Defendants are two Greek restaurants. Defendant Milos HY Inc. (Milos Hudson) owns and operates Estiatorio Milos - Hudson Yards. Defendant Milos, Inc. (Milos Midtown) owned and operated Estiatorio Milos - Midtown. (NYSCEF No. 20 at ¶ 10.) Plaintiff Francisco Huertero worked as a runner for Milos Hudson starting in November 2021. Plaintiffs Atiqur [*2]Rahman and MD Nozmul Islam Emu worked as bussers at Milos Midtown from June 2017 until March 2020, when that restaurant closed as result of the COVID-19 pandemic. (Id. at ¶ 31.)

Plaintiffs assert causes of action for alleged violations of the Labor Law, the Executive Law, and the New York City Administrative Code. Rahman and Huertero assert these claims on behalf of themselves and on behalf of a putative class.

Defendants now move under CPLR 7503 to compel Huertero to arbitrate his claims against them. Defendants also move to dismiss the claims of Rahman and Emu asserted against Milos Hudson, and to dismiss portions of these plaintiffs' first cause of action against Milos Midtown.

The branch of the motion to compel arbitration is granted. The branches of the motion to dismiss are granted in part and denied in part.

Defendants move to compel arbitration of plaintiff Huertero's claims against them. They contend that Huertero signed an agreement through which he agreed to be bound by an arbitration agreement contained in an employee handbook. The motion is granted.

Plaintiff argues that defendants have not met the summary-judgment threshold to establish that Huertero's claims must be arbitrated. (NYSCEF No. 39 at 1.) This argument is unavailing. The court concludes that defendants—through submission of the handbook and a written receipt for the handbook signed by Huertero—have made out a prima facie case in favor of compelling arbitration.

Plaintiffs also argue that defendants do not provide a complete copy of the handbook, and therefore that it is unclear whether its provisions are contractual obligations. Plaintiffs says that it is possible that a provision in the handbook provides that it is not an employment contract.

Plaintiffs, however, do not dispute that Huertero signed a receipt showing that he received a copy of the handbook.^[FN1] In doing so, Huertero agreed that he would be bound by the handbook's arbitration requirement and that the clause requiring arbitration "is part of [his] employment with the Company." (NYSCEF No. 32 at 11 [handbook agreement].) Additionally, the handbook does not say that it lacks contractual effect. (Cf. Seltzer v Clark Assoc., LLC, 2020 WL 5525590, *4 [SD NY, Sept. 3, 2020, No. 20 Civ. 4685] [holding arbitration provision in handbook not binding when it "renounce[d] contractual effect and lack[ed] any indication that [*3]agreeing to arbitrate [wa]s a condition of employment"].^[FN2] ) The court therefore concludes that the handbook's arbitration requirement is binding on Huertero.

Plaintiffs also contend that because defendants reserved the right to change unilaterally the terms of the handbook, any contract based on the handbook is illusory and lacks mutual consideration. This argument is unpersuasive. "[M]utuality of remedy is not required in an arbitration contract; instead the critical question here is whether there was consideration for the employment contract, of which the arbitration agreement is a component part." (Matter of Ball [SFX Broadcasting Inc.], 236 AD2d 158, 161 [3d Dept 1997].) The parties do not dispute that there was consideration for plaintiffs' overall employment. Thus, that defendants reserved the right to make changes to its handbook is not enough to render the arbitration component void.

Additionally, "when an agreement contains an arbitration clause, 'a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.'" (Curry v Volt Info. Scis., Inc., 2008 US Dist LEXIS 20910, *6 [SD NY March 18, 2008, No. 07 Civ. 7158], quoting Buckeye Check Cashing, Inc. v Cardegna, 546 US 440, 449 [2006].) Plaintiffs challenge the validity of the entire handbook agreement. Thus, an arbitrator should determine whether that agreement is (or is not) illusory. Indeed, the arbitration agreement itself provides that "[t]his agreement to mandatory arbitration also covers any objection to arbitrability or the existence, scope, validity, construction, or enforceability of this arbitration agreement." (NYSCEF No. 32 at 7 [pdf pagination].)

Plaintiffs further contend that the arbitration agreement is substantively unconscionable. They assert that Huertero will be compelled to pay half the arbitration fees—a sum that will be cost prohibitive to him. Plaintiffs say that the costs would prevent Huertero from asserting his claims in arbitration.

