Posted on September 3, 2010 by Mark Tabakman

Collective Action Defeated Through Finding Of Exempt Status of Accountants: Glory Be The Day!

The Eleventh Circuit Court of Appeals court has concluded that a lower court’s dismissal of a collective action filed by accountants was legally proper on the basis that the Company did not misclassify these accountants as exempt.  In an area of wage-hour law that is rife with all manner of shades of gray, this is a great victory for this employer and employers in general.
The case is entitled Bell v. Callaway Partners LLC, in the U.S. Court of appeals for the Eleventh Circuit; the case had been filed in the North District of Georgia.

The opinion recited that “the class of plaintiffs in this lawsuit are highly educated accountants and certified public accountants who, during their employment with Callaway, often made more than $100,000 a year and thus they fall under the overtime exemption.”  The plaintiffs had evidently tried to contend that they were not “salaried” as the federal regulations demand, so it did not matter whether or not they performed “professional duties.”  This would be the only tactic open to them, especially if they were more than “staff accountants” or “junior accountants.”

As a component of their attack on the salary issue, the plaintiffs asserted that the Company paid out bonuses and paid them for work performed on weekends in a manner that transgressed against the salary basis test.  If they succeeded in showing they were not salaried, it would not matter whether they performed professional duties 100% of the time because, by definition, they would be non-exempt.

The plaintiffs charged that they were not paid by a salary basis, as the bonuses they received were reduced if they worked less than eight hours in a single weekday.  However, if they were paid a minimum fixed amount of at least $455 per week, the federal minimum, they are still considered salaried.  The Eleventh Circuit noted this, finding that “because there was a nondeductible minimum weekly salary, Callaway was free to structure any bonus program as it saw fit.”

This is the danger of an attack based on lack of a salary basis---if the employer is wrong, there is no defense and the plaintiff(s) win because it is of no avail or legal relevance that the work performed was “exempt” or “professional.”  The FLSA makes a few minor exceptions to this otherwise inviolate requirement to pay “white collar” employees a salary in order to seek to claim the exemption (i.e. doctors, lawyers), but if employers pay in any method other than a salary, the exemption is automatically lost for the employee or class of employees and then significant liability may result.
 

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Posted on August 31, 2010 by Mark Tabakman

Health Care Industry: DOL Intensified Focus Mandates More Awareness

In a recent posting in the Wage Hour Defense Blog, Kara Maciel brought attention to the new, intensified focus by the federal Department of Labor in auditing and inspecting health care facilities.  I represent a number of such facilities and have also noticed an uptick in such investigations, especially as concerns lunch breaks and rounding.  That post is at www.wagehourblog.com/2010/08/articles/wage-and-hour-policies/hospitals and nursing homes

As I have written about before, many health care employers (as well as others) have smart time clocks that automatically deduct thirty minutes every day for lunch.  As Kara notes, if the employee does any work during that otherwise automatically deducted period, the lunch period(s) may then be claimed to be working time.  Since patient care is a top priority and patients may and do need assistance and care at all times of the day, it is possible that employees may be interrupted during their lunch or claim that they are, even if the interruption is only for a moment, e.g. answering a question.


The difficulty of defending these claims is evident, as Kara notes.  Unless employers have built in fail-safe mechanisms to allow for the reporting and concomitant investigation of interrupted lunch claims, it will be virtually impossible to try to prove or disprove whether a certain employee actually took their full thirty minute lunch break on a day or days in the last two years.  I have advised creating a form for this contingency, placing it in boxes or containers by nursing stations or other central points and giving employees either in-service training on the procedure or otherwise documenting that employees are aware of the reporting procedure.  In that manner, employees can be properly compensated and the employer can adequately defend itself against years-later claims of unpaid working time.

The key is to be proactive.  Internal audits of compensation practices, especially those relating to exemption classification issues and working time issues, are essential. If a policy is problematic (or out rightly illegal) it should be changed immediately, so that any applicable statutes of limitations can start being eroded away.

“Eternal vigilance is the price of liberty,” said Thomas Jefferson.  It is also the price to pay for not being caught unawares in a FLSA collective and/or state law class action on issues that with careful planning and foresight could have been completely avoided.

