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Wage & Hour – Developments & Highlights

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

Horseshoe Casino Settles FLSA Class Action by Table Games Supervisors

Posted in Class Actions, Exemptions

The vast majority of FLSA class actions result in settlements, as few employers, frankly, are hardy enough to go to trial and risk even more.  An interesting settlement has just been announced.  A putative class of casino workers and the Company have requested that a federal court grant preliminary approval to a settlement that resolves allegations of misclassification of allegedly exempt workers.  The case is entitled Oberfoell et al. v. Horseshoe Cincinnati Management LLC d/b/a Horseshoe Casino Cincinnati, and was filed in federal court in the Southern District of Ohio..

The proposed $775,000 settlement resolves the issue(s) of whether table games supervisors were exempt from overtime under the Fair Labor Standards Act and state law.  Each of the named plaintiffs would receive $25,000 in service awards, i.e. extra money because they were the lead plaintiffs and more than $250,000 in legal fees for the plaintiffs’ counsel.

The payments would be done (as I have settled such cases) on a prorated basis, based on number of weeks employed as a table games supervisors for a defined period of time.  The $470,000 for class members is a little more than half of the monies workers claimed they were owed.

The parties’ motion stated that “trial of this matter would be complex and factually intensive with respect to both liability and damages and that “while plaintiffs believe their claims are strong, they are aware that success is not guaranteed.  The workers claimed that they did not fit the executive exemption. me in a misclassification matter, according to the motion.

The Takeaway

If I, as the employer’s counsel, believe my case is bad, or problematic, I counsel the employer to get out as quickly and cheaply (whatever that means) as possible.  Herein, there must have been issues of “primary duty” and whether the supervisors performed too much non-exempt work.  Defending administrative exemption cases is even tougher because who knows, really, what discretion and independent judgment are.

Concomitant to settling a bad case, fixing the problem is even more paramount.  You don’t want to settle something and then, a handful of months later, be hit again with the same allegations.

Fool me once…

USDOL Issues Joint Employer Guidance:  More Enforcement Coming Down The Pike!

Posted in Independent Contractor

There exists already a doctrine of joint employer law under the Fair Labor Standards Act,  Now, the USDOL wants to make it easier for two (or more) entities to be found as joint employers.  The head of the Wage Hour Division, David Weil, stated that the new policy is required because of increasingly varied employment arrangements in today’s workplace.

This guidance follows on the heels of a recent NLRB decision holding that a company (Browning Ferris) and its contractor can be a joint employer (or a single employer) even if the company had not exercised control over employee terms and conditions of employment.

Mr. Weil observed that companies are increasingly sharing employees or using third-party management companies, independent contractors, staffing agencies or labor providers.  Significantly, the Interpretation also applies to franchise operations, which are abundant on today’s employer/employment landscape.  He observed that “through its enforcement efforts, the Wage Hour Division regularly encounters situations where more than one business is involved in the work being performed and where workers may have two or more employers.”

U.S. Department of Labor headquarters

By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons

There are two types of joint-employment arrangements that are being targeted, or, more delicately put, examined.  One of these is the “vertical joint employment,” which occurs when an employee has an employment relationship with one employer, e.g. a staffing agency or a subcontractor, but that employee remains economically dependent on, i.e. actually employed, by the other entity involved.  The other entity, usually a company that has contracted to use workers sent by the staffing agency, would be looked to/at as the potential joint employer.  The other scenario is “horizontal joint-employment.” Under that rubric, the employee has employment relationships with two or more employers that are only perhaps, on paper, separate, but that is the only difference, such as in the case of sister companies or affiliated companies.

The Takeaway

When the DOL can go after two employers for the same liability, its chances of securing all the wages due the workers is greatly enhanced.  Although there have been FLSA regulations in existence for decades on what is a “joint employer,” this new initiative, similar to the exemption and independent contractor “action” going on shows a greater enforcement posture and attitude by the agency.

