Insurance won’t cover Whitby suit


City officials have confirmed the city’s insurance carrier will not provide coverage for the millions of dollars in damages sought by employees at Rye Golf Club’s Whitby Castle in their lawsuit to recover what they say are unpaid overtime wages and stolen tips.

The City Council authorized City Manager Scott Pickup at its Feb. 26 meeting to hire Manhattan-based law firm Harris Beach to defend the city and the golf club against what could turn out to be a class action suit initially filed by nine former and current waiters, kitchen workers and bartenders, all of whom were hired by RM Staffing. Harris Beach employs City Attorney Kristen Wilson, who is on retainer with the city.

RM, one of the shell staffing companies set up by former Rye Golf Club general manager Scott Yandrasevich in 2007 and hired by the city, allegedly served as the key company in Yandrasevich’s financial scheme to defraud the city, which was uncovered in 2012.

Wilson and her fellow Harris Beach colleagues Douglas Gerhardt and Mark McCarthy, who are billing the city $215 per hour outside of the city’s retainer agreement with the firm, are currently in the process of evaluating the suit’s causes of action and deliberating whether it makes sense for the city to file a motion to dismiss the case, either in part or in full. This decision will be made soon, McCarthy said.

The lawyers for the city, which has hired Harris Beach in the past to defend it in other matters outside of the firm’s retainer, are meeting with members of the club’s staff to discuss possible options, after press time.

The lawyers’ recommendation to the city will be based on reconciling the fact that, while the city’s insurance carrier, Travelers Insurance, does not define the city as an employer under its policy—leading them to deny coverage of the claims—state labor standards do.

The RM employees’ lawsuit, filed on Dec. 23, 2013, pursuant to the Fair Labor Standards Act and New York Labor Law, defines employer in a much broader way, even more so than labor codes in other states do.

The city maintains these waiters and bartenders were employees of RM Staffing, not the city, so the city is not defined as their employer.

“Our definition under [the city’s] policy is very narrow,” Wilson said. “The definition of employer for labor purposes is broad…it’s meant to capture many more situations.”

The lawsuit also holds other entities accountable—RM Staffing & Events, Yandrasevich, and the Morris Yacht and Beach Club in the Bronx, where RM also supplied hourly employees—but it does not specify a dollar amount for damages.

The former club manager of the city-run Rye Golf Club allegedly stole hundreds of thousands of dollars in members’ dues by submitting falsified invoices to the city manager’s office starting as early as 2007. Yandrasevich is currently facing second degree grand larceny charges and will be in court again on March 18; meanwhile, the Westchester County District Attorney’s office is preparing a case to bring before the grand jury.

McCarthy said the issue of whether or not Rye is an employer is still open at this point but needs to be decided “before we get too much further.”

Time is ticking, since plaintiffs’ attorneys, Manhattan-based unpaid overtime litigation firm Pelton & Associates, are attempting to have the suit declared a class, or collective, action, which is when a group of people sues another group of people or a person.

If the action is designated a class action under the Fair Labor Standards Act, the plaintiffs will be authorized to send notice to other plaintiffs who are eligible to join the suit, said Brent Pelton, an attorney representing the plantiffs.

“We think the liability is in the millions but, until we have more of the underlying employment records, we’re not able to immediately find that out,” he said. “I don’t see how the damages could be less than [in the millions of dollars-range] on the volume of the business conducted throughout those six years.”

Six years is the statute of limitations on this case as defined by New York labor law.

From the city’s point of view, Wilson said, millions of dollars in damages is unrealistic.

Currently, the city’s hired counsel is looking at the RM wages, salary and tips dispersed in the last year and prior to that, according to Pickup, but this activity is complicated by the fact that some of the staff who worked at Whitby were supplied by other staffing agencies besides RM. Another complicating factor is that calculating the tips the employees are owed is a difficult endeavor, Pickup said. Yandrasevich, as manager, admitted at an Oct. 9, 2012, Rye Golf Club Commission meeting that all employees’ tips went to the restaurant to “offset labor costs.”

Pelton said, under New York Labor Law 196d, it is clear gratuities belong to the service employees.

Given the possibility some of the potential plaintiffs may be illegal workers, opting for a class action to recover stolen tips and unpaid overtime is prudent since identification is not necessary to participate, according to one club member who has spoken with some of Whitby employees.

Rye resident Ted Carroll has urged the City Council to investigate the original hiring of RM Staffing and hold those public officials and city staff who allowed the hire accountable. Carroll, who is not a club member, and Rye Golf Club Commissioner Leon Sculti both said the club’s members were irate when it was revealed at the Oct. 9, 2012 commission meeting the workers’ tips were going directly to the club.

Sculti said what allegedly might have happened to the staff as far as tips goes is unjust.

“If they have to sue everybody and they feel like that is the right thing they need to do, then so be it,” he said.

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