Wage & Hour - Development & Highlights : New Jersey Labor and Employment Lawyer & Attorney : Fox Rothschild LLP Law Firm : Serving Essex County, Sussex County, Roseland, New Jersey

I have often posted on the recently found aggressiveness of the Departments of Labor, on both the federal and state levels, to step up enforcement of (alleged) wage-hour (i.e. overtime) violations and independent contractor audits (i.e. 1099/consultant).  More fuel has just been thrown onto this already raging fire as the federal DOL has now requested more money to “fight” violations of the Fair Labor Standards Act, the Family Medical Leave Act and to curb the ostensible scourge of misclassification allegedly rampant in business today.

The need for more money seems to also have political overtones, as suggested by the recent statement of the Acting Secretary of Labor, who stated that “the Department of Labor's fiscal year 2014 budget request is a critical ingredient in the Obama administration's plan to grow the economy from the middle class out, not from the top down.”  The Acting Secretary added that the DOL wants to “make sure Americans can support their families with a decent wage and secure benefits.”  All this seemingly designed to help the (highly-prized, politically) middle class and those with aspirations to enter the middle class.

The increased monies would be focused on the pursuit of wage hour transgressors and almost four million additional to audit independent contractor misclassification issues.  Exemption classification audits would also be stepped up with these funds.  Such misclassifications, in the DOL’s view, “deprive workers of benefits and protections to which they are legally entitled and puts law-abiding businesses at a disadvantage against employers who violate the law.”

The employer can never know, for sure, if/when he will be subject to a DOL audit on exemption classifications, employee-contractor classification or any other aspect(s) of wage hour compliance. The only sure-fire defense is, simply, to be in compliance.  To achieve that lofty, but not unattainable goal, the best strategy is to (as I have done for numerous clients) conduct a self-audit of all compensation practices and classification issues, fix what may be broken, softly, subtly, and then whatever happens, the employer will have some level of assurance that all will be well.

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The National Association of Medicaid Directors (“NAMD”) is challenging the proposed rule to extend minimum wage and overtime protections to home health care workers.  Currently, home health care workers are exempt from the minimum wage and overtime requirements under the Fair Labor Standards Act.  Pursuant to the proposed change, any home health care work assigned to a household by a third party, such as a staffing agency, will be entitled to minimum wages and overtime.  However, home health care workers that are directly employed by an individual or household will continue to be classified as exempt employees.

In December 2011, the United States Department of Labor (“DOL”) announced the proposed rule change.  To date, it is still not clear when the revised regulation will be enacted.  Part of the delay may stem from the controversy that the proposed regulations has generated.  Labor rights advocates have argued that home health care workers are typically minorities and deserve to be fairly paid.  On the other side of the debate, the NAMD has argued that the added cost of paying home health care workers minimum wage and overtime would result in a diminished level of care.  Additionally, disability rights groups claim that the elderly and disabled will be forced into nursing homes due to the expected skyrocketing cost of home care.  Nursing homes will not be affected by the proposed rule as their workers are exempt from minimum wage and overtime requirements.

Staffing companies should be prepared for the likelihood that the proposed rule will eventually be enacted.  In the meantime, these businesses should examine which policies and procedures need to be put in place to comply with the rule change.  In particular, businesses will need to consider how to track and record the time worked by home health care workers so that they can be paid on an hourly basis.
 

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I have posted several times about the offensive use of the FRCP Rule 68 Offer of Judgment in FLSA collective overtime (or other) actions, have myself utilized it to dispose of a FLSA collective action and have watched with great interest the journey to the US Supreme Court of the Genesis Healthcare case.  Well, the favorable outcome I portended has happened!

In Genesis HealthCare Corporation v Symczyk, the U.S. Supreme Court has ruled that when Genesis Healthcare Corporation offered full relief to the named plaintiff and the plaintiff refused it, then, under FRCP 12(b)(1), the refusal mooted the named plaintiff’s putative wage-and-hour and the collective action.

The Court left open, however, the issue of whether an unaccepted offer of judgment under Rule 68 moots an FLSA claim, leaving that perhaps more important issue in some legal doubt (although I am confident that this question will ultimately be decided in favor of defendants).  Significantly, the Court did not have to decide that issue, as the plaintiff had waived that issue and it therefore did not require resolution.