 

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Posted on August 24, 2010 by Mark Tabakman

Proposed Legislation Seeks To Expand FLSA Coverage To In-Home Workers

Under the proposed Workforce Empowerment Act (S. 3696), introduced in the Senate on August 3,  2010, in-home direct care workers who work more than twenty hours per week will be covered by the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).  The bill would amend the FLSA, which currently exempts from its minimum wage/overtime protections individuals who work on a “casual basis in domestic service. 29 USC 213(a)(15).  A companion bill has also been introduced in the House of Representatives.  These workers typically provide assistance to their clients with such activities as bathing and eating.

The proposed bill’s Findings state that in the direct industry “working conditions are often difficult and turnover is high because of low pay, access to health insurance and other benefits, strenuous conditions…”  The Findings also report that 13,000,000 Americans are currently receiving such services and that “two-thirds of older adults will need some form of long-term care at some point in their lives.”

The proposed amendment defines “casual employment” as employment which is irregular or intermittent and which is not performed by an individual whose vocation is the provision of babysitting or companionship services.  Employment will not be considered “casual” if the hours worked in a week, for whatever number of employers, exceeds twenty (20).

Is this an initiative of the Obama Administration?  Any proposed expansion of the coverage of the FLSA is more likely to come from a Democratic Administration in any event.  I know this---there will certainly be record keeping, timekeeping issues if this law goes into effect because many of these workers have significant “down time” during the day, when they are able (?) to have free time to follow their own pursuits.

Are they engaged to be waiting or waiting to be engaged when these “chunks” of down time pop up?  Who knows?  Working time issues are amongst the grayest under the FLSA.  I guess we will see.
 

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Posted on August 18, 2010 by Mark Tabakman

Union Representation Activities: Are They "Working Time" Under The FLSA?

In a rather new twist on the working time class action trend, Southwestern Bell Telephone Co. is being sued in a Fair Labor Standards Act (“FLSA”) collective action, where the underlying theory is that the company has denied union representatives compensation for their time performing union-related duties.  The case is entitled Kayser et al. v. Southwestern Bell Telephone Company and was filed in the U.S. District Court for the Eastern District of Missouri.

The workers allege that their time spent representing union members at labor-management meetings are hours worked and they are not being paid, in violation of the FLSA.  The Complaint alleges that shop stewards and other functionaries of the Communications Workers of America (“CWA”) discharge a number of duties, among them the representation of union members at disciplinary, investigatory and grievance meetings.  At all of these proceedings, there is a right to union representation under the National Labor Relations Act (as well as most union contracts).

The investigatory meetings, from which discipline might be imposed, are held by the company during the “accused” employee’s work time.  Such meetings are for the ostensible benefit of the company so it can determine whether employee misconduct has occurred, claim the plaintiffs.  On those occasions when the employee asks for union representation, the Union provides the representative.  An analogous procedure is utilized when the meeting is to impose discipline on a member, hear a grievance presentation, or any other labor-management purpose.  Again, the common denominator, according to the plaintiffs, is that the meetings are held on employee work time.

The employee/representative plaintiffs seek overtime, based on a theory that these hours would take them beyond the statutory threshold for overtime, i.e., 40.  As a “side issue,” the complaint alleges that employees are chilled and deterred from seeking to become union functionaries because they know their compensation will suffer.  The employees seek an injunction, as well as liquidated (i.e. double) damages and attorneys’ fees.  The class purports to cover current/former union representatives in Missouri, Kansas, Oklahoma, Arkansas and Texas.

There is a specific FLSA regulation addressing the issue of whether time spent in union matters is working time. 29 CFR 785.42.  The regulation leaves that determination to “the process of collective bargaining or to the custom and practice under the collective bargaining agreement.” I daresay that the employer will defend by asserting that if this matter is not specifically addressed in the labor contract, it means the parties never intended for the time to be compensable.  The case is interesting because it highlights the interplay or, some might say, the tension, between federal labor law and the FLSA.
 

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Posted on August 16, 2010 by Mark Tabakman

Off-The-Clock Work: A Hidden Danger Explodes

I have posted numerous times on the issues of preliminary and postliminary work and whether these activities are compensable.  Part and parcel of this issue is whether such time is compensable.  A recent case highlights (again) this issue and the confusion that well-intending employers face when determining whether or not to pay employees for alleged working time.

