Posted on November 11, 2009 by Mark Tabakman

Motor Carrier Exemption FLSA Class Action Defeated On Interstate Commerce Issue

The federal motor carrier exemption from overtime, 29 USC 213(b)(1), which applies to safety workers (e.g. drivers) engaged in interstate commerce, has been found to exempt Ray’s Trash Service, Inc. drivers from their right to overtime under the Fair Labor Standards Act even though the drivers do not cross state lines. They were held to nevertheless be in the stream of interstate commerce. The case is entitled Craft v. Rays, LLC which had been filed in the U.S. District Court for the Southern District of Indiana.

The judge held that the transportation of recyclables across state lines sufficed to bring the drivers into the “practical continuity” of interstate commerce. As the judge noted, “although plaintiffs never transported the recyclables across state lines, the court finds that their transportation was part of a practical continuity of movement across state lines.”

The drivers filed a class action in May 2008, alleging their pay was improperly docked, but the main thrust of their class action was a claim for overtime. The employees claimed that the interstate commerce ended when the movement of the goods was interrupted and because the employer did not have the “fixed and persisting intent” to ship the goods out of state. That intent is necessary to show that interstate commerce still continues despite the fact that the driver drives only within a State.

The judge rejected those arguments, holding that the company did not just have a speculative intention to ship out of state, as more than half of the recyclables were, in fact, sent to out-of-state recipients. The court held that the activities the drivers engaged in – included baling and consolidating recyclables, were no more than “repackaging,” which, under the law, did not interrupt the flow of interstate commerce.

One commentator has suggested that this ruling will have special relevance today, for FLSA motor carrier overtime cases, as all of us are living and working in a “green economy” in which numerous recyclables will be shipped out of state. From my perspective, it means that a lot of drivers will not be seeing or getting any green.
 

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Posted on November 9, 2009 by Lee A. Sevier

Mere Conclusions as to Employer Status will Result in Dismissal

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

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Posted on November 9, 2009 by Lee A. Sevier

Mere Conclusions as to Employer Status will Result in Dismissal

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

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Posted on November 9, 2009 by Lee A. Sevier

Mere Conclusions as to Employer Status will Result in Dismissal

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

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Posted on October 27, 2009 by Mark Tabakman

Court Strikes Claims In US Steel/Steelworkers FLSA Class Action

In a case entitled Clifton Sandifer et al. v. U.S. Steel Corp. a federal judge has cut out some claims from a work time class action suit, but has allowed one major allegation to remain in the case. That cause of action involves whether the employees should be paid for the time spent in walking from their locker room to their work stations.

The case is in federal court in Indiana; the plaintiffs filed suit in December 2007. Unlike many class actions I have commented upon, this was not a misclassification lawsuit, but rather a work time case. The plaintiffs sought compensation for time spent donning, doffing, walking, showering and laundering personal clothing in excess of the 40-hour workweek. The employees allege that these “work” activities consumed 9-10 hours per week.

The judge threw out the portions of the case pertaining to the donning and doffing of protective clothing, agreeing with US Steel that the compensability of these activities was addressed in the parties’ collective bargaining agreement. The court also found that showering was not required by the company and therefore was a postliminary (i.e. after work) activity for which no compensation was required.

Similarly, even though instructions were provided on how to launder clothing worn under work gear, transporting and laundering clothing was not required by the Company and thus it was not compensable. The judge kept the walking to work station claim, rejecting the company argument that these were non-compensable preliminary and postliminary work. The judge also rejected the de minimis doctrine argument, finding that walking times varied widely throughout the plant.

Judge Miller also did not accept the argument that these claims were preempted under the National Labor Relations Act as they ostensibly involved interpretations of the collective bargaining agreement, rather than statutory violations of the Fair Labor Standards Act.
 

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Posted on October 22, 2009 by Lee A. Sevier

Affirming that Mere Speculation is not Enough to Sustain FLSA Claim

In Bailey et al. v. Border Foods Inc., the U.S. District Court for the District of Minnesota dismissed with prejudice a proposed collective and class action against a Pizza Hut franchisee after finding that the lead plaintiffs failed to adequately plead that their wages fell below the required minimum wage. The plaintiffs, former delivery drivers for Pizza Hut, accused the franchise operator of violating the federal Fair Labor Standards Act and Minnesota Fair Labor Standards Act by failing to pay minimum wages, and making unlawful wage deductions and wrongfully retaining employee gratuities in violation of the state law.

The Court also dismissed without prejudice the state claims against the franchisees, noting that once the federal claims were dismissed, he no longer had jurisdiction over the case. In doing so, he declined to exercise supplemental jurisdiction over the state claims.

