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.
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.
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.
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!
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.”
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.
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….
I have lectured and presented extensively on what does and does not constitute working time, in the context of preliminary and postliminary activities. The key in such determinations is whether the activity at issue is so connected with the main/major job activity as to make the activity at issue compensable. The US Supreme Court has added context (or, shall I say, clarification) to this analysis by holding that time spent going through security screenings is not compensable time. The case is entitled Integrity Staffing Solutions Inc. v. Busk et al. and was a 9-0 vote in the Court.
I have held off commenting on this momentous case, sifting through the Opinion and collecting my thoughts. The Court analyzed whether the main job activity could not be performed if this postliminary activity was not engaged in and concluded it yet could be done. Although hailed by (mostly management side) commentators as a novel and ground breaking decision, I assert that it is not such a watershed development.
I say this because I analogize it to waiting on line to punch in or out or waiting in line for a paycheck. These are specific activities enumerated in the Portal to Portal Act as being non-compensable activities. In fact, the defendant in this case argued exactly that. The employees argued that the end-of-shift anti-theft search was integral to the primary duty of the workers, i.e. that they do not steal/take Amazon products.
Not so, said the Court. The main function of the workers was to do their jobs. Their “job” was not the taking or potential taking of the products they were supposed to be working with. The Court also rejected the employees’ contention (which was far-fetched, in my view) that they could be compelled to mow the warehouse lawn or wash their supervisor’s car, before or after their shifts, without pay. The Court noted that the employer did not employ workers to pass through security checks, but rather to pick orders and pack them for shipment to Amazon customers.
If employees engage in preliminary activities, it is incumbent upon the employer to analyze (objectively) whether the workers cannot perform their “real” job without performing those pre or post shift activities. If they cannot, the time is working time and must be paid and if those minutes/hours bring the employee(s) over forty hours, then overtime must be paid.
People who employ domestic employees or personal assistants may forget that such employees are doing productive work when they are under the control and/or direction of the employer and if those work hours exceed forty in a week, overtime is owed. Mariah Carey may have forgotten that truism as she has been sued for overtime by her assistant. The employee claims she is owed money for managing the singer’s domestic affairs and for services performed while she traveled with her on tour. The case is entitled Oliver v. Maroon Entertainment, Inc. and was filed in federal court in New York (with a claim under New York law as well).
The plaintiff claims she often worked sixteen hours a day, for the last seven years. Although the statute of limitations (SOL) under federal law is two years (with a possible third) the SOL under New York law is six years, posing a potentially significant exposure, even if only a single employee is involved.
The Complaint alleges that the “defendants willfully refused to pay plaintiff overtime wages, despite defendants’ knowledge that plaintiff was performing valuable work on defendants’ behalf and at defendants’ direction in excess of 40 hours per workweek.”
The plaintiff’s duties included cleaning and organizing Ms. Carey’s Manhattan apartment as well as doing the same at various hotel rooms in New York City when Ms. Carey’s family and guests visited. The plaintiff also managed household tasks and attended Ms. Carey’s guests and the personal needs of the pop star and her family. She also arranged for various services and repairs to the apartment and traveled with Ms. Carey during tours and vacations, performing much the same duties as she did when the singer was in New York. These duties took up 6-7 days per week and averaged 10-16 hours per day, alleged the plaintiff.
It is absolutely necessary to keep accurate records of hours worked by a domestic or a personal assistant. These people are performing productive work, whatever day, whatever time of day, if they are directed to do things, whether explicitly or, more importantly, implicitly. I recommend drafting an agreement, which may be just a single piece of paper, outlining duties and hours of work, with an acknowledgement that overtime will be paid for hours exceeding forty in a single work week.
A federal judge has ordered Chipotle Mexican Grill to turn over attorney-client communications because the Company failed to meet a “good-faith” compliance requirement under federal law. This is a FLSA collective action case where the theory was that the chain misclassified a group of workers as exempt from overtime under the executive exemption of 29 USC 213(a). The case is entitled Scott v. Chipotle Mexican Grill Inc. and was filed in federal court in New York.
Magistrate Judge Netburn denied the request for a protective order on Company communications with its attorneys; the Court noted that one Chipotle affirmative defense was that it relied on administrative authority in classifying the plaintiffs as exempt and another was that it did not act willfully.
The Judge concluded that it had been shown that Chipotle had the advice of counsel on the issue, which completely undermined the use of the attorney-client privilege because the law that the Company was using to argue for the protection of the privilege required a showing that the employer acted in “good faith” to comply with the law.
The Court stated that “where the defendant has clearly benefited from the advice of counsel on the very issue on which it asserts good faith, it puts its relevant attorney-client communications at issue and thereby waives its privilege.” The Judge ordered the documents produced in three weeks. The Company had argued that the plaintiffs were not entitled to the discovery of the communications in order to determine if Chipotle had communicated with its attorneys on classifying the employees, because that would undermine attorney-client privilege.
The Judge did not see it that way. She found that the Company had placed the attorney-client communications “at issue” because two of its affirmative defenses relied on 29 USC 259/260, both of which required that the employer acted in “good faith” to meet its obligations under the FLSA. The Judge observed that even if Chipotle did not explicitly mention “good faith” in its defenses, it relied on statutes that required it.
The seemingly scary lesson learned here is that if counsel’s advice was relied upon in the classification analysis of employees, those communications could be subject to discovery. I wonder, though, if that is, ab initio, a bad thing. If the communications make a credible case for exemption, that might actually be a good thing for the defendant.
The US Department of Labor is always issuing (and has always issued) regulations implementing and interpreting the Fair Labor Standards Act. Oft times, practitioners are arguing to a court either that the regulations should be deferred to or that the regulations are not binding on a court and should be struck down.
