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Wage & Hour – Development & Highlights

To Highlight Recent and Noteworthy Developments In Cases And Regulations on Wage and Hour Laws That Affect Large and Small Businesses

Skadden Case on Lawyer Overtime/Exempt Status Argued Before Second Circuit

Posted in Class Actions, Exemptions, Overtime Issues

I have been following this protracted saga for some time and there is another chapter now being written.  The law firm of Skadden Arps is being sued in a Fair Labor Standards Act collective action by lawyers claiming they were not doing legal work because all they did was document review.  In argument before the Second Circuit Court of Appeals, the firm argued that the theory that document review work was not “practicing law” was contradicted by the FLSA and, more importantly, common sense.  The case is entitled Lola v. Skadden Arps Meagher Slate & Flom LLP and was argued in the Second Circuit.

The federal district court dismissed the case in September 2014.   The district court Judge found that Lola was exempt from overtime under the professional exemption as a licensed attorney practicing law.  The plaintiff argued to the Court that “mechanical document review” was not the practice of law because he did not have to use his legal knowledge, skill or training.  Lola also contended that the district court erred by applying the definition of practicing law in North Carolina and urged that the Second Circuit to adopt a “federal definition” for what qualifies as the practice of law.

The FLSA professional exemption applies to any employee with a “valid license” and one who is “actually engaged in the practice thereof.”  The firm argued that neither the USDOL nor any other federal appellate court has sought to define what “practicing law” meant and contended that the definition of the practice of law in the jurisdiction where the work was performed should control.  The firm emphasized that the North Carolina State Bar has acknowledged that document review is legal work.

The firm noted that document review work is extremely important to a case and that a case could be dismissed if the document review work is done poorly or mistakenly.  The firm added, as a finishing touch, that attorney fees are given for document review work performed by such contract lawyers.

The Takeaway

I have always thought that the plaintiffs would lose.  I know that document review is important because it touches on issues of relevance and, more importantly, privilege, which only a “lawyer” would have the training and insight to make judgment calls on what is/is not privileged or relevant.  This case will have huge ramifications throughout the legal world because document review lawyers are used throughout the field.

My gut tells me that the saga is not to end with the Second Circuit ruling, whenever that may issue.  The US Supreme Court will, I imagine, ultimately get involved.

An anonymous letter raises questions concerning FLSA retaliation

Posted in FLSA Retaliation

On Friday, February 20, 2015, a federal judge issued an unusual order in Fujiwara, et al. v. Sushi Yasuda, LTD, et al, 12-cv-8742(WHP) (S.D.N.Y. Feb. 20, 2015).  After receiving an anonymous letter in an FLSA lawsuit, United States District Judge William H. Pauley directed counsel for the parties to conduct an investigation into the circumstances concerning the allegations asserted in the anonymous letter and to submit a joint report by next Monday, March 2, 2015 on the status of the investigation.

The lawsuit claimed that a sushi restaurant, Sushi Yasuda, improperly withheld gratuities from employees, and violated the minimum wage and overtime requirements of the FLSA and New York Labor Law (NYLL).  After taking initial discovery, Plaintiffs moved for class certification of their NYLL claims.  However, before Sushi Yasuda filed any opposition, the parties entered into a settlement agreement on a class-wide basis, which the court eventually approved in January 2015.  Thus, the lawsuit had been settled before the anonymous letter was sent to the court.   However, the letter, purportedly sent by an unknown chef at the restaurant, indicated that class members were being pressured by unnamed managers not to cash their settlement checks under the threat of losing their job and work visa.

Certainly, the anonymous letter would trigger concerns of prohibited retaliation under the FLSA, see 29 USC § 215, which explains why Judge Pauley took the unusual step of having counsel for the parties investigate the circumstances surrounding the letter.  Indeed, the court’s reaction to the letter demonstrates that retaliation can occur even after a settlement has been reached between the parties and approved by the court.

