Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-06773/USCOURTS-cand-3_06-cv-06773-4/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DIENNA HOWARD,

Plaintiff,

 v.

GAP INC.,

Defendant. /

No. C 06-06773 WHA

ORDER GRANTING 

MOTION TO DISMISS

INTRODUCTION

In this putative class action, defendant moves to dismiss under Rule 12(b)(6) or, in the

alternative, moves to strike portions of the second amended complaint. This order holds that the

pleading fails to state a claim for violation of New York’s labor statutes prohibiting illegal

kickbacks and deductions from employee wages. Plaintiff was already given leave to amend

following the first motion to dismiss. Further leave to amend will not be granted. Accordingly,

defendant’s motion to dismiss is GRANTED. This action is DISMISSED. 

STATEMENT

Defendant Gap, Inc., is a clothing retailer selling clothing and accessories under its own

brand name through its retail stores. At some time in 2002, plaintiff Dienna Howard took a job

working as a sales associate at a Gap store in McKinley Mall in Buffalo (Compl. ¶ 13). Her

duties included assisting customers with purchases and stocking the store’s merchandise. 

Howard was paid at an unidentified hourly rate while working for defendant (id. at ¶ 8). 

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 1 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

She worked for only twelve hours over two shifts before quitting her employment with

defendant (id. at ¶ 16). 

While she was being trained, plaintiff alleges that she was told by an unnamed manager

that all sales associates must purchase, and while working, wear Gap clothing and accessories. 

Employees were allegedly required to make periodic clothing purchases from their employer to

keep their attire current to reflect the items sold by the store at the time (id. at ¶ 14). Howard

purchased items of clothing from her employer, including three t-shirts costing approximately

$7.50 each, Capri jeans at an allegedly substantially higher price, and a grommet belt, the price

of which was unknown to plaintiff (id. at ¶ 15). She alleges that such purchases were at all

times a condition of her employment, and that her agreed-upon hourly wage was “substantially

reduced by the purchases that she was required to make from Gap, Inc.” (id. at ¶ 17–18). 

Finally, she alleges that the clothing purchases represented a significant cost to Gap’s

employees because of the low hourly wage they received, and that Gap sold clothing to its

employees at a profit because “the cost of producing the clothing is less than the cost Defendant

charges to its employees for the clothing” (id. at ¶ 12). 

Plaintiff filed her first class-action complaint on October 31, 2006, in California

asserting diversity jurisdiction. She then filed her first amended complaint on December 8,

2006, shortly after defendant had filed its first motion to dismiss. That complaint alleged

three claims: a violation of New York Labor Law Section 193 prohibiting unauthorized

deductions from employees’ wages, a violation of New York Labor Law Section 198-b

prohibiting illegal kickbacks to employers, and a claim for unjust enrichment. Defendant filed

another motion to dismiss which was granted on January 19, 2007. Plaintiff was granted leave

to amend. Thereafter, plaintiff filed a second amended complaint, adding a few general

allegations and removing the claim for unjust enrichment. A hearing was held on this motion

on April 26, 2007. Plaintiff’s counsel did not appear. 

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 2 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

ANALYSIS

A motion to dismiss under Rule 12(b)(6) tests for legal sufficiency of the claims alleged

in the complaint. A complaint should not be dismissed “unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 

Conley v. Gibson, 355 U.S. 41, 45–46 (1957). “All allegations and reasonable inferences are

taken as true, and the allegations are construed in the light most favorable to the non-moving

party, but conclusory allegations of law and unwarranted inferences are insufficient to defeat a

motion to dismiss for failure to state a claim.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir.

2004). 

1. ILLEGAL KICKBACKS UNDER NEW YORK LABOR LAW SECTION 198-b.

Under Section 198-b, employers are prohibited from requesting, demanding or receiving

“a return, donation or contribution of any part or all of said employee’s wages, salary,

supplements, or other thing of value, upon the statement, representation, or understanding that

failure to comply with such request or demand will prevent such employee from procuring or

retaining employment.” N.Y. Lab. § 198-b. 