In an interesting case, a federal judge has struck down USDOL regulations barring third-party employers from claiming a minimum wage or overtime exemption for “companionship” domestic workers and an overtime exemption for live-in employees. The Court held that the agency exceeded its authority. The case is entitled Home Care Association of America et. al. v. Weil et. al., case number 1:14-cv-00967, and was filed in federal court in the District of Columbia. The new regulation was slated to go into effect January 1, 2015.
In 1974, Congress included domestic workers under the protection of the minimum wage, but excepted the minimum wage requirements to any domestic employee providing “companionship services.” Further, the overtime requirements would also not apply to live-in domestic workers. Companionship services were specifically defined as services of “care” or “fellowship” that are not performed by trained workers. Then, in October 2013, DOL modified the regulation for third-party employers (e.g. domestic care employers that are not family members) to block them from receiving these wage exemptions for companionship or live-in domestic workers. The lawsuit charged that the rule “dramatically” departed from the plain language of the exemptions and exceeded statutory authority. The DOL asserted this was “a permissible construction of the FLSA.”
Judge Leon disagreed with the DOL. The Court noted that since 2007, Congress had repeatedly failed to change the statutory language of the companionship exemption. The Court concluded that “the fact that the department issued its notice of proposed rulemaking after six of these bills failed to move is nothing short of yet another thinly veiled effort to do through regulation what could not be done through legislation.”
I tend to think that the advantage lies with the party arguing to a court that it ought give appropriate deference to the interpretation of the agency charged with the interpretation and enforcement of a particular statute. When the regulation at issue, however, diverges so markedly and plainly from the statute that it is supposed to clarify, that table gets turned fairly quickly.
I also believe that the Court got it right…
Employers often have questions relating to basic wage and hour issues. This blog post is designed to refresh your memory as to the current status of some of your more basic wage and hour issues in New Jersey as we wrap up 2014.
Q1. What is New Jersey’s minimum wage?
A. Effective January 1, 2014, the hourly minimum wage in New Jersey is $8.25 per hour. BUT effective January 1, 2015, the minimum wage rate in New Jersey will be raised to $8.38 per hour.
Q2. If I have tipped employees, do I have to pay the minimum wage ?
A. The employee’s total earnings (hourly wage plus tips) must equal at least the minimum wage per hour. The hourly rate is up to the employer; however, the suggested rate according to the NJ DOL is a minimum of $2.13 per hour. If the hourly rate plus tips does not equal at least the minimum wage per hour, the employer is required to make up the difference.
Q3. When do I pay out overtime?
A. You must pay overtime, at the rate of time and one half, after 40 hours of actual work in a 7-day workweek, with the exception of certain salaried employees.
Q4. Am I required to give employees a lunch break?
A. In NJ, the mandatory break law only applies to minors under the age of 18 and they must be given a 30 minute meal period after 5 consecutive hours of work. Company policy dictates break and lunch periods for anyone over the age of 18.
This is just an overview of some FAQs. And don’t worry, it’s not uncommon to have questions as simple as those outlined above. It’s important to know the basic rules well, because failing to know the state’s basic wage and hour rules tends to lead to more complicated problems.
Jerry Seinfeld’s sitcom famously portrayed the “Soup Man” as the temperamental owner of a soup stand who would decline to serve customers that did not properly place a soup order. Placing the humor aside, a new lawsuit raises the question as to whether a business can ban a lawyer who has initiated a lawsuit against it.
In a complaint captioned Wigdor v SoulCycle, filed in the New York County Supreme Court, a well-known plaintiff’s attorney, Douglas Wigdor, complains that SoulCycle retaliated against him for representing an employee of the business in a wage and hour lawsuit against the company. Wigdor complains that he was banned from SoulCycle because he initiated the action against it.
Significantly, Wigdor is being represented by another well-known member of the plaintiffs’ bar, Anne Vladeck. It would seem that they have a common interest (more than just to “spin”), but what about the interest and rights of the business owner? Should the owner of a restaurant or retail store have a right to prevent counsel from entering, for example, to solicit business in their establishment? Moreover, if an action is presently pending, does the lawyer risk making him/herself a witness or engaging in improper communication with the owner or manager of the business?
Perhaps, this is all a question of timing. Indeed, Wigdor relies on both New York and California law to assert a claim of retaliation – that he was banned because he initiated an action against SoulCycle. Yet, if Soul Cycle had banned Wigdor before he initiated the action, that conduct could not be “in retaliation” for anything. Moreover, there is a question as to whether the New York Labor Law, which prohibits retaliation against an employee, could even apply to that attorney’s lawyer. New York Labor Law § 215 prohibits retaliation against an “employee,” and states: “No employer … shall discharge, penalize, or in any other manner discriminate against any employee because such employee has made a complaint to his employer…” Id. (emphasis supplied). Yet, no mention of the employee’s lawyer. Indeed, the Courts have regularly explained that the adverse action against an employee constituting retaliation is such an action that “might have dissuaded a reasonable worker from making or supporting similar charges. See Copantitla v. Fiskardo Estiatorio, Inc., 788 F.Supp.2d 253, 303 (SDNY 2011)(emphasis supplied). The references are to an “employee” or “worker” – not counsel.
However, Wigdor’s complaint doesn’t stop with the claim of retaliation. Instead, Mr. Wigdor further boldly complains that “such a ban will operate as a restraint of trade that will inure to the detriment of the public by restricting the available pool of lawyers for individuals contemplating legitimate legal action and deter those potential claimants from seeking representation.” The argument is interesting if not fanciful. At some point a balance needs to be reached where the business owner has an appropriate say in deciding who should not be allowed to patronize his/her business. It seems Seinfeld’s Soup Man has meet Oliver Twist – “Please Sir, can I have some more?”