A federal judge has granted conditional certification to what could be a class of 8,000 workers employed at Huhtamaki Inc.  The suit alleged that this company, which does consumer packaging, did not pay employees for so-called “off-the-clock” work that it mandated they do.  The case is entitled Shockey v. Huhtamaki, Inc. and was filed in the District of Kansas.

The theory is that the company improperly rounded the time of the workers to reflect their scheduled shift times, when they actually (according to the allegations) engaged in tasks before their shift and after their shifts had ended.  Although the judge found that rounding policies varied amongst the company facilities, which are situate in ten states, there was sufficient similarity to make a granting of conditional certification appropriate.  At a later stage in the case, the employer-defendant will be able to (possibly) make a showing of sufficient dissimilarity as to reverse the designation of the matter as a class action

A serious allegation is that the company erased or wiped out time that was recorded on time cards.  Such a deliberate policy, if proven true, could have serious consequences for this company.  The gravamen of this allegation is that the non-exempt employees were compelled to arrive early and stay late to perform productive work, but the company intentionally erased that extra, what seems like, working time.

The company has defended by asserting that the plaintiffs did not sufficiently set forth the precise tasks they were engaged in.  The company also denied that an overall policy or plan that was intended to preclude employees from getting their rightly due compensation, contending that in numerous instances, the company did in fact compensate employees for working additional time.
 

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Posted on August 11, 2010 by Mark Tabakman

FLSA Settlements: Employers Must Be Wary Of Correct Procedure

I have defended a number of Fair Labor Standards Act (FLSA) class actions and individual suits and many of these result in settlement.  When these cases are settled, naturally, a document is drawn up for the plaintiff(s) to sign.  These settlements, under law, must be judicially approved and if they are not, both parties (especially the defendant)  run the risk  that the settlement may be invalid and the plaintiff(s) then legally able to continue the lawsuit.   A recent case illustrates the dangers inherent in negotiating and finalizing settlements in FLSA cases.

In Dees v. HydraDry, Inc. filed in the Middle District of Florida, a federal district judge, who received a joint stipulation for dismissal of an overtime suit, issued an opinion in which he stressed the role of the court in assessing the worthiness of settlement agreements; the opinion emphasized that confidentiality agreements in FLSA settlements will not receive judicial approval.

If the settlement includes full relief, meaning that it includes the liquidated (i.e. double) damages and attorney’s fees, then the parties need not request judicial review, but if there is some form of compromise, meaning that the employee has given up any rights in the settlement, then court approval is necessary.  The judge wrote that if “the employer in a FLSA case might offer full monetary compensation to the employee for the FLSA case might offer full monetary compensation to the employee for the FLSA claim, but might require the employee to refrain from informing fellow employees about the result the employee obtained.  Or the employer might require the employee to trim the shrubbery at the employer’s home each weekend for a year.  In either instance, the employee outwardly receives full monetary compensation for his unpaid wages, but effectively the additional term. . (the ‘side deal’) confers a partially offsetting benefit on the employer.”

In order to ensure that the spirit and substance of the FLSA is protected by a settlement, the judge stated that a court should engage in a two-fold analysis.  The first step is to determine whether the compromise is fair and reasonable to the employee.  If that threshold is reached then the court must examine whether the settlement in any other manner improperly undermines the “values” embodied by the FLSA.  In other words, a court should approve the settlement only if the settlement is fair to the employee and facilitates the purposes of the FLSA.

The judge outlined the following factors in determining whether the settlement is fair to the employee: 1) the existence of fraud or collusion behind the settlement: 2) the complexity, expense, and likely duration of the litigation; 3) the stage of the proceedings and the amount of discovery completed; 4) the probability of plaintiff’s success on the merits; 5) the range of possible recovery; and, 6) the opinions of counsel.  The court also opined that such settlements should not ever be confidential, as the court’s action in approving such a settlement was a “public act.”

In conclusion, settlements are a necessary, indeed, vital component of resolving FLSA cases.  The last thing the employer wants is to reach a settlement and then have a court throw it out or worse, not seek judicial approval and learn later that the case it thought was finished has been revitalized through the employer’s own fault (i.e. not submitting for judicial approval).
 