As Mr. Weil so eloquently stated “where joint employment exists, one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance.”  This is, to me, another pro-employee endeavor by the agency, maybe before the election is held.

Supreme Court Speaks To the Ability of Defendants To Use Rule 68 Offers To Moot Class Actions

Posted in Class Actions

I have myself successfully utilized the Offer of Judgment procedure in FLSA cases and often blogged about these so-called “pick off” actions.  Now the Supreme Court has weighed in.  The Court has (perhaps) dealt a significant blow to the ability of class action defendants to “pick off” named plaintiffs by offering them complete relief for their individual claims and thereby mooting the remainder of the class action.  In Campbell-Ewald v. Gomez, No. 14-857 (U.S. Jan. 20, 2016), a 6-3 majority held that an unaccepted offer of judgment made to a named plaintiff pursuant to Federal Rule of Civil Procedure 68, standing alone, does not moot the plaintiff’s claim and deprive the trial court of Article III subject-matter jurisdiction.

While the Court’s decision blunts a strategy that has enjoyed increasing popularity with defendants to try to shed themselves of class actions there is yet left the possibility that Rule 68 offers can still be employed as a defense or, rather, an offensive weapon for an employer in a FLSA case.

In the context of class action litigation, defendants have used Rule 68 offers of judgment as a tool for picking off representative plaintiffs, mooting the remainder of the case and forcing courts to dismiss for lack of jurisdiction.  The Campbell-Ewald case arose as a purported class action for violations of the Telephone Consumer Protection Act.  Before Plaintiff Gomez could move for class certification, the defendant made a Rule 68 offer of judgment to pay Gomez $1,503 for each text message he received, together with costs and a stipulated injunction against sending text messages in violation of the TCPA.  When Gomez did not accept the offer, the defendant contended that his claim was moot and the case should be dismissed for lack of subject-matter jurisdiction.

The Supreme Court held that the Offer of Judgment had expired when not accepted after 14 days in accordance with Rule 68 and thus could not affect the continued viability of Gomez’s claim.  “An unaccepted settlement offer – like any unaccepted contract offer – is a legal nullity with no operative effect.”  Accordingly, the Court held that an unaccepted offer of judgment does not moot a plaintiff’s case or affect the ability of a district court to adjudicate it.

The Takeaway

Despite the Court’s holding in Campbell-Ewald, Rule 68 offers still may play a key role in terminating class actions.  Even if an offer of complete relief is not enough to moot a case, actual payment of complete relief pursuant to that offer may be able to.  Tellingly, the majority in Campbell-Ewald did not reject this notion.  Thus, maybe, if a class action defendant actually tendered payment into court and allowed the entry of judgment in favor of the single plaintiff, the case would be moot.  Although this is an open issue, a good strategy in a FLSA case may be to make a Rule 68 offer of judgment, pay the damages into court and offer to pay “reasonable” attorney fees.  The attorney fees are either settled between the lawyers or determined by the court.

In other words, it is still worth trying it and hoping for the best!

The Magic Bullet: Need For Individual Analysis Dooms FLSA Collective Action Motion for Certification

Posted in Class Actions, Overtime Issues

Some months back, I blogged about a FLSA class action filed against Life Time Fitness based on a theory that personal trainers were compelled to work off-the-clock and were not paid.  Well, a federal judge has just denied the motion to conditionally certify a proposed class of personal trainers and instructors.  The Judge found that their allegedly improper working conditions varied too much from employee to employee to permit the conditional certification of the class.  The case is entitled Steger et al. v. LTF Club Operations Co. Inc. et al., and was filed in federal court in the Northern District of Illinois.

U.S. District Judge Sharon J. Coleman concluded that assessing the workers’ claims would mandate “highly individualized” scrutiny and defenses because the employees were paid pursuant to a complicated commission system, thereby rendering a collective action inefficient.  The Court noted that testimony from the workers demonstrated that their working conditions varied, again requiring individualized attention.