In making its decision, the Court stated “[i]n this case, plaintiffs have failed to identify their hourly pay rates, the amount of their per-delivery reimbursements, the amounts generally expended in delivering pizzas, or any facts that would permit the court to infer that plaintiffs actually received less than minimum wage.”   Specifically, the complaint merely alleged that the plaintiffs were “systematically deprived” of minimum wage. Further, on the plaintiff’s consent forms, they wrote they did not “believe” they were paid enough to cover expenses, which indicated that they were speculating as to whether their pay actually fell below minimum wage.

In deciding to dismiss the federal claims with prejudice, the Court noted that the plaintiffs were given fair notice of their pleading deficiencies but did not request leave to replead.

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere “belief” of an FLSA violation will not be sufficient to sustain a claim in court. 

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Posted on October 22, 2009 by Mark Tabakman

The Department of Redundancy Department: Class Action Style

In an unusual move, Rite Aid Corp. is seeking dismissal of an overtime class action filed by a former drugstore employee, asserting it is identical to another class action that had been previously filed and is still working its way through the courts. The case is docketed as Georgianna Gordon v. Rite Aid Corp.

The Company urges that, under federal law, the action filed first takes precedence over this action, which was recently filed in the U.S. Southern District of New York. The earlier action, entitled Indergit v. Rite Aid Corp. and Rite Aid of New York Inc. was filed some ten months before this current action.

As the Indergit action was filed before this case, and as there is considerable identity of the issues and parties, the Company urges that the Court apply the first-filed ruled. This seems somewhat self-evident, as the issues presented in this case are being actively litigated in Indergit. If the federal judge does not dismiss the action, the Company will then seek a stay pending resolution of the earlier case.

Ms. Gordon worked as an Assistant Manager and Manager at Rite Aid from July 2007-June 2009. She alleges that she primarily did non-exempt work, such as stocking shelves. She admits that she opened/closed the store and responded to and resolved customer complaints, but denies that she ever hired or scheduled employees, which would clearly be exempt work. She claims she worked between 50-60 hours per week and earned a salary of approximately $800 per week.

She also alleges that she did not exercise independent judgment. This is an odd allegation, especially under the Fair Labor Standards Act, as the “discretion and independent judgment” component of that exemption test has been deleted under the revised regulations of August 2004.

This is not the first case of overtime “flu” to hit this Company. In July 2009, a class of Assistant Managers in Ohio sued Rite Aid on a misclassification theory. To further complicate matters, similar misclassification lawsuits have been lodged against Rite Aid competitors CVS Caremark Corp. and Walgreen Co.

These Assistant Manager cases are extremely tough to defend, because it is difficult to prove that management remains the employees’ “primary duty” even when they are working the cash register, stocking shelves or waiting on customers. I believe, and have advised numerous clients, the best and most prudent thing to do is to treat these folks as non-exempt from the commencement of their employment, build the overtime into their compensation, assuming they have to work 48-50 hours every week and then never worry about overtime lawsuits. Never worry about overtime lawsuits. Sorry—I’m being redundant.

 

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Posted on October 8, 2009 by Mark Tabakman

The Employer Beats The Class To The Punch With A Dramatic Result!

In a ground-breaking decision, the Ninth Circuit Court of Appeals has set a path down for defendant-employers in Fair Labor Standards Act (“FLSA”) class actions that is breathtaking in its simplicity and conclusive effect. In Vinole v. Countrywide Home Loans, the Court ruled that an employer need not wait until the close of discovery (which is very expensive and time-consuming) to file a motion seeking to deny class certification before the plaintiff moves to have the class certified.

The plaintiffs, External Home Loan Consultants, alleged that they had been misclassified as exempt outside sales employees, resulting in an illegal failure to pay them overtime. The Company, relying on California Wage Orders and the language in the FLSA regulations, had in fact classified these workers as exempt as outside sales people.

Before the pretrial motion deadline and discovery deadlines ensued, the Company filed a motion to deny class certification under Federal Rule of Civil Procedure 23. The plaintiffs opposed the motion, claiming that it was premature because they had not yet filed their class certification motion and further contending that class certification was appropriate, based on the evidence that they had adduced.

In affirming the lower federal court’s denial of class certification, the Ninth Circuit held that too much individual analysis of what the employees did, e.g. outside sales work or lack thereof, was required. As I have written about many times, individuality is the death knell of a class action, as plaintiffs must prove commonality, i.e. a common policy, plan or practice applicable to the entire class.

