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Wage & Hour – Development & Highlights

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

Attorney Overtime Lawsuit Dismissed Under FLSA Professional Exemption

Posted in Exemptions, Overtime Issues

I told you so!

A federal judge dismissed the putative collective action against the huge law firm, Skadden Arps, which was filed by a lawyer claiming he was working as a non-lawyer and was entitled to overtime. Judge Sullivan ruled that the lawyer(s) were exempt from the FLSA under the professional exemption in 29 USC 213(a) as licensed attorneys practicing law. The case is entitled Lola v. Skadden Arps Meagher Slate & Flom LLP and had been filed in the Southern District of New York.

The named plaintiff claimed his document review work was routine and “mechanical” in nature and did not require any legal knowledge or training. Interestingly, the Judge stated that it seemed unfair that these lawyers should not receive overtime when a properly trained and supervised non-lawyer could have done this work, but as the plaintiff was a licensed attorney he was, in fact, engaged in the practice of law and therefore exempt.

The plaintiff’s attorney stated that they will appeal, on the theory that in order to be considered practicing law, an individual had to use/apply his legal knowledge and be exercising discretion. This was hotly contradicted by the defendants who contended, in their motion to dismiss papers, that the assertion that a licensed attorney doing document review was not practicing law was “flawed and refuted by the FLSA, overwhelming legal authority and common sense.” Plaintiff rebutted by claiming that the exemption applies only to those “actually engaged in the practice thereof.”

The Judge stated that the Congress and the US Department of Labor could revisit the regulations and law given the circumstances (e.g. many lawyers doing document review as their job) that the legal profession faces. This is, perhaps, most especially so for young lawyers starting out, faced with oftentimes a long and grueling process of finding a “real” job.

The plaintiff’s lawyer will appeal to the Second Circuit. I “boldly” predict the result will be the same.

To be continued…

Choice of Law Provisions and Class Actions

Posted in Class Actions

Picture this: you’re enjoying a lovely evening with friends inside a hole-in-the-wall restaurant in Brooklyn.  As the evening is winding down, the clouds open up and give way to a torrential down-pour.  You think to yourself, “How am I possibly going to hail a cab in this weather…and in Brooklyn of all places.”

Brooklyn

Luckily, you remembered, you downloaded Uber, the mobile application that connects you with a personal driver.  Within minutes, you receive a notification that your driver is outside waiting for you!

What does this vignette have to do with wage and hour recent developments and highlights?

Earlier this month, a California judge held that out-of-state drivers for Uber Technologies Inc. could not participate in a putative class action that alleged the company violated various California laws, despite a choice of law provision in their licensing agreement with Uber that designated California as the governing law.

Uber drivers in 3 states: California, Georgia and Washington brought a class action suit against Uber claiming it violated CA law by falsely advertising that customers did not need to tip drivers since a gratuity is included in the total cost of the service.  The drivers claimed that Uber did not in fact provide the full gratuity to drivers.  The second part of the claim was that Uber misclassified them as independent contractors instead of employees.

Uber sought to dismiss the claims as they applied to drivers who both lived and worked outside of California arguing that CA law applied nationwide because the relevant state laws did not include geographical limitations.  Uber also argued that the choice of law provision in the licensing agreement overcame any presumption against extraterritorial application of those laws.

The Judge found that the licensing agreement’s choice of law provision did not overcome the “presumption against extraterritorial application” of the state laws the drivers claimed Uber violated.   The judge found the lower court reached the wrong conclusion by interpreting Gravquick A/S v. Trimble Navigation International, Ltd., 323 F.3d 1219 (9th Cir. 2003) incorrectly.

The decision held that a contractual agreement to apply California law “must yield” to laws containing explicit geographic limitations, the court said. “There is no logical reason to reach a different result where that limitation is implicit.”

For employers, it will be interesting to monitor the outcome of this case.  Many companies contain similar choice of law provisions, and so far this case is educational in how those provisions will be applied when employees from other states seek to join a class suit.

Overtime for New York Employers

Posted in Overtime Issues, Working Time

Employees must receive overtime pay at the rate of 1½ times their regular rate of pay for all hours worked over 40 in a workweek.

A common question we see is that “what is the regular rate of pay?”

First of all, the regular rate of pay can never be less than the minimum wage.  An employee’s regular rate is the amount that the employee is regularly paid for each hour of work.  When an employee is paid on a non-hourly basis, such as via salary or piece work, the regular hourly wage rate is found by dividing the total hours worked during the week into the employee’s total earnings.  The New York Department of Labor provides the following example:

For example, a non-residential employee who (before overtime) has piece rate earnings of $500 in a workweek for 50 hours work has a regular rate of $10 per hour.

Seem simple enough? Turning to the situation where an employee has multiple rates of pay…

The regular rate is the weighted average of the worker’s multiple rates of pay for the week based on the number of hours worked at each rate.  The weighted average is the total regular pay divided by the total hours worked in the week.  It is important to know that the overtime rate may vary weekly depending on how many hours the employee worked at each rate of pay.  The New York Department of Labor provides the following example:

For example, if an employee works 20 hours for an employer as a janitor for $10.00 per hour, and 30 hours for an employer as a groundskeeper for $20.00 per hour, that employee’s regular rate is $16.00 per hour.

To conclude this brief lesson in what constitutes regular rate of pay, employers should know that certain payments are not part of the regular rate.   These include true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, pay for expenses incurred on the employer’s behalf, premium payments for overtime work, gifts, payments in the nature of gifts on special occasions, payments for occasional periods when no work is performed due to vacation, holidays, or illness.

While overtime administration seems fairly intuitive, employers run into situations where employees later claim they are owed overtime.  Thus, it is essential that employers have a real understanding of overtime implications.

Federal Court Settles New Jersey Wage Payment Law Statute of Limitations

Posted in Articles

In an important decision, a New Jersey federal district court has ruled that the statute of limitations for claims under the New Jersey Wage Payment Act is six