The Judge wrote that “the pressure that each [personal trainer] felt to work off the clock depended on his or her location, his or her job title and responsibilities, his or her department head at the particular moment, his or her productivity, and his or her personal decisions.”  She asserted that “although two putative plaintiffs might share one or two of these factors in common, a highly individualized analysis would nonetheless be necessary to determine the extent to which each employee worked off the clock and whether that conduct was attributable to Life Time.”

The proposed class would have stretched to more than one-hundred locations across the country, going back to 2011.  The Judge did find that the supervisors of the employees received commissions based on department revenues and she did note that some of these supervisors pressured their employees to report fewer hours so as to minimize the “draws” taken from their particular division’s cash flow.  Countered against this was the undisputed fact that the Employee Handbook required workers to report all hours worked.  Moreover, the testimony indicated that the five job titles sought for inclusion in the proposed class did not have “substantially identical” experiences.  Thus, the Court denied the motion.

The Takeaway

The employer’s best defense (sometimes, indeed, the only defense) is that a class is inappropriate because there is too much of a need for individual scrutiny.  Consider what was at stake here—more than one hundred locations, nationwide, and several hundred employees.  The potential liability for the employer would have been staggering, but now that possibility is (likely) gone forever.

The employer still has some stuff to clean up here, as noted by the Judge.  But now it has the time to do it.  Thanks to the magic bullet defense!

Human Resource Managers, Personnel Clerks And The Administrative Exemption: Where Is The Line Drawn?

Posted in Class Actions, Exemptions, State Wage & Hour Laws

Here is another exemption misclassification lawsuit, but this time coming from a different angle.  This time, it is a group of human resources employees who work for Lowe’s have filed a putative class action on the theory that they were misclassified as managers and are thus entitled to overtime.  This is very dangerous because the suit comes from people who are supposed to help the employer in making exempt and non-exempt determinations.  The case is entitled Lewis et al. v. Lowe’s Home Centers LLC and was filed in federal court in the Southern District of New York.

The five named plaintiffs, all Human Resource Managers (HRMs), allege that they worked at least fifty hours per week and were labeled exempt, even though their duties were not managerial in nature.  They estimate there are possibly 250 possible opt-in members of the class.  They seek damages that their attorney estimates could reach $15 million.  The Complaint alleges that “the policy of underpayment was a business decision to purposefully evade the provisions of the New York Labor Law and applicable regulations and saved the defendants tens of millions of dollars.”

The plaintiffs claim (as in many of these cases) that all they did was process clerical paperwork for payroll, benefits and new hires; they allege they also worked in other departments, including sales, customer service and cleaning break rooms and bathrooms.  They maintain that they had no supervisory responsibilities or decision-making authority.  According to their lawyer “they are store-level, low-level personnel employees.”

Although the lawyer conceded that these individuals conducted interviews for job applicants, they could only ask a designated series of questions, very well defined and limited, and then grade the answers.  He claims that they could not make recommendations on hiring decisions, but asserted rather cavalierly, that “a 10-year-old schoolgirl could ask these questions and mark down a score on the interview sheet.”

Significantly, a similar class action was filed against Lowe’s in Florida in 2012 and the Company settled that case for $3.5 million.  There were 900 HRMs involved in that matter and they made identical claims of misclassification.

The Takeaway

Human Resource Directors are clearly exempt under the administrative exemption (the toughest one to prove, by the way).  However, people with HR type responsibilities, such as “personnel clerks,” or classifications like that, often times are non-exempt.  The flashpoint issue is discretion and independent judgment, or lack of same.  If these folks are simply following a prescribed script or menu and then just adding numbers, without being able to evaluate the candidates to any extent, that is problematic. The earlier, big, settlement does not help either!

I believe, however, that an employer can enhance the exempt duties of perhaps otherwise non-exempt employees, or that non-exempts can “evolve” into exempt employees.  Some strategic, proactive planning can accomplish this worthy goal.