However, the letter does raise additional questions.  Because the letter is anonymous there is no way to know whether the author was a named plaintiff, an opt-in plaintiff, or a class member that never affirmatively joined the litigation.  The FLSA anti-retaliation provision, however, prohibits any retaliatory conduct “against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA] or has testified or is about to testify in any such proceeding …” Id. at §215(a)(3).   Thus, one question is presented as to whether a claim of FLSA retaliation can involve an individual who engaged in no protected activity.  Additionally, in this case there was no determination on the class certification under Rule 23 or under state law.  Thus, there could not be retaliation based on the unknown author’s standing as a class member involved in the litigation.  Because the FLSA relies on an “opt-in” procedure, as opposed to Rule 23 class certification, an individual who does not opt-in to the litigation, is not presenting any FLSA claim or bound by any determination concerning such claims in that litigation.  See, e.g., Guzman v. VLM, Inc., 07-cv-1126 (JG), 2008 WL 597186 at *10 (E.D.N.Y. Mar. 2, 2008); Butler v. American Cable & Tel, LLC, 09-cv-5336, 2011 WL 4729789, at *12 (N.D.Ill. Oct. 6, 2011).

Of course, the argument can be made that, by virtue of sending the letter, the anonymous-chef author has engaged in some type of protected activity, even if he/she is not a named Plaintiff or opt in Plaintiff.  Thus raising the question as to whether such activity, merely sending a letter to the judge, actually satisfies the requirements of Section 215.

Putting those questions aside, there is no question that the court, by virtue of its inherent authority to supervise the settlement and ensure that the settlement is fairly effectuated, would have jurisdiction to address the possibility of any conduct which could impact the settlement and to punish anyone who threatens the fair and efficient resolution of the settlement.  Exercising such jurisdiction inevitably requires a determination as to whether any threat was actually made, and if so, what exactly was stated or threatened.

Whatever the answer to the questions posed above, it is important for any employer to impress on its managers that they may not threaten any employee for asserting an FLSA claim.  Certainly, any such threats could result in additional claims of retaliation, which will inevitably cost the employer more to defend.  Indeed, in order to truly realize the benefit of the settlement agreement and finally resolve these wage and hour claims, the employer should want the settlement payment to be fulfilled so that the employer can move on and return to business without further issues.

When Do Bonuses Get Included In Non-Exempts’ Regular Rate for OT Calculations?

Posted in Overtime Issues

A little known aspect of the FLSA is the need for an employer to include non-discretionary bonuses when calculating the regular rate for purposes of overtime calculation.  In a collective action, the employees of Publix Super Markets have charged that the Company has not done that, particularly in the face of an alleged admission by the employer that the bonuses were nondiscretionary.  The case is entitled White et al. v. Publix Super Markets Inc. and was filed in federal court in Tennessee.

The Company had filed a motion for summary judgment asserting that the quarterly profit sharing bonus paid to hourly employees, the Christmas bonus, paid time for six holidays and tuition reimbursement did not warrant inclusion in the OT rate.  The Company charged that the plaintiffs mislabeled the manner in which the employee bonuses were actually calculated and that, in fact, the payments were within the law.

The workers fired back, contending that the Company had gone on record conceding that the payments were nondiscretionary and that the payments conflicted with DOL regulations.  The Company rebutted by contending that the bonus already provided “simultaneous payment of overtime compensation due on the bonus.” The Company asserted that the bonus was calculated based on number of hours employees worked at their store during the relevant period and thus fell within the safe harbor of percentage bonuses.  If a bonus is computed as a percentage of total employee earnings, then under USDOL regulations, it is legal.   The Company asserted that the USDOL had already concluded that the bonus did not need to be included into the OT calculation based on this percentage calculation.

The workers countered by asserting that the DOL’s “longstanding interpretation” of the total earnings requirement for rendering a bonus excludable from the regular rate was that the retail bonus had to be included because they were remuneration for employment and not just expense reimbursements, the Company could not exclude those payments from the regular rate.

 The Takeaway

Bonuses (or whatever they are called) must be included in the regular rate, if they part of a policy, practice or custom and employees expect such bonuses.  Truly discretionary bonuses are rare animals, i.e. the Christmas bonus, but a way to defend such an allegation is to build into the bonus “program” that the giving of such bonuses is contingent on, for example, “budgetary concerns.”

With that said, if the plaintiffs in this case can show that the payments at issue were given as payments for some employment related activity, as opposed to, for example, a paid sick day where no employment activity is engaged in, they might have a case.

The Drive Towards “Fighting” Misclassification Heats Up In DC

Posted in Exemptions

I had blogged a few weeks ago about the Obama Administration’s initiative to revamp the white collar exemption rules to make more people overtime eligible.  Well, the Administration is not waiting for such revisions to seek to “root out” instances of alleged misclassification.  It has added $25 million dollars in the federal budget for the US Department of Labor to “fight” employee misclassification.

