations that managers (including individual defendants) worked at both sites and made or ratified decisions on pay and staffing across locations.
• Common management and ownership/financial control: Allegations of co-ownership, overlapping officers/shareholders, and consolidated operational decision-making.

Because the inquiry is fact-intensive and non-exhaustive, these specifics were sufficient to permit discovery on a single-enterprise theory, which in turn supports joint-employer liability for wage violations.

3) Individual Liability (Owners/Managers)

The court held the complaint adequately pled that Hui Fang and Wei Zhao were employers under FLSA/NYLL by alleging the Carter factors:

• Power to hire and fire;
• Supervision and control over schedules/conditions;
• Authority over rates/methods of pay; and
• Maintenance of employment records.

Supporting facts included that Hui Fang was known as “Boss,” hired other kitchen workers, and ratified pay decisions, and that Wei Zhao was a manager at Flushing who became the “big manager” at Brooklyn—the site where plaintiff also worked. The court also noted the complaint’s allegation that both were among the ten largest shareholders (BCL § 630[a]), signaling an additional statutory avenue for wage recovery, even as the decision grounds individual liability primarily in the economic reality test.

Impact and Significance

• Pleading Threshold Lowered for Joint Employment: Plaintiffs can survive a CPLR 3211(a)(7) motion by alleging functional control with specific facts—even if their assignments to a particular corporate entity were limited in number and formal control factors are absent. Working a few shifts on another entity’s premises on core tasks can be enough to plead joint employment.
• State-Court Embrace of Federal Framework: The Second Department reinforces that NYLL “employer” is interpreted coextensively with FLSA, solidifying the role of federal precedent (Carter/Zheng) in New York state courts for wage-and-hour cases.
• Single-Enterprise Pleading in Multi-Location Contexts: Allegations of common branding, shared staff and managers, cross-location resource sharing, and centralized labor decisions suffice to plead a single enterprise. This is especially consequential for restaurant groups, hospitality, retail chains, and franchises with shared operational features.
• Exposure for Individual Decision-Makers: Owners/managers who influence hiring, scheduling, and pay face personal exposure under FLSA/NYLL. The mention of BCL § 630 underscores that top shareholders may also face statutory wage liability, subject to that statute’s procedural elements.
• Defense Strategy Implications: Early dismissal will be difficult where complaints offer concrete, non-conclusory facts of cross-location work, integrated operations, and managerial control. Defendants should develop factual counter-showings later (summary judgment) or seek to narrow claims through discovery rather than expect 3211 dismissal.
• Plaintiff Drafting Guidance: This decision is a template for robust pleading: specify cross-location shifts, identify managers and their roles, describe shared logistics and branding, and articulate who set or ratified pay and conditions—across entities if applicable.

Complex Concepts Simplified

CPLR 3211(a)(7) and CPLR 3013

• CPLR 3211(a)(7): A motion to dismiss for failure to state a claim. The court asks only whether, assuming the facts are true and giving every favorable inference, the complaint states a legal claim. It is not about proving the case—just pleading it.
• CPLR 3013: Pleadings must be particular enough to give notice of the transactions/occurrences and the material elements of each claim. Facts, not bare conclusions, are required.

“Employer” Under FLSA/NYLL

• Broad definition: FLSA defines “employer” expansively, focusing on whether a person or entity acts in the interest of an employer relative to the employee. New York courts interpret NYLL coextensively.

Economic Reality Test (Two Paths)

• Formal control (Carter): Power to hire/fire; control schedules/conditions; set pay; maintain records.
• Functional control (Zheng): Looks at realities of control over the work, including who provides premises/equipment, who supervises, the integral nature of the work to the business, and whether the worker’s services are predominantly for the alleged employer. It is flexible and fact-specific.

Joint Employer vs. Single Integrated Enterprise

• Joint employer: Two entities can both be your “employer” under FLSA/NYLL if, in economic reality, each exercises sufficient control over your work. Liability is joint and several.
• Single integrated enterprise: Related companies can be treated as one for liability when they function as a single business—interrelated operations, centralized control of labor, common management, and common ownership/financial control. This theory often supports finding that separate corporations jointly employ the workforce.

BCL § 630 (Top Ten Shareholder Wage Liability)

• What it does: Makes the ten largest shareholders of a corporation personally liable for unpaid wages.
• Important procedural features (beyond this decision): Enforcement typically requires statutory steps (e.g., timely notice to shareholders and efforts to collect from the corporation). The court here did not adjudicate those prerequisites; it simply noted the allegation as pled.

Wage Statutes at Issue

• FLSA: Federal minimum wage and overtime statute with broad “employer” liability.
• NYLL and WTPA: New York’s minimum wage/overtime and wage-notice/wage-statement requirements; NYLL’s enforcement regime often runs parallel to FLSA.
• 12 NYCRR Part 142: New York’s Minimum Wage Order for Miscellaneous Industries and Occupations, setting wage and overtime rules for covered workers.

Practical Takeaways

• Even minimal cross-location work can support joint-employer pleading. A small number of shifts at a related entity’s premises on integral tasks may suffice to allege functional control.
• Detail, detail, detail. Identify managers by name; describe specific instances of cross-location assignments; explain who made or ratified pay decisions; and describe shared branding, resources, and payroll practices.
• Corporate separateness is not dispositive. Separate incorporation and separate worksites will not insulate entities if operations and labor decisions are integrated.
• Individual exposure is real. Owners and managers who influence hiring, scheduling, pay, or recordkeeping risk personal liability under FLSA/NYLL; top shareholders may face BCL § 630 exposure subject to statutory procedures.
• Early motions to dismiss are harder to win. Where complaints allege specific facts reflecting functional control and integrated operations, courts will typically deny 3211(a)(7) motions and allow discovery.

Conclusion

Yu v. Mask Pot provides a clear and consequential roadmap for pleading joint-employer and single-enterprise liability in New York state courts. By expressly embracing the federal economic reality framework and recognizing functional control as sufficient where formal control is absent, the Second Department lowers the barrier to surviving a motion to dismiss in wage-and-hour cases. The decision also underscores that multi-location businesses and their managers can face exposure where operations, staffing, and labor decisions are centralized or interrelated—even if workers perform only limited assignments at secondary locations.

For practitioners, the case crystallizes best practices in drafting wage-and-hour complaints and signals that early dispositive motions will face headwinds when plaintiffs allege concrete facts of cross-location work, common branding, shared personnel, and decision-making authority. In the broader legal landscape, Yu strengthens the alignment between NYLL and FLSA doctrines in state courts and reinforces the trend of looking beyond corporate formalities to the economic realities of how labor is organized and controlled.