FLSA Lawsuit Against Quest Diagnostics Alleges Failure To Include Non-Discretionary Bonuses In Regular Rate

Posted in Class Actions, Overtime Issues

When employers calculate overtime, and what the regular rate will be for the overtime, they must ensure that they include all “extra” payments, like commissions, or earned or promised bonuses, when they pay the overtime.  Failure to do so is a violation of the Fair Labor Standards Act.  To prove the point (hopefully not!), Quest Diagnostics has been hit with a class action overtime suit filed on that very theory.

The named lead plaintiff alleges that the Company failed to properly pay hundreds of hourly workers by not including automatic incentive payments in their overtime rate calculations.  The case is entitled Avila v. Quest Diagnostics Clinical Laboratories Inc. et al., and was filed in federal court in the Central District of California.

The named plaintiff, a referral assistant and testing assistant at the Company’s West Hills, California, location claimed that she typically worked more than forty hours per week.  She alleges that when she was paid overtime, her non-discretionary payments bonuses, such as “Recognition Quest” and “Goal Sharing Bonus” were not included when figuring out her regular rate of pay, thereby violating state law and the Fair Labor Standards Act.  She claims in the Complaint that the “defendants regularly and systematically, as a policy and practice, miscalculated the overtime rate of pay by failing to properly include the various forms of incentive pay paid to plaintiff.”

The named plaintiff claims that there are more than five-hundred people in the class and that there were common policies or practices that applied to all class members.  The lawsuit alleges violations of the FLSA and California law, as well as state Counts alleging a failure to timely pay wages upon separation and violations of the California Unfair Competition Law.

The Takeaway

These kinds of lawsuits can sneak up on an employer.  It is a nuance of FLSA law that these payments, often small, must be included for regular rate purposes.  On a weekly basis, the extra money for employees is not that much and is financially manageable.  But, if these inclusions are not effected then, over a two (or three year) look back period and for up to five hundred employees, the amounts that could be due are staggering (plus liquidated damages and attorney fees).  I recently settled such a case, early on in the litigation, and the sums due were significant.

The lesson to be learned is a simple one—other than for discretionary (and that is a term of art) bonuses, all sums employees derive from their employment, that are promised to them or are found in employer policies (e.g. commission, attendance bonus) must be included when computing their regular rate in overtime weeks.  It may be a tedious chore, but a chore that will prove far less aggravating than dealing with a FLSA collective action.

Pay a little now, or pay a lot more later…

It’s Playoff Time For the Buffalo Jills: Cheerleaders Claim They Are Not Independent Contractors

Posted in Class Actions, Independent Contractor, Overtime Issues

There is, as we all know, an insane amount of litigation on independent contractor issues.  These controversies can emanate from any industry and there is no business that is immune to these allegations.  Case in point.  A judge in New York State has just granted class certification to a class of cheerleaders for the Buffalo Bills of the NFL who are claiming that the misclassification deprived them of overtime pay.  Although they may be out of the playoffs, the team may yet be in the limelight, but for the wrong reasons.  The case is entitled Caitlin Ferrari, et a. vs. Stephanie Mateczun, et al, and was filed in the Supreme Court of New York in Erie County.

The Judge ruled that the plaintiffs, known as the Buffalo Jills, are entitled to class certification because (under New York law) the statute of limitations is six years so the proposed class can extend back six seasons.  There were approximately forty (40) cheer leaders engaged during this time, so the Judge deemed it impracticable to try their cases separately.  The Court also found sufficient commonality in the claims as to warrant class certification.

The lead plaintiff Buffalo Jill, Caitlin Ferrari, alleges that the Jills were required to attend all Buffalo Bills home games, attend biweekly practices, conduct dance clinics as well as make several public appearances from April-December.  She alleged that a small component of this “work” was paid over, making the wages of the Jills less than the State minimum wage.  She also alleges that, although the Jills can, on their own, sell the Buffalo Jills swimsuit calendars at $5/calendar, if they do not sell the calendars they are stuck with what they do not sell.  The parties have been expanded, with the team and the League now being added in.  The Jills want unpaid wages, unreimbursed expenses and attorneys’ fees.