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Posted on August 6, 2010 by Mark Tabakman

Tip Pools: Employers Must Be Wary of Wading In

In another of the slew of tip pool cases that have ripped through the restaurant industry in New York City and elsewhere, a federal judge has granted class certification to workers who receive tips in the Smith &-Wollensky Restaurant Group Inc.  These employees allege that the chain has improperly required them to pool their tips in a manner proscribed by the law.  The case is entitled Schmidt v. Smith & Wollensky and was filed in the U.S. District for the Northern District of Illinois.

The lawsuit charges that Smith & Wollensky did not comply with the Fair Labor Standards Act (FLSA) rules regarding the tip-credit provisions of the Fair Labor Standards Act and Illinois wage law  The “tip credit” allows an employer to pay less than the federal minimum wage, on the assumption that the employee will make up the difference in tips.

However, certain rigid requirements must be met. If employees who do not receive tips as a customary function of their job duties, they cannot share in the pooled monies.  The complaint charges that such employees did share in the pool and, as such, the validity of the tip pool is destroyed and the employer then loses the ability to claim the tip credit.  What follows then is that for every hour worked, the employer has not properly paid the minimum age and tremendous liability (potentially) arises, depending on the number of employees involved and how far back the statute of limitations goes (e.g. two or three years under FLSA and longer under state law).  In this case, the complaint charges that the employer required servers to share tips with “expediters, dishwashers, silver polishers and coffee makers” and also included a manager in the tip pool.

In granting class certification under Rule 23, the state law claim, the judge rejected the employer’s argument that the class was unduly broad as it sought to include all of the employees receiving tips, not just servers.  This was based on holdings by the Court of Appeals for the Seventh Circuit which has determined that a class is too broadly defined if it seeks to include employees who could not have a recovery or suffered an injury at the misconduct of the employer.  The District Court judge, however, ruled that the manner in which the class was defined was not overly broad because it “appropriately includes those employees who ‘could’ have been injured by defendant's alleged conduct.”

In the restaurant industry, tip pooling arrangements are under constant focus and are the targets of a rash of class action lawsuits.  One way to resolve this dilemma is not to tip pool and just allow each waiter to receive/keep his own tips.  The downside is that there will be fights over good “stations” and other possible employee discord/unrest.  This may a smaller price to pay than thousands (or hundreds of thousands) of dollars in damages.
 

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Posted on July 23, 2010 by Mark Tabakman

Assistant Manager Saga Continues: Radio Shack Hit (Again)

In Florida, an Assistant Manager has filed a class action against RadioShack Corporation, alleging that the company has misclassified these managers as exempt executives and has not paid them overtime.  The case is Truax v. RadioShack Corp. and was filed in the U.S. District Court for the Southern District of Florida.

The plaintiff is also claiming that Radio Shack “knowingly and willfully” violated the Fair Labor Standards Act; this is an attempt to extend the otherwise two-year statute to three years and to recover liquidated (i.e. double) damages.  The plaintiff is claiming that the company failed to pay time and one-half for the overtime hours.  The named plaintiff claimed he regularly worked 55 hours every week but was only paid straight pay for the hours, rather than time-and-a-half that is mandated by the FLSA.

In another case, RadioShack is alleged not to have paid workers for attending store meetings. In that case, Kamar et al. v. RadioShack Corp., the U.S. Court of Appeals for the Ninth Circuit has affirmed a lower federal court ruling that granted class certification to the plaintiffs.  That case involved mandatory meetings (on Saturday) that non-exempt employees attended and were not paid for.

On the Assistant Manager issue, the best defense is that these workers are truly exempt. The second best defense is that the class certification motion must fail because individualized assessment of each Assistant Manager is needed because some might have exercised more managerial duties than others.  The need for individual scrutiny is the antithesis of a class action .

As far as the mandatory meetings, this is basic FLSA law.  Non-exempt employees compelled to attend meetings or trainings are on the clock. 
 

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Posted on July 16, 2010 by Mark Tabakman

Here Comes An Avalanche of FLSA Cases: Employers Be Aware, Be Proactive!