The arbitration agreement provides that arbitration will be conducted by Judicial Arbitration & Mediation Services ("JAMS") and would be conducted using JAMS's Streamlined or Comprehensive Arbitration Rules and Procedures. (NYSCEF No. 32 at 8 [pdf pagination].) JAMS's Streamlined Rule 26 and Comprehensive Rule 31 provide that each party will "pay its pro rata share of JAMS fees and expenses as set forth in the JAMS fee schedule in effect at the time of the commencement of the Arbitration, unless the Parties agree on a different allocation of fees and expenses." (JAMS Streamlined Arbitration Rules & Procedures § 26; [*4]Comprehensive Arbitration Rules & Procedures § 31.^[FN3] ) Defendants argue that "[b]ecause the parties may agree on a different fee allocation and the Arbitration Agreement permits the recovery of fees by the prevailing party in accordance with applicable law, . . . Huertero's claim that the Arbitration Agreement is substantively unconscionable fails." (NYSCEF No. 43 at 6.)

The court agrees with defendants. When it comes to whether a fee-sharing provision in an arbitration agreement is unconscionable, the inquiry "'should focus on the claimant's ability to pay the arbitration fees and costs, the expected cost differential between arbitration and litigation in court, and whether that cost differential is so substantial as to deter the bringing of claims.'" Jones v Landry's, Inc., 2025 WL 1527307, *7 [SD NY May 29, 2025, Dkt. No. 23-cv-9920], quoting Brady v Williams Capital Group, L.P., 14 NY2d 459, 467 [2010].)

Here, Huertero has not shown that the fee schedule that would govern the parties' arbitration is cost-prohibitive. It is not clear how large his share of the fees will be. Nor has he shown that the cost of arbitration is likely to exceed the cost of pursuing his claims in this court. Additionally, even assuming that the cost of arbitration turns out to be cost-prohibitive to Huertero, the portion of the arbitration agreement concerning the fee arrangement could be severed, leaving the rest of the arbitration agreement enforceable. (NYSCEF No. 32 at 9 [pdf pagination] ["If any part of this arbitration agreement is found to be invalid or unenforceable, that specific part will be severed, but the remainder of this arbitration agreement will continue in full force and effect."]; see also Adams v Kent Sec. of New York, Inc., 156 AD3d 588, 590 [1st Dept 2017] [holding that arbitration agreement would survive cost-prohibitive fee-sharing and venue provisions due to severability clause].)

Plaintiffs also argue that the arbitration agreement is procedurally unconscionable. According to plaintiffs, Huertero was not given time to review the handbook before signing it. (NYSCEF No. 41 at 1 [Huertero's affidavit].) Huertero further represents that "[n]o one explained to me the documents I was required to sign, or any of Defendants' policies. I only recall discussing my payrate and schedule." (Id.) Defendants argue, however, that they did not use "high pressure tactics" to get Huertero to sign the agreement and there was no "disparity in bargaining power." (NYSCEF No. 43 at 6, quoting Isaacs v OCE Bus. Servs., Inc., 968 F Supp 2d 564, 570 [SD NY 2013].)

The court agrees with defendants. Huertero does not describe any tactic that defendants allegedly employed to convince him to sign the arbitration agreement. Nor does Huertero represent that he made any effort to ask defendants to explain the documents to him. It was Huertero's responsibility to ensure he understood the documents before signing. (See Ragone v Atlantic Video at Manhattan Ctr., 595 F3d 115, 122 [2d Cir 2010].) Additionally, Huertero does not represent that he requested additional time to review the arbitration agreement. The court [*5]concludes that the arbitration agreement is not procedurally unconscionable.

The branch of defendants' motion to compel arbitration of Huertero's claims is granted and the action, as it pertains to Huertero, is stayed.

Defendants argue that Huertero waived his right to bring class actions claims, whether in this court or in arbitration, when he signed the handbook agreement. Plaintiffs reiterate their position that the employee handbook is not binding and therefore that the waiver has no effect.