The suit is the latest of several clashes over fair pay between NFL cheerleaders and their respective teams in recent years.  The Oakland Raiders and Tampa Bay Buccaneers have settled similar cases.  Indeed, there is a similar case in which a group of cheerleaders is seeking unpaid wages from these defendants.   Three of those plaintiffs joined the Ferrari lawsuit in January 2015, saying they “wish to stand in solidarity with their fellow cheerleaders” and believe that “a class action is the best way to do so.”

The Takeaway

I have handled many independent contractor litigations and DOL audits.  Many of these cases have been unemployment audits, where the exposure may not be that much because the DOL there is only seeking back due contributions (and interest) for unemployment insurance.  The FLSA scares me a lot more.  There are liquidated damages, a three year possible statute of limitations and fee shifting.  Overtime claims by a class of misclassified independent contractors and/or minimum wage claims are the much bigger danger.

So, don’t let any independent contractor work more than forty hours…

Judge Denies Class Certification Motion In Goodyear Suit: No Common Issues Exist!

Posted in Class Actions, Overtime Issues

I often (happily) blog about employer victories in defeating efforts of plaintiffs to secure conditional certification in FLSA overtime cases.  Well, another victory has come down the pike.  A federal judge has just denied a motion for conditional certification, finding (as is often the case) that common issues among the putative class did not predominate.  The case is entitled Johnson et al. v. Goodyear Tire & Rubber Co., and was filed in federal court in the Central District of California.

The Judge concluded that Goodyear did not have common, uniform policies of not paying hourly employees at the auto service centers for making bank runs.  The plaintiff also argued that the Company did not include bonuses when computing the regular rate for overtime.  The Judge disagreed, stating that “to the extent plaintiff’s claim alleging miscalculation of overtime pay rests on his own experience with rounding errors in his paychecks, he has failed to demonstrate that other putative class members suffered similar harm.”

The plaintiff alleged that when he would close the “Just Tires” facility, he would be compelled to go off-the-clock to finish his duties of setting the alarm and depositing receipts at the bank; he claimed compensation for those duties.  He also alleged that since all of his work was not taken into account and bonuses not included in the overtime calculation, he was improperly paid in contravention of the Fair Labor Standards Act.   The lead plaintiff estimated there were 100-4,000 affected by these transgressions, a sizeable class under any definition.

The Judge ruled that, as common issues did not predominate as to alleged unpaid working time, there were also no common issues applicable to the derivative claim seeking damages and other remedies for allegedly “deficient” wage statements.   The Judge also tossed aside a weak claim concerning publication (or not) of some Social Security number digits.  The Court noted that some members of the putative class members accessed their statements digitally and thus they were compelled to input those numbers.

The Takeaway

If there are no written policies on a particular issue, i.e., an alleged wage-hour violation, then the plaintiff has a more difficult task in that he must demonstrate the existence of a “practice” that applied to everyone.  Although it could be argued that going to the bank was for the employer’s convenience and therefore should have been compensated, the plaintiff failed to show that everyone in his classification was “required” to do this.  This is how these motions are defeated.

A good start for the upcoming year!

Happy New Year!

Home Health Care Exemption Issue May Be Heard By U.S. Supreme Court

Posted in Exemptions, Overtime Issues

I have followed this story for some time and I am glad that the Home Care Association of America has petitioned the U.S. Supreme Court to overturn an appellate court decision that extended the overtime protections of the Fair Labor Standards Act to most home care workers.  The Association argues the decision conflicts with Congressional intent and other Supreme Court precedent.  The case is entitled Home Care Association of America et al. v. David Weil et al., and is under consideration by the Supreme Court of the United States.