This can be the start of a trend that might push back on the multiplicity and veritable explosion of class actions. In giving employers a weapon to use offensively, the Ninth Circuit (usually, a fairly liberal, pro-employee Circuit) has signaled that, as Bob Dylan wrote four decades ago, the “times, they are a changin’”
 

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Posted on September 30, 2009 by Lee A. Sevier

Lock and Unload!: De Minimis Plus Failure to Mention Equals Dismissal of Class Action

In Albrecht et al. v. Wackenhut Corp., the U.S. District Court for the Western District of New York has dismissed a lawsuit in which approximately 115 security guards accused their employer, Wackenhut Corp., of violating the Fair Labor Standards Act and New York State Labor Law by not paying them for time spent arming up, checking through security and arming down.

The plaintiffs alleged that that these duties took roughly 15 minutes per day and that they should be compensated for that time. However, the Court found that all three of the processes took less than a minute each to complete. On that basis, the Court reasoned that these preliminary and postliminary activities were not subject to compensation under the Fair Labor Standards Act as they were de minimis in nature. 

Additionally, Wackenhut had implemented a daily briefing for all guards at the Ginna facility, and, consequently, the guards had to report for duty 15 minutes before the start of their scheduled shifts. The parties agreed that they were being compensated for that time, but the plaintiffs claimed the briefings were not included in overtime calculations. The Court rejected this contention because it was not included in the complaint nor mentioned in the depositions. Moreover, the Court pointed out that Wackenhut's policy called for the briefing time to be compensated at the guards’ normal base rate for time under 40 hours in a week and at the guards’ overtime rate for time over 40 hours in a week.

Accordingly, the court dismissed the case. The point is that the de minimis doctrine covers only fleeting, inconsequential periods of time. Although the employer in this case succeeded in having the case dismissed, if the time had actually been shown to be 10-15 minutes per day, or, roughly, an hour per week, that would not have been deemed inconsequential and the class action would have been viable. Repetitive duties, done every day, will not be de minimis if the aggregate time, on a weekly basis, exceeds a small amount of time.

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Posted on September 23, 2009 by Mark Tabakman

I Told You So: The Offer Of Judgment Works!

A few weeks ago, I posted about a procedure that could be used to defeat FLSA collective actions before they got started. That was the Offer of Judgment procedure under Federal Rule of Civil Procedure 68. Although there were cases previously approving that dismissal process, there seems to be the beginning of a tide.  Only a few days ago, a federal judge has dismissed a class action against United Mortgage and Loan Investment LLC, on the basis that the court lacked subject matter jurisdiction because the defendants had offered the plaintiffs the maximum they could recover, which they turned down.  That simple scenario is the essence of the Offer of Judgment process.

In this case, docketed as Simmons v. United Mortgage and Loan Investment, LLC et al., the U.S. District Court for the Western District of North Carolina dismissed the case and denied the plaintiff’s motion for conditional collective action certification.  This was because the “defendants’ May 16, 2008, offer of judgment mooted the action, depriving this court of subject matter jurisdiction.”

As the plaintiffs rejected the offer, they will receive nothing. This really points out the dangers for continuing to litigate when a plaintiff has already been offered everything they could conceivably win. In my view, this represents a (hopefully) growing trend of the federal courts showing that when a plaintiff refuses to resolve a case at an early stage in the litigation process, there are consequences that flow, i.e. dismissal of the case and not receiving the originally offered money (or any portion of it).

Significantly, the May 2008 Offer gave the plaintiffs all they could have won at trial, i.e., back pay, liquidated damages, attorneys’ fees and costs. When they did not take the offer, the result was that the active case or controversy, which is what is needed for a court to maintain jurisdiction, was dissolved.

The Judge agreed there were concerns relating to a defendant-employer's ability to “pick off” FLSA plaintiffs and moot a collective action before it got started.  Rule 68 does exist for a reason, however, and it is there to be used, in the appropriate circumstances.  In this regard, under the FLSA’s opt-in mechanism, only those individuals who affirmatively choose to join a particular suit are actually in it, so an individual who has tried to opt in to a collective action that is mooted through an Offer of Judgment may nevertheless pursue his own case.

I believe this is a very viable mechanism for an employer trying to stop FLSA cases at an early stage, before legal fees mount up and before other putative plaintiffs join in and, especially, before a class gets certified. The key lies in melding proactive action with making the Rule 68 Offer. If the employer is doing something wrong (e.g. misclassification of employees as exempt), it must fix the problem before it makes the Offer of Judgment so that the one active case gets dismissed and even if others then come forward, there will be nothing for them to glom on to, as the problem has been solved and the danger eradicated..
 

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