The court agrees with defendants. Huetero signed the handbook agreement through which he agreed to comply with the handbook's terms. (NYSCEF No. 32 at 11 [pdf pagination].) And, as this court held above, that agreement is valid. The handbook provides that Huertero and defendants "agree to waive their right to commence, to become a party to, or to remain a party to or participant in, any group, representative, class, collective, or hybrid class/collective action in any court, arbitration proceeding, or any other forum, against the other." (NYSCEF No. 32 at 8 [pdf pagination].) Accordingly, the branch of defendants' motion to dismiss Huertero's class-action claim is granted.

A. The Branch of the Motion Seeking to Dismiss Rahman and Emu's Claims as Against Milos Hudson

Defendants contend that to the extent that Rahman and Emu's claims are asserted against Milos Hudson, those claims must be dismissed because Rahman and Emu undisputedly did not work at Milos Hudson. (See NYSCEF No. 29 at 13.) Plaintiffs, on the other hand, allege that defendant operated Milos Midtown and Milos Hudson as a single integrated enterprise—and therefore that Rahman and Emu can assert claims against both Milos Midtown and Milos Hudson. The court agrees with defendants.

There are "four criteria to determine whether two or more companies are sufficiently interrelated to constitute a single entity: (1) interrelation of operations; (2) centralized control of labor relations; (3) common management; and (4) common ownership or financial control of the entities in question." (Quino v Heburechnaya I.S., Inc., 230 AD3d 601, 603 [2d Dept 2020].) The second criterion is the most important. (Lockwood v CBS Corp., 219 AD3d 1326, 1328 [2d Dept 2023].)

Here, plaintiffs' allegations "merely consist[ ] of bare legal conclusions that [Milos Hudson and Milos Midtown] had a centralized control of labor relations. The plaintiff[s] failed to evince or allege in a nonconclusory manner any way in which [Milos Hudson] was involved" in their employment with Milos Midtown. (Lockwood, 219 AD3d at 1328.) Accordingly, the court grants the branch of defendants' motion to dismiss Rahman and Emu's claims as asserted against Milos Hudson.

B. The Branch of the Motion Seeking to Dismiss Rahman and Emu's Labor Law Claim Against Milos Midtown (First Cause of Action)

On this branch of the motion, defendants move to dismiss the portions of Rahman and Emu's first cause of action based on allegations that Milos Midtown violated the Labor Law by failing to provide proper wage notices and wage statements, by claiming improper tip credits; and by implementing an invalid tipping pool. (NYSCEF No. 20 at ¶ 38.)

1. Wage Notices and Wage Statements

a. Labor Law § 195 (1) (Wage Notices)

These plaintiffs claim that Milos Midtown violated the wage-notice requirement of Labor Law § 195 (1) and thus may not claim a tip credit.^[FN4] The court concludes that this claim is time-barred.

A § 195 (1) wage notice must be provided at the time of hiring. Plaintiffs were hired in 2017 and brought this action in 2024, more than six years later. The § 195 (1) claim is therefore dismissed. The court does not reach the parties' remaining arguments concerning the wage notices, particularly those concerning whether the notices complied with the requirements of 22 NYCRR 146-2.2.^[FN5]

b. Labor Law § 195 (3) (Wage Statements)

These plaintiffs also claim that defendants did not provide them with tip-credit notices with every payment of wages (NYSCEF No. 20 at ¶ 25), or before every pay rate change (NYSCEF No. 39 at 16); and that defendants failed to provide them with tip-credit notices reflecting their actual hours worked. (NYSCEF No. 25 at ¶ 70.) Plaintiffs therefore contend that Milos Midtown was not entitled to a tip credit on plaintiffs' wages.

Defendants argue that this claim should be dismissed. According to defendants, the amended complaint "does not plead a single fact from which the Court can infer that, in any specific week, Plaintiffs' total compensation fell below the minimum wage; or that their wages should not have been subject to a tip credit." (NYSCEF No. 29 at 15.)

Under Labor Law § 195 (3), an employer must "furnish each employee with a statement with every payment of wages, listing . . . the dates of work covered by that payment of wages; name of employee; name of employer; address and phone number of employer; rate or rates of pay and basis thereof" and other items. Wage statements must also provide notice that "in the event plaintiff did not earn enough tips to meet the minimum, [the employer] would be responsible for paying him the difference." (Ahmed v Morgan's Hotel Group Mgt., LLC, 160 AD3d 555, 556 [1st Dept 2018], citing 12 NYCRR 146—2.2.)