Plaintiff’s prior claim under this section was dismissed at least in part because it was

never clear that this section was intended to address bilateral transactions where the employee

was given something of value. In response, plaintiff has added allegations that Gap’s requiring

her to purchase clothing was akin to the compelled purchase of a uniform. Plaintiff then refers

to the Fair Labor Standards Act, under which “the Department of Labor has determined that

employers are required to purchase and maintain uniforms that employees are required to wear

to work” (Compl. ¶ 46). Howard states in her brief that she has not asserted a claim under the

FLSA. Plaintiff also added an allegation that her wages were substantially reduced below the

agreed-upon hourly wage because of the compelled purchases. She also alleged that the

clothing was sold to her at a price higher than the cost of production. 

As with the prior motion to dismiss, defendant again urges that the New York statute

was not meant to address bilateral transactions in which the employee receives something of

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 3 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

value. Plaintiff has alleged that the clothing was a significant cost to her, and that the clothing

was sold to her at a price higher than the cost of production. This is not the same as alleging

that the company was trying to profit from the sales of clothing to its employees who received

little or nothing but continued employment in return. Absent from the complaint is any

allegation that the clothing was valueless to plaintiff, that she could not use it for other

purposes, or that she was directed to purchase certain items. Under the statute, she still has not

alleged that she “returned” her wages to her employer as a condition of employment. She

participated in a bilateral transaction. Here, Howard receives something of value; she is not

simply giving back part of her wages to her employer in exchange for continued employment. 

As before, plaintiff has identified no decision in New York or elsewhere indicating that

this section was intended to apply to bilateral transactions. Of the two decisions found by the

Court that address this section, neither is pertinent here. In Chu Chung v. New Silver Palace

Restaurant, 272 F. Supp.2d 314, 317 (S.D. N.Y. 2003), it was illegal for busboys in a restaurant

to be required to remit a portion of their tips to their employer as a condition of employment. In

Bull & Bear Group, Inc. v. Fuller, 170 A.D.2d 275, 277 (N.Y. App. Div. 1 1991), a contract

that required a corporate officer to sign a promissory note to purchase stock was held not to be

an illegal kickback under Section 198-b because requiring him to do so was not a return of his

wages. As the earlier order held, neither of these situations covers plaintiff’s complaint. 

Plaintiff argues at length that her allegedly required purchases of Gap clothing were akin

to the mandatory purchase of a uniform. She points out in her amended complaint that the Fair

Labor Standards Act has been interpreted to require that employers must maintain and pay for

uniforms where the nature of the business requires the employee to wear a uniform. 37 C.F.R.

531.3(d). In her brief, however, she states that her allegations regarding the FLSA “are

included as background information relevant to Defendant’s policy of requiring its employees

to purchase clothing from GAP to be worn while working. Plaintiff has not asserted claims

under the FLSA” (Opp. at 8). Even if she were trying to plead a claim under this regulation, it

addresses facilities provided by the employer and whether they must be included in

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 4 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

computations of reasonable cost in determining wages. There is no indication that there would

be a private cause of action, or any cause of action at all under this regulation. At any event,

any claim under the FLSA would be time-barred because the applicable statute of limitations is

two years from accrual of the violation or three years if the violation was willful. 29 U.S.C.

255(a). At all times, plaintiff has pleaded that she worked at Gap in 2002, some four years

before the first complaint was filed. 

In response, defendant argues that even if its employees were required to purchase its

clothing, it is less like a uniform than plaintiff contends because it can be used for other

purposes than working at Gap. To use defendant’s analogy, the clothes that plaintiff was

allegedly required to buy were not like a shirt emblazoned with a “Kentucky Fried Chicken”

logo. They could also be worn as part of the employee’s everday, non-work wardrobe. Howard

has never pleaded that she was unable to wear her clothing outside of working hours or after she

had discontinued her employment. Plaintiff’s allegedly compelled purchases of three t-shirts, a

belt and a pair of jeans are not like a foundry worker’s steel-toed boots or a surgeon’s optical

loupe. As the Court noted in the prior order, Gap, like most employers, has a legitimate interest

in having its employees appear professional. Plaintiff’s purchases are all things that she could

use in her ordinary life. 

Plaintiff has failed to plead that she was required to return her wages to her employer as

a condition of her employment. Accordingly, defendant’s motion to dismiss is GRANTED as to

this claim. 