The 5-4 decision held that the plaintiff’s FLSA collective action challenging the Company's automatic meal break deduction policy was properly dismissed on jurisdictional grounds because the only named plaintiff in the suit no longer had an interest in the case after the employer offered full relief on her individual claims.

The Court reversed the Third Circuit decision, a pro-employee decision, that held that even though the named plaintiff was kicked out, the rights and claims of other potential opt-ins survived that unfortunate occurrence and the remainder of the class could yet proceed, assuming they could show they were similarly situated.

My heart soars.  I “knew” this was going to be the outcome or was, at the least, very encouraged when the Court took the case for review.  I also believe that Court at least intimated or “predicted” or “suggested” an outcome on this ostensibly more global issue and I am gratified to now "really" have a strong offensive weapon for a defendant and I look forward to using it (soon).

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When I am faced with a wage suit, whether individual or class action, I always look for a “magic bullet” a quick fix, a tactic that might make the entire suit go away in one fell (and less costly) swoop.

One of these tactics is to use a preemption defense. Where there exists a labor contract, the argument is that the National Labor Relations Act preempts the wage hour suit, meaning the employees have to arbitrate their claims. There are other types of preemption defenses, as illustrated by the defendant’s attempted use of one in a recent case. The tactic failed, but the principle remains an important one.

A federal judge has held that a federal transportation statute did not preempt state wage law claims filed by a class of truck drivers, who claimed they were really employees, not independent contractors. The case is entitled Martins et al v. 3PD Inc., and was filed in federal court in the District of Massachusetts.

The judge rejected the Company’s contention that the wage hour claims and misclassification allegations were preempted by the Federal Aviation Administration Authorization Act of 1994. This statute, in sweeping fashion, preempts state laws that address issues of price, route, or service for any motor carrier regarding hauling of cargo or property. The defendant claimed the broad range of this federal law trumped the state law claims.

The court stated that “3PD argues that plaintiffs’ claims are preempted by the FAAAA for two reasons: (1) they impermissibly seek to 'enlarge or enhance the bargain' that the parties entered into, and (2) they would affect the price of motor carrier services.” The court rejected both arguments, holding that both contentions relied on the premise that the individuals were independent contractors, but that, according to the court, was the quintessential issue in the litigation. The court also certified the class.

Always examine a possible preemption defense. This is easier to do when there exists a labor contract, but the possibility of preemption must always be considered, as it can eliminate a class action in a single motion.
 

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Complying with overtime requirements should be relatively “simple” for employers, yet often these requirements cause confusion for the business community or are, perhaps, disregarded.  The FLSA requires that covered, nonexempt employees be paid (at least) the federal minimum wage of $7.25 per hour, and one and one-half times their regular rate for hours worked over 40 per week.  Just this past year, the U.S. Department of Labor’s Wage and Hour Division investigated numerous New Jersey employers.  It obtained a consent judgment to recover $3 million in back wages and $91,000 Civil Money Penalties from a New Jersey employer found to be in violation of the FLSA!

Not only were the employees working up to 84 hours per week without receiving earned overtime pay.  Many of the employees were paid partly “off the books,” and sometimes in cash, to disguise the improper payment of overtime.  As such, the employer failed to maintain accurate records of the hours employees worked.  This second aspect, failing to maintain accurate records of hours worked, led to a consent judgment between the Labor Department and the employer consisting of a three-year monitoring program including the installation of biometric time clocks in each establishment; a notice to workers regarding the terms of the compliance agreement; FLSA training for all employees in English and other languages; an anti-kickback protection clause to ensure that all workers are paid any back wages due; and a toll-free telephone number for workers to report violations to the monitor. 

Failure to follow-up overtime regulations can lead to not only a large judgment of back-pay, but civil penalties as well.  Overtime calculations can also become complicated when an employer gives bonuses, since absent an exception, they must be included in the regular rate of pay.  The calculation in itself is quite complicated.  The proper computation has been addressed in an earlier post and it remains an issue of concern for employers as simply “knowing” that overtime is due is only half the answer.  The other half (perhaps even more important) is the proper computation of that overtime.

 The lesson for employers is to be quite cognizant of the overriding obligation to properly pay overtime, to know what employees are entitled to overtime and to know its proper computation.  These questions are often easier posed than answered, but an internal audit of the employer’s compensation practices is a sure fire way to answer those questions correctly.