Under the proposed budget, it is anticipated that the DOL will hire more than 350 new employees, including 177 investigators and other enforcement staff.  The Wage Hour Division, the entity charged with conducting investigations relating to misclassification, will hire an additional ninety new investigators.

The amount of $25 million will go towards the so-called “misclassification initiative.”  Investigators will look more numerously to and closer at alleged employee misclassification, such as when workers are deemed independent contractors or consultants.  They are then ostensibly denied overtime and the protection of unemployment benefits.

The additional enforcement personnel will work pursuant to a joint undertaking by the DOL and Treasury to take away the reasons that employers misclassify employees and to beef up the power of both agencies to seek enhanced penalties for violations of the employee status rules/laws.

Nancy Leppink, the Deputy Administrator of the USDOL, has stated that when misclassification occurs “employees are deprived of the protections and benefits of the nation’s most important employment laws, and their employers gain an unfair advantage in the marketplace. Employees are particularly vulnerable to misclassification in these difficult economic times.”

The Takeaway

The most important thing is to be proactive.  Undertake, through and with counsel, an internal examination/scrutiny of all jobs considered exempt to ensure that they “really” are.  If you conclude some are not exempt, make the tough decision to reclassify the jobs.  Remember, most of all, titles mean nothing.  You need to match up the actual duties performed against the criteria set forth in the regulations to make decisions on exempt status.

Easier said than done…

Settlement Agreements in FLSA Cases Must Pass Judicial Scrutiny

Posted in Class Actions

It is no secret that most FLSA class action lawsuits settle.  The costs of litigation, the fee shifting nature of the statute, plus the fact that oftentimes the merits/defenses are not that clear (or good) for the employer militate settlements being made.  However, that is not the end of the story because the settlement then has to be approved by the Judge and that may be easier said than done, as the parties to a suit involving Ricoh Americas Corporation just were made to realize.

The Court would not approve a $325,000 settlement between the company and a class of 400 technicians, finding it was unfair and that insufficient information was provided to the Court to allow it to approve the settlement.  The case is entitled Ramirez v. Ricoh Americas Corp. and was filed in federal court in the Southern District of New York.

U.S. District Judge Fox ruled that the lead plaintiff did not give enough details to support the validity of the settlement.  The plaintiff failed to identify how much additional discovery was needed, e.g. number of class members to be deposed, what experts might be required and, most importantly, why “the instant litigation would be complex, expensive and time consuming.”  The Judge also noted a dearth of evidence showing that putative class members supported the deal and he chided the plaintiff for only taking a single deposition in the seven months since the litigation commenced.

The plaintiff(s) were technicians and sued under the FLSA, the New York Minimum Wage Act and the overtime provisions of the New York Labor Law; the suit was filed in December 2013.  However, the plaintiff did not explain what a comparable position to the position of technician meant and that the class definition (as set forth in the plaintiff’s memorandum of law) was inconsistent with the definition set forth in his notice of motion seeking conditional certification and there was no definition in the proposed settlement agreement.

The Court stated that “the inconsistency of the proposed class definition in the plaintiff’s notice of motion and the memorandum of law and the absence of a definition of the proposed class from the proposed settlement agreement and notices, makes it unclear to the court — as it will make it to anyone who would receive the plaintiff’s notices — who the putative class members might be.”  That was enough, by itself, for the Court to reject the proposed settlement.

The Takeaway

Both parties must take heed when they reach a deal to ensure that all details are addressed so the settlement will get court approval.  The last thing either side wants is to get a deal shot down and then go back to the drawing board, i.e. engage in more protracted discovery, at more expense for both sides and then hope/pray that the settlement then gets approved.  I have (on more than one occasion) had to “help” adversaries prepare and frame settlements so that they get court approval.

Sometimes easier said than done!

Employer Responsibilities During Inclement Weather

Posted in Overtime Issues

This week’s snow “storm” left two questions unanswered for most people: (1) where was the snow? and (2) did I have to use a PTO day during Tuesday’s state-of-emergency?

We encourage employers to carefully handle this issue, as it can become confusing and complicated.  First, the answer depends on whether the employees are exempt or non-exempt.  (Remember, exempt employees are salaried employees who are exempt from overtime).  Under New Jersey State law, employers are not required to pay non-exempt employees for time not actually worked.  This includes when employees are unable to work due to a declared state of emergency.  Know however, that these non-exempt employees who were unable to work due to a weather related emergency may be eligible for unemployment benefits…

On the other hand, employers are required to pay a salaried employee who is exempt from overtime, for days the business was closed (if less than a full workweek) due to a weather related emergency or disaster.  The employer must pay an exempt employee “the full salary for any week in which the employee performs any work without regard to the number of days or hours worked,” because as we know from our previous posts, “deductions may not be made for time when work is not available.”