Defendants have not provided a complete set of the wage statements that they allegedly provided Rahman and Emu—only one statement for each plaintiff from a single week in June 2018. (See NYSCEF No. 33 at 7-14 [pdf pagination].) Defendants provide an affidavit from Maria Teresa Arguelles, human resources manager for Milos, Inc., who represents that "Milos Midtown provided Plaintiffs with detailed wage statements with every payment of wages, including specifically a separate line item regarding the amount of tip credit taken based on the applicable tip credit rate and the number of hours worked." (Id. at 3 [pdf pagination].) But Arguelles does not represent that this statement is based on her personal knowledge (as opposed to her review of Milos Midtown's records). Nor does she otherwise provide evidence establishing that "'the employer made complete and timely payment of all wages due pursuant to this article.'" (Ahmed, 160 AD3d at 556, quoting Labor Law § 198 [1-d] [emphasis added].) Moreover, the two wage statements, as submitted on this motion, do not contain a notice that "in the event plaintiff did not earn enough tips to meet the minimum, they would be responsible for paying him the difference." (Id.)

The branch of the motion to dismiss plaintiffs' Labor Law § 195 (3) claims is denied.

2. Tip Credit Based on Non-Tipped Work

Plaintiffs allege that defendants improperly "claimed tip credits for all hours worked despite having caused tipped employees to engage in non-tipped duties exceeding twenty percent (20%) of the total hours worked each workweek, in violation of the NYLL" and its implementing regulations. (NYSCEF No. 20 at ¶ 38.) Plaintiffs further allege that their duties included "sweeping the floor, throwing out garbage, polishing dishes, silverware, and glassware, cutting bread, filling up oil batters, bringing water, filling up ice, preparing napkins and setting up tables," and that they did so for more than 20% of their workday. (NYSCEF No. 20 at ¶ 40.)

Under 12 NYCRR 146-2.9, if "an employee does both tipped and non-tipped work on a given shift," the employer may not claim "a tip credit where the non-tipped work is either (a) for two or more hours or (b) for more than twenty percent of his or her shift (whichever is less)." (Aldape v Ocinomled, Ltd., 2023 NY Slip Op 50811(U), *2 [Sup Ct, NY County 2023].)

Defendants argue that plaintiffs did not work for 20% or more of their shifts doing non-tipped tasks. (NYSCEF No. 29 at 20.) Defendants rely on the complaint's allegations that Rahman and Emu worked shifts that were either 4.25 hours or 13 hours and that they performed 30-45 minutes of non-tipped duties after the scheduled end of their shifts. (See id., citing NYSCEF No. 20 at ¶¶ 33-35.) Defendants therefore contend that plaintiffs could not have [*6]worked for 20% or more of their shifts doing non-tipped work. This court disagrees. That Rahman and Emu allege that they were required to spend 30-45 minutes after their shifts performing non-tipped work does not show that all of their required work during their shifts was tipped work, as defendants implicitly assume.

The branch of defendants' motion to dismiss Rahman and Emu's claim under 12 NYCRR 146-2.9 claim is denied.

3. Improper Tip Pool (Labor Law § 196-d claim)

Plaintiffs allege that they were required to participate in a tip pool without their consent. They also allege that they "observed managers and supervisors improperly taking tips from the tip pool" and that those "managers included non-eligible employees, such as sommeliers and baristas." (NYSCEF No. 20 at ¶ 39.) Plaintiffs argue that the tip pool was invalid under Labor Law § 196-d, and therefore that defendants are not entitled to take a tip credit. (NYSCEF No. 39 at 18-19.)

Labor Law § 196-d provides that "[n]o employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee." Under 12 NYCRR 146-2.16, "An employer may require food service workers to participate in a tip pool and may set the percentage to be distributed to each occupation from the tip pool. Only food service workers may receive distributions from the tip pool."

a. Whether Plaintiffs Allege a § 196-d Violation

Defendants seek to dismiss the § 196-d claim, arguing that 12 NYCRR 146-2.16 "allows employers to require food service workers to participate in a tip pool." (NYSCEF No. 29 at 18-19.) Defendants contend that plaintiffs' allegations that managers and supervisors stole their tips are insufficiently pleaded—that plaintiffs do not detail "the name of the manager, the amount taken, the date taken, the circumstances, the duties of the managers or any other fact to support it." (Id. at 19.)