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I have posted a number of times on the slew of intern lawsuits recently filed under the Fair Labor Standards Act. This may be a new “wave” or fertile new ground for plaintiff side practitioners so I keep following these cases, particularly, the Hearst Corporation case, with more than a little interest. This particular case is entitled Wang v. The Hearst Corporation and was filed in federal court in the Southern District of New York.

The Company is fighting the bid for class certification lodged by a group of unpaid interns who claim they were really employees and therefore denied minimum wage and overtime protections. The essence to securing/keeping certification is the existence of an overall, companywide policy that establishes, ab initio, a group of workers “similarly situated.” The Company has argued that the circumstances surrounding the internships at the nineteen (19) Hearst magazines that overall conclusions about the work experiences and/or “employee” status cannot be made. In sum, there is no commonality, ergo, no “class.”

This is the famous “individuality” defense that I have commented upon frequently. The defendants contend that for the Court to extrapolate from the few individual accounts by the named and/or deposed plaintiffs to all others in the alleged class, many thousands, possibly, is inappropriate.

The Company wrote in its opposing papers that “the bigger picture obscured by plaintiffs is that these internships are desirable learning opportunities for college students who have not yet entered the job market. These students all knew in advance that their internships would be unpaid, they knew the internships were limited to those who could earn academic credit, they knew the internships were of short duration spanning a semester or summer vacation, and they knew there was no job waiting for them at the end.”

I agree with the individuality defense and observe it is the only way to go, as there is no dispute that the people were paid nothing. The “understanding” that existed prior to the commencement of the internships is also important but, if the plaintiffs can demonstrate that they performed “productive work,” there may be an issue for the Employer. Thus, in any intern situation, be aware of this minefield.

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There are many industries where the agreement between the worker(s) and the employer is that the worker will receive a certain fixed lump sum of money, sometimes wholly or partly in cash, for an agreed-upon number of hours. This situation is rife in the gasoline station industry, as evidenced by the fact that a New Jersey gas station operator has recently settled a case, agreeing to pay $3,000,000 in unpaid wages/overtime and penalties to more than four-hundred employees at more than seventy gas stations in New Jersey for violations of the Fair Labor Standards Act . The case is entitled Harris v. Daniyal Enterprises LLC et al and was filed in federal court in New Jersey.

The employer also had to pay $91,000 in Civil Money Penalties. These are assessed for willful conduct or for repetitions of the same type of offending conduct, which occurred in this instance. The owner was also held personally liable.

The Acting Secretary of Labor noted that “this agreement returns hard-earned wages to workers in one of only two states that still mandates full-service gas pumps. All gas station owners and operators in New Jersey should take note of this precedent by reviewing their payroll practices and legal obligations. Gas station attendants are few in number, earn low wages, work long hours and often lack English proficiency — factors that contribute to their vulnerability as well as the importance of protecting their right to be paid properly."

There were fourteen companies named as defendants, all owned by Mr.Chaudhary; these companies operated BP and Shell gas stations in New Jersey. The Complaint alleged that the employees often worked more than eighty hours per week, with no overtime, with payment off the books to disguise the fact that the employees were working in excess of forty hours per week..

There had been two prior investigations by the DOL, both finding that monies were owed. In both instances, DOL officials met with Mr. Chaudhary and explained his obligations for recordkeeping and proper payment of wages, which he evidently did not heed. Under the terms of the agreement, the employer must implement a monitoring program at each station to ensure FLSA compliance, as well as establishing a confidential hotline for employees to report alleged violations.

First lesson---it only takes a single employee to complain to a DOL (or an attorney). Then, anyone in the same boat, i.e. similarly situated, will be included in the action. Second lesson---informal deals or arrangements, i.e. a salary for a set number of hours (often over forty) is a dangerous idea because overtime must still (and always) be paid, regardless of the “agreed-upon” arrangement.
 

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Do employers need to pay employees for accrued vacation time upon termination?  This is a question without a simple answer, and one that has been heavily litigated over the past several years.  Unlike most wage and hour issues, the Fair Labor Standards Act does not address this concern.  Rather, the payout of vacation time has been left to the states to regulate, and as can be expected, the results have widely varied.  Below is a brief overview of the different ways in which states have handled the payout of overtime:

• Employees must be paid for all unused, accrued vacation time at the time of termination (California, Colorado).

• Employees will be paid for vacation time upon termination unless the employer has a written policy stating otherwise (Iowa, Indiana).