2. UNLAWFUL DEDUCTIONS UNDER NEW YORK LABOR LAW SECTION 193.

Section 193 also prohibits deductions from an employee’s wages unless such deductions

are made pursuant to government regulations or are expressly authorized by the employee and

are for the employee’s benefit, whether done outright or by a separate transaction. N.Y. Lab.

§ 193. For this claim, plaintiff’s allegations remain substantially the same as before, except that

she now alleges that the purchases she made were paid out of wages she earned from Gap. As

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 5 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

before, plaintiff does not plead that Gap deducted the money directly from her wages. She

alleges that the deductions were made by separate transaction. 

Defendant argues that even if the purchases were compelled, they were at a substantial

discount and therefore plaintiff received a benefit. Defendant goes on to explain that if the

purchases did constitute a deduction, they were exactly the sort of deduction for support or

monetary benefit contemplated by the statute. Defendant cites Angello v. Labor Ready,

859 N.E.2d 480 (N.Y. 2006), in support of that proposition. This argument, however, stretches

the statute too far. Under Angello, even deductions that ostensibly benefit workers can violate

the statute. The statute itself specifies that “[s]uch authorized deductions shall be limited to

payments for insurance premiums, pension or health and welfare benefits, contributions for

charitable organizations, payments for United States bonds, payments for dues or assessments

to a labor organization, and similar payments for the benefit of the employee.” N.Y. Lab. Code

§ 193. Payments for clothing do not fit in any enumerated category. Nor are they similar to

deductions for insurance, health care, or union dues. Gap employees may have benefitted from

the opportunity to purchase discounted clothing, but that was not the kind of benefit

contemplated by the statute. 

In her second amended complaint, plaintiff added the allegation that she paid for her

allegedly compelled purchases out of her wages. Defendant argues that it is difficult to see how

this could possibly be the case. If plaintiff was, as she alleges, required to wear Gap clothing at

all times while working, she would have had to have started work wearing Gap clothing. This

means that she would have had to have purchased them either before starting work, or very soon

after starting work. Given plaintiff’s brief career with Gap, it seems unlikely that the price of

the clothing was deducted from her wages. On a motion to dismiss, however, plaintiff is

entitled to all reasonable inferences in her favor. Her first few hours at Gap were perhaps

devoted to training or orientation. She also alleges no facts as to when she purchased the

clothing and so has not foreclosed the possibility that the purchases did, in fact, come from her

wages. 

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 6 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Plaintiff has not, however, pleaded that this was the kind of coercive economic

arrangement that the statute was meant to prevent. There is not a sufficient connection between

her receiving her wages and the purchases she made to satisfy the statute. Beyond merely

alleging that the purchases were made out of her wages, she has not pleaded a connection

between her wages and an alleged deduction. She has cited to no decision, and none has been

found, that would warrant extending New York’s labor laws to cover the facts she alleges here. 

Moreover, plaintiff still has not alleged that the clothing was of no value to her, that it

was sold to her at a price greater than fair market value, or that she could not find other uses for

it. It is likely true that she could have used the money for other necessities of life. Most jobs,

however, come with some costs. Some workers must purchase business-casual clothing for

work. Even more workers pay to commute to work, either by car or by transit. Such expenses

reduce an employee’s wages, but are not considered unlawful deductions and need not be

reimbursed by employers. It is also likely true that Gap’s alleged policy may not be the best or

most fair way of treating its workers who are paid a relatively low hourly wage. Howard

attempts to shoehorn the Gap’s alleged policy into a New York statute prohibiting unauthorized

deductions, but her allegations, even if true, do not fit into the statute. Accordingly, plaintiff

has failed to plead a claim under Section 193. Defendant’s motion is GRANTED, and this claim

is DISMISSED. 

CONCLUSION

For all of the above-stated reasons, defendant’s motion to dismiss is GRANTED. 

Plaintiff has already amended her complaint twice, so no further leave to amend will be given. 

Thus, this action is DISMISSED. The Clerk shall CLOSE THE FILE. 

IT IS SO ORDERED.

Dated: April 26, 2007. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:06-cv-06773-WHA Document 42 Filed 04/26/07 Page 7 of 7