Can employers force employees to take a vacation day(s) for the day(s) the business was closed due to a weather related emergency? According the NJ DOL, the answer is, YES.  If an employer chooses to provide benefits, it’s technically up to the employer on how it will be administered.  But keep in mind, benefits have to be administered uniformly in accordance with the established policy, employment agreement or union contract (if one exists).  Employees may have a basis for a wage claim if an employer fails to adhere to the policy, agreement or contract.  As such, employers should be thoughtful when making decisions about how to handle snow days.

As for what happened to the snow, that is above our pay-grade.

Another FLSA Off-the-Clock Case: Employees Allegedly Ordered Not To Report Time

Posted in Class Actions, Overtime Issues

I have posted numerous times about the dangers of (and the escalation of lawsuits) involving claims of off-the-clock work. Well, here we have yet another example.  A $450,000 settlement has now been approved in a case in which admissions representatives at a chain of cosmetology schools claim they were required, under an unwritten policy, to work off the clock without pay.  The case is entitled Le et al. v. Regency Corp. et al and was filed in federal court in Minnesota.

The five named plaintiffs and twenty opt-ins will receive payments that range from $199-$28,605, but the lawyers will get the lion’s share of the settlement, the sum of $238,000.  This highlights one of the ironies in cases involving fee-shifting statutes—the plaintiffs get basically very little and the lawyers get a great deal.

The lawsuit was filed in February 2013.  The five named plaintiffs alleged that the company paid them a salary to avoid treating them as “hourly” employees punching a time clock until December 2010.  The company contended they had been deemed hourly since February 2010 and overtime eligible for any off-schedule overtime hours the employees reported.

Not so, shot back the plaintiffs.  They alleged that they were nevertheless compelled to work through lunches and perform work before/after their shifts and not report that working time pursuant to the direct orders of their supervisors. The Court granted class certification in July 2013, finding that the small number of employees in the class, i.e. 155, as well as the fact that they all worked in the admissions department at company headquarters, supported their theory that they were all subjected to the same company policies, which is the necessary hallmark of a bona fide collective/class action.

The Takeaway

If employers think that simply paying employees a “salary” makes them exempt from overtime, they are mistaken.  Here, the employer evidently realized that but then neglected (unintentionally or otherwise) to pay employees for preliminary or postliminary work and allegedly ordered the workers not to report.  If the pre-shift work was connected to the main job, it will be (likely) compensable working time.  If there is employer compulsion for an early reporting, or worse, as here, employer directives to work and not report the time, that makes it worse.

FLSA Collective Action Certified By NJ Federal Court: Another Dangerous “Electronic” Class Action

Posted in Overtime Issues

In Maddy v General Electric Company, filed in federal court in the District of New Jersey, the plaintiffs brought a collective action pursuant to the Fair Labor Standards Act (“FLSA”) to recover allegedly unpaid overtime compensation from General Electric Company (“GE”).  The theory was unpaid preliminary and postliminary work.   The plaintiffs were service technicians for GE’s Appliances Division; they made service calls to customers’ homes to repair GE appliances.   There were 900 service technicians.

Despite the rule that service technicians’ paid work did not begin until they arrived at their first customer call, there were certain tasks they had to be completed beforehand.   The plaintiffs generally logged onto their computers and checked their list of calls for the day before they left their homes.

The service technicians asserted that it took 10-15 minutes to boot up and log into their computers, and another 15-30 minutes to check their call lists, read emails and call their first customers prior to heading out for the day.  They repeated some of this work after hours in the afternoon/evening.

The Court certified the class, although GE claimed that there was no policy in place requiring service technicians to do any pre-shift work.  To the Court, however, it was clear that some unpaid work-related activity had to occur before service technicians arrived at their first calls and that all service technicians were similarly situated in this regard.  The Court observed that whether this activity actually satisfied the elements of a claim under the FLSA was a merits question and therefore it was not for consideration at the conditional certification stage.  At this step, the plaintiffs only had to allege a policy and present facts showing that the alleged policy affected them and all other service technicians similarly.   Significantly, the Court observed that policy need not be written.