• Employees will be paid for accrued vacation time depending on the employer’s written vacation policy and/or procedures (New Jersey, Pennsylvania).

Based upon the varying state rules regarding vacation pay, employers need to carefully assess whether their vacation pay policies are permissible. In particular, employers should consider whether the applicable state law permits the company to restrict the payout of accrued vacation time.  As Mark Tabakman stated in an earlier posting, “it is probably better to err on the side of conservatism in these matters (i.e. allowing payout) rather than risk a class action where the costs of defending and the possible costs of paying the plaintiffs’ legal fees will geometrically increase the payouts that otherwise would have been mandated.”
 

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The federal motor carrier exemption applies to drivers, mechanics and other employees whose duties affect safety and who work in interstate commerce.  This exemption applies to truck companies and bus companies.  Any state is free to adopt this exemption, in toto, or to modify it or, in fact, not adopt it at all.

The New Jersey Department of Labor has adopted a version of the federal exemption that applies only to common carriers There is also an exemption, a separate exemption, that applies to bus companies and their employees.  That exemption has caused problems for the employer community so the state DOL is now proposing new rules to clarify when a bus company employer is not required to pay overtime to employees.

The new definition of “common carriers of passengers by motor bus” would now include “any employer which operates an autobus.”  This would establish bright lines so that employers (and DOL investigators/officials) would know exactly whether the employer has to pay overtime.

The DOL issued a communication stating that “the new rule would eliminate any possible confusion among employers and employees with regard to the proper scope of the exemption.”  To its credit, the agency observed that the absence of clear definition of the terms “common carrier" and "motor bus" has caused problems because employers have been unsure (for some time) where the line is drawn between employees who should receive overtime pay and those who should not.

Under the new rule, DOL investigators would need only to confirm whether the Motor Vehicle Commission has classified the vehicle as an "autobus."  Secondly, the investigator would also need to confirm that the proper registration documents are on file.

The lesson for employers, within New Jersey and elsewhere, is to always be cognizant that state law, on exemptions and all other wage hour issues, must be examined, and complied with, in addition to compliance with the Fair Labor Standards Act.  It is not enough to “merely” comply with the federal statute.
 

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In December, I blogged about off-the-clock work in my post Unreported, Off-the-Clock Work.  Off-the-clock work includes meal break time, and issues arise when employees work during these breaks, or claim that they work during these breaks, but are not paid.  Recently, an Ohio federal judge decertified a class of employees who alleged that their employer’s meal break policy violated the FLSA.  The judge decertified the class action suit because the workers’ experiences were too diverse to justify the class. 

The case, Creely v. HCR ManorCare Inc. et al., was filed in the U.S. District Court for the Northern District of Ohio, the case number is 3:09-cv-02879.

The employer, HCR ManorCare Inc., (“HCR”) has more than 44,000 hourly employees.  A class of 318 nurses, licensed practical nurses, certified assistants, and admissions coordinators claimed that employees missed meal breaks and were not properly compensated because HCR failed to  ensure that employees were paid.  Specifically, the plaintiffs claimed that HCR failed to train employees on how to report incidents where they worked during meal breaks, and even in some instances, actively discouraged employees from doing so.  The judge however, decertified the conditional class because the claims presented varying accounts of what instructions these workers received on claiming wages earned while working through meal breaks (since wages were automatically deducted for meal break time). 

Although this class was decertified, this decision demonstrates the overriding importance for employers to maintain reasonable procedures for employees to report ostensible work performed during meal times.  To avoid incidents like this, employers should ensure that employees are properly trained to report their time and managers are keenly aware of their employees working, or seeking to work, through lunch.

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In a matter of first impression, the Northern District of Illinois determined that maids and house cleaners employed by third parties are protected by the Fair Labor Standards Act (“FLSA”).  In reaching this decision, the court held such workers are not exempt from overtime by the “domestic service” exemption of the FLSA.  The case is entitled Arenas v. Truself Endeavor Corp. d/b/a Garret/Juarez Cleaning and is pending in the Northern District of Illinois.

The underlying action was brought by ten cleaning and janitorial workers who claim that they worked for Truself Endeavor Corp. (“Truself”), a company that provides cleaning services for private homes, and were not paid minimum wages and overtime.  Truself moved to dismiss the complaint based on several theories including an argument that the employees were exempt from overtime pursuant to the domestic services exemption.