Employees eligible to receive a share of "employer-mandated tip splitting should be limited to employees who, like waiters and busboys, are ordinarily engaged in personal customer service, a rule that comports with the expectation[s] of the reasonable customer." (Barenboim v Starbucks Corp., 21 NY3d 460, 471-472 [2013] [internal quotation marks omitted].) Eligibility to participate is "based upon duties and not titles." (Id. at 471 [internal quotation marks omitted].) Additionally, "'employees who regularly provide direct service to patrons remain tip-pool eligible even if they exercise a limited degree of supervisory responsibility.'" (Matter of Marzovilla v New York State Indus. Bd. of Appeals, 127 AD3d 1452, 1454 [3d Dept 2015], quoting Barenboim, 21 NY3d at 472.)

Here, plaintiff alleges that defendants improperly required plaintiffs to participate in the tip pool. But as 12 NYCRR 146-2.16 provides, doing so is permissible.

Additionally, plaintiffs allege that the managers and supervisors improperly took tips from the tip pool. Plaintiffs allege that those managers include sommeliers and baristas who would be ineligible to take tips from the pool. The court concludes that these allegations are sufficient at the pleading stage.

b. Whether a § 196-d Violation Renders a Tip Credit Invalid

Defendants further argue that although § 196-d bars an employer from claiming any part of the tips of its employees, doing so does not affect the employer's right to take a tip credit with respect to the employees' hourly wages—only the employer's right to the tips claimed.^[FN6] (NYSCEF No. 29 at 17.) Plaintiff, on the other hand, contends that if defendants violated § 196-d, defendants would not be allowed to take a tip credit and would have to repay any tip credit taken with respect to plaintiffs' hourly wages.

This court is not aware of binding appellate authority on this issue. Some courts have held that because § 196-d provides that nothing in that section "shall be construed as affecting the allowances from the minimum wage for gratuities in the amount determined in accordance with the provisions of article nineteen of this chapter," an allegation that an employer violated § 196-d cannot render improper the employer's claiming of a tip credit (Little v Hartz Hotel Services, Inc., 81 Misc 3d 844, 850 [Sup Ct, NY County 2023].) Others have "uph[e]ld the reimbursement of a tip credit to the employees due to an employer's violations of Labor Law regulations." (Chowdhury v GK Grill LLC, 2015 NY Slip Op 30169[U], *4 [Sup Ct, NY County 2015] [collecting cases].)

The court agrees with defendants that an alleged § 196-d violation does not render them ineligible to use tip credits. Section 196-d explicitly states that it does not affect "the allowances from the minimum wage for gratuities in the amount determined in accordance with the provisions of" the Minimum Wage Act (Labor Law § 650 et seq.). To hold that an employer's alleged § 196-d violation necessarily renders the employer ineligible to claim a tip credit would read out this clause from the statute.

Accordingly, it is

ORDERED that the branch of defendants' motion to compel arbitration of Huertero's claims is granted; and it is further

ORDERED that the branch of defendants' motion to dismiss Huertero's class-action claims is granted; and it is further

ORDERED that the branch of the motion to dismiss the complaint as against defendant Milos Hudson is granted; and it is further

ORDERED that the branch of the motion to dismiss Rahman and Emu's Labor Law § 195 (1) claim as against Milos Midtown is granted; and it is further

ORDERED that the branch of the motion to dismiss the Labor Law § 195 (3) claim is denied; and it is further

ORDERED that the branch of defendants' motion to dismiss the 12 NYCRR 146-2.9 claim is denied; and it is further.

ORDERED that the branch of defendants' motion to dismiss the Labor Law § 196-d claim on liability is denied; and it is further

ORDERED that the branch of defendants' motion to dismiss the portion of plaintiffs' Labor Law § 196-d claim for tip-credit-based compensatory damages is granted; and it is further

ORDERED that the balance of the claims in this action are severed and shall continue; and it is further

ORDERED that the parties appear for a telephonic preliminary conference on July 30, 2025; and it is further

ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant and on the office of the County Clerk (using the NYSCEF document type "Notice to the County Clerk - CPLR § 8019 (c)"), which shall enter judgment accordingly.