The Association claims that the the D.C. Circuit’s revival of the USDOL rule that gives home care workers the same FLSA benefits that similarly situated workers who provide the same services in institutions enjoy conflicts with the Supreme Court ruling in Long Island Care at Home v. Coke, where the Court re-affirmed that home care employees who work for third parties are, in fact, exempt from overtime.

The Association contended that the issue before the Court this time was not addressed, much less resolved in Coke. That case did not address whether the governmental agency was empowered to stop companies from “availing themselves” of the enumerated statutory exemption that could encompass their employees.  The petition called attention to the fact that the FLSA’s legislative history did not support the premise that Congress sought to limit the companionship exemption by excluding employees who work for third parties.

The petition stated that “this court’s review is required to resolve conflicts between the D.C. Circuit’s decision and this court’s ruling in Coke, which will otherwise result in unprecedented expansion of executive power to rewrite the FLSA.”

The organization also raised two additional questions for the Court to look at: 1) whether the D.C. Circuit erred in concluding the exclusion of employees of third-party employers was suggested by legislative history; and, 2) whether the new rule is unreasonable because the agency failed to even look at unaffordability and inadequate state funding of the higher costs that will ensue now for these services. The DOL has stated that the rule will bring roughly two million workers under its ambit of minimum wage and overtime protections.

The Takeaway

I hope the Court takes this case.  There is a fundamental conflict between what workers fall within the exemption and those that have been carved out of it.  That is simply not right, nor does it make sense, from either a legislative history perspective or a regulatory perspective.  Keeping the “new” rule will also, possibly, wreak havoc with a considerable segment of the economy.

Is that what we need?

Happy Holidays!

A Great Victory! Federal Judge Rules Against Plaintiffs In Off-Duty BlackBerry Use Trial

Posted in Class Actions, Overtime Issues, Working Time

I have followed this case closely for some time,  I blogged in September that I thought the City of Chicago had positioned itself in the most favorable position, with the policies and procedures it had implemented, to win this very large class action.  It seems I was right.  The federal district court judge has ruled that police officers who sought overtime pay for their off-duty use of City-issued BlackBerrys failed to demonstrate that there was an unwritten policy to the effect that they would not be compensated for the work.  The case is entitled Allen v. Chicago and was filed in federal court in the Northern District of Illinois.

The Judge agreed that the officers had proven that they did, in fact, perform off-duty work on their BlackBerrys, but concluded that they failed to show that the City “suffered and permitted” the work to be done, knowing about it but then refusing to compensate the officers for that work. This was a protracted proceeding; the case was filed five years ago and the trial ended in late August.

The Court found that there was no evidence indicating that the officers’ supervisors knew that they were working on their BlackBerrys off-duty without submitting time slips to be paid for the work.  The plaintiffs also did not show that the superiors pressured line officers not to submit slips for this off-duty work.  The Court rejected plaintiffs’ contention that they were “terrified” of submitting requests to be paid as there was a “culture” within the department of not submitting such requests.

The City countered those arguments, by asserting that the officers could not show any official department policies of not paying requests for overtime.  In fact, and to the contrary, the City presented evidence of numerous instances of officers requesting and, significantly, receiving overtime pay for off-duty use of their BlackBerrys.

The Takeaway

The issue of preliminary and postliminary, off-the-clock work, allegedly which has not been paid, has been bursting upon the legal scene for a number of years.  In this vein, there has been a horde of these BlackBerry cases.  Most of the time, the employer defends by claiming it is de minimis, which it usually never is.  The other defense is that the work was not ordered or directed.  It is then that the “suffer and permit” doctrine kicks in and the defendant loses on that ground.

What the City of Chicago did in this case, however, is the best defense of all.  By issuing the Memoranda and by having in place a system for officers to report the time, the City essentially preempted the claims of the men by “imposing” upon them a burden to prove that nameless, “unwritten” policies, trumped the documented issuances of the Police Department.