The domestic services exemption excludes from overtime protection any worker “employed on a casual basis in domestic service employment to provide babysitting services or an employee employed in domestic service to provide companionship services.”  The district court rejected this argument and held that the domestic service exemption “applies by its terms only to babysitting and companionship.”

The Arenas case provides a strong indication that the courts are wary to broaden the scope of the domestic service exemption to include additional household functions.  Employers in the janitorial services industry should review their pay policies to ensure that they are compliance with federal and state law.
 

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I have noticed that there are not many lawsuits (e.g. class actions) brought that test the limits of the professional exemption.  That exemption, geared towards anyone with an advanced degree (lawyer, doctor, CPA, engineer) is fairly well defined and a lawsuit easily defended.  That rule, however, has its exceptions, as demonstrated by the granting of conditional certification to a class of more than three-hundred PriceWaterhouse auditors who claim that, since they were not CPAs, they were not exempt and are entitled to overtime.  The case is entitled Kress et al. v. PriceWaterhouse Coopers LLP and was filed in federal court in the Eastern District of California.

This development is another in a long saga of claims by such employees that the Company has, in a wholesale manner, misclassified them and denied them overtime.  The employees contend that they typically worked fifty-five hours per week during the tax season but were always denied overtime.

The Company has defended with the only defense that it can, the professional exemption as there seems to be little dispute that these employees worked the hours that the Complaint alleges. In other words, the Company is in for a dime, in for a dollar—if the defense is successful, then every member of the class gets nothing.  If it is unsuccessful, the liability will be astronomical (in all likelihood).  The plaintiffs counter by alleging that the Company’s required training regimen for its auditors coupled with the absence of additional training requirements renders the professional exemption inapplicable, as there was no advanced course of study required for the position.

The Company has also defended by contending that the actual duties and work of each associate must be scrutinized on a weekly basis, which means that too much individual scrutiny (my favorite defense) is necessary, thus defeating the class action.  This may actually turn out to be a better defense than the exemption defense?

When defending a professional exemption case, I always ascertain if an advanced degree is required and held by the employees at issue or an advanced license, like a CPA license. The difference between “staff accountants” or “junior auditors” which are non-exempt jobs and an exempt professional is that degree.  Management side practitioners must always start and end the analysis with that inquiry.
 

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I often post on and discuss working time issues, e.g. travel time, on-call time, automatic lunch deduction cases, training time and, of late, after-hours employee email/blackberry usage and whether it is "work hours."

On Thursday, January 17, 2013, at 11AM, I am giving a one-hour Webcast on the topic "What Is Working Time and When Is It Compensable?"   The link is http://www.hr.com/stories/1354556504350

This is a gray, gray, confusing topic and grist for the mill of class actions!

Hope you can listen in.

.

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Section 7 of the Fair Labor Standards Act (“FLSA”) was amended by the Affordable Care Act to require employers to provide reasonable break time for an employee to express breast milk for her nursing child for one year after the child’s birth each time such employee has the need to express the milk. This requirement became effective when the Affordable Care Act was signed into law on March 23, 2010.

Under this amendment employers are required to provide a place, other than a bathroom, that is both (1) shielded from the view and (2) free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.  Employers and employees can access the The Wage and Hour Fact Sheet #73 “Break Time for Nursing Mothers under the FLSA” to become familiar with basic information about the law.       

The FLSA prohibits employers from discharging or discriminating against any employee because he or she has filed a complaint.  29 U.S.C. § 215(a)(3).  To establish a retaliation claim under the FLSA, an employee must show that (1) she engaged in statutorily protected activity; (2) she suffered adverse action by her employer; and (3) the adverse action occurred as a consequence of her protected activity.

The 11^th Circuit was the first appellate court to interpret these new provisions.  In Miller v. Roche Surety & Cas. Co., Inc., No. 12-10259 (11th Cir. Dec. 26, 2012) the 11^th Circuit held that an employee’s claim failed as a matter of law because her employer provided her with the necessary breaks and a private space in which to express breast milk.  The court also held that the employer did not retaliate against the employee for filing a complaint under the FLSA since the employee’s e-mail requesting a time and place to express breast milk did not constitute a complaint.  The court found that the circumstances surrounding the employee’s e-mail, would not have informed Roche that Miller was filing a complaint under the FLSA.

This decision offers some direction about these new FLSA provisions.  It informs us that employers must not only develop solutions that comply with these new FLSA, but should also review their current policies to ensure compliance.

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