The Takeaway

I have blogged and lectured numerous times about the dangers of class actions involving preliminary/postliminary use of PDAs, electronic devices and checking emails.   If there is any, underline, any, hint of employer compulsion, and/or the pre/post shift activity is integrally related to the main job, that time is likely to be deemed compensable.  These actions often occur in technician or route driving classifications, employees who use employer-issued PDAs for their work.

The best defense—draft a policy addressing all aspects of this issue, especially when, and how much of the time, will be compensable.  In other words—get out in front of this wave before it knocks you over!

Wage-Hour Litigation To Rise in 2015: So What Else Is New?

Posted in Working Time

I posted on January 7, 2015 about what to watch for in new USDOL regulatory initiatives in 2015. This post focuses on an even more telling truism—-wage-and-hour litigation continued to rise in 2014, posing major problems (and exposures) for employers. I do not need to be Svengali to “predict” that this trend will continue this year, putting the onus on employers to be proactive in ensuring that their compensation and wage hour policies (including bonus and commission plans) comport with the FLSA and state law.

A recently released report on class action cases observed that while employment discrimination filings and ERISA suits have dropped, FLSA lawsuits rose; a total of 7882 filed in 2013 to a total of 8,066 in 2014. One reason for that rise is that it is easier for plaintiffs to file such suits.

The report notes that the Second and Ninth Circuits are the “hotbeds” of FLSA litigation. More cases are filed, and more class action certifications are granted in these Circuits than anywhere else in the country. More tellingly, plaintiffs in all jurisdictions were granted conditional certification (after which, often, cases settle) close to 70% of the time and plaintiffs, more than half the time, were able to thwart decertification challenges.

The report also notes, hardly surprisingly, that wage-hour litigations will continue to rise this year. Interestingly, the report observes that settlements from employment class actions fell in 2014 (except for ERISA cases). Maybe the downturn in settlements reflects the continuing vitality and use by employer-defendants of the US Supreme Court’s Wal-Mart decision. As it became tougher to secure class certification, plaintiffs are encountering employers who are more aggressive in settlement posture, figuring they have a good chance to defeat certification on the merits (or lack thereof) of the case.

Not only did the Supreme Court help employers with Wal-Mart, in 2013, the Court issued its decision in Comcast which imposed another hurdle on plaintiffs seeking class certification. Thus, defendant employers became even more emboldened in refusing to settle and seeking judicial “victories.”

The Takeaway

It is essential for employers to monitor, review and, if need be, modify their wage hour policies, especially on classification (i.e. exemption and independent contractor) and working time issues. Fixing problems before the suit arrives at the door is always the best and cheapest recourse for the employer.

Happy New Year! (Maybe): USDOL To Revise White Collar Exemptions

Posted in Exemptions, Overtime Issues

I have posted before on the USDOL’s initiative to revise (think: narrow) the FLSA white collar overtime exemptions under the Fair Labor Standards Act.  This initiative will be at the top of the list of regulations and legislation that I will be watching in 2015.  This watchful waiting may come to naught, however, as the gridlock in Congress makes it difficult to imagine that the “liberal” changes sought will be enacted.

In March 2014, President Obama directed the Secretary of Labor to “modernize and streamline” the existing FLSA overtime regulations.  The President opined that because these regulations were supposedly “outdated,” (although only six years old) millions of workers were not overtime eligible.

A notice of proposed rulemaking is due to come out in February.  Following the release, employers and, most importantly, employer organizations, will have the chance to comment (think: criticize) the proposals.  It seems, however, that the rule will not be finalized in 2015.  The major concern of employers is that a loosening of these rules will certainly generate another flood of lawsuits.

It does appear that one component of the proposed revisions is raising the minimum salary threshold (now set at $455 per week).   Another possible revision is fixing a definitive percentage of time that an employee must perform exempt tasks in order to qualify for the exemption.  Now, the concept of “primary duty” is somewhat amorphous although it is ostensibly set at 51% of the work performed must be exempt work.

Maybe, just maybe, drawing brighter lines would be beneficial.  My experience is that employers (almost universally) want to comply with the law and making exemption decisions often is difficult because of the grayness involved in determining who is and is not exempt.  If employers could make these decisions with greater certainty and perhaps end up classifying more people as non-exempt, they could adjust the compensation of these newly deemed non-exempt workers so the employer’s labor costs would not necessarily need to increase.

Maybe that is a win/win scenario.

To be continued….