Statistics were just published showing a rise in litigation under the Fair Labor Standards Act.  This highlights the fact (something we have seen for some years, now) that there is a semi-organized network of plaintiff side lawyers specializing in FLSA cases who are actively seeking out these cases and also highlights the fact that, under a Democratic administration, there is a more employee-friendly federal Department of Labor.

FLSA cases filed in federal courts rose almost 23% in the second quarter of 2010 and represents a leap of 25% from the first quarter of 2009. From January 1-June 30, 2010, there has been a total of 3,230 FLSA cases filed.  That is 6% more than for the same time frame in 2009.

Why are we seeing this?  As a management side practitioner, as someone who defends such cases, I wonder about it and then the answer dawns on me, clear as day.  The FLSA (and all state wage-hour laws) are fee-shifting statutes, so there is an incentive for a plaintiff attorney to engage in this work, because there is a decent chance of a payday.  Second, these laws contain a lot of gray in them and employers who are striving their utmost to comply in good faith will often unintentionally run afoul of the myriad rules and regulations.

Lastly, but not of least importance, the ability for plaintiffs to gain conditional certification in a FLSA case is fairly common.  Not that much “proof” is needed and then the burden dramatically shifts to the employer to try to de-certify the class (not often done) or, as often happens, settle the case, to avoid more plaintiff attorney fees accumulating.  The last option, often times, is go to trial, especially in a classification case, especially where the administrative exemption is at issue.

For example, the DOL issued a position statement, an Interpretation, holding that, in many instances, mortgage loan officers do not qualify for the administrative exemption.  The Interpretation rescinded two prior DOL Opinion Letters, both of which gave employers a cubbyhole to classify employees as administratively exempt.

In sum, it is more important than ever to be proactive and “self-reflective” for employers. Self-audits or internal audits of compensation practices, classification decisions and analyses and working time issues must be conducted by HR or labor counsel.  If something is wrong, it should be fixed immediately, as to stop a running liability and the maintenance of an “eternal” two (or three) year statute of limitations.  With the stakes in these cases very high, with the burdens of proof (at least initially) for plaintiffs distinctly modest and the fess shifting component, it is far better to be safe than very sorry.
 

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Posted on July 14, 2010 by Mark Tabakman

Another Law Firm Sued For Overtime, This Time By A Lawyer: What's The World Coming To?

A few months ago, I posted about a law firm sued for overtime by a paralegal.  In this latest case lodged against another law firm, a securities and antitrust plaintiff’s law firm named Labaton Sucharow LLP, a former attorney has filed a class/collective action seeking overtime.  The suit was filed under New York law and the Fair Labor Standards Act.  The case is entitled Koplowitz v. Labaton Sucharow LLP and is in the U.S. District Court for the Southern District of New York.

The suit’s primary contention is that because the attorney was paid hourly and worked more than forty hours, he was entitled to overtime compensation and not paid it . I find this a challenging theory because it is my understanding that lawyers (and doctors) can be paid hourly, under the Fair Labor Standards Act and still qualify for the professional exemption.  See 29 CFR 541.304. Perhaps the twist here is that the plaintiff is alleging that New York State does not recognize this exception to the salary requirement, but then why would the suit also be filed under the FLSA?.

Notwithstanding the FLSA carve-out for lawyers and doctors on the salary issue, the plaintiff’s attorney has boldly asserted that “the law is simple.  Employees paid on an hourly basis cannot be exempt under the FLSA’s `white-collar` exemptions.  It is disturbing that a prestigious law firm would pay employees in clear violation of the law.”

The plaintiff's attorney must have a countervailing argument to escape the dispositive force of the FLSA regulation because he filed the case as a collective action, ostensibly on behalf of all attorneys employed by the firm within the last six years who worked in excess of forty (40) hours per week and were paid hourly.

The other problem for the plaintiffs, as I see it, is that New York generally follows the FLSA regulations and guidance on exemption issues, meaning that New York will likely adopt the same rule that lawyers are exempt, even if paid hourly . One argument might be to contend that the duties assigned to the plaintiff were not lawyer duties and thus did not constitute exempt work.
 

I will follow this with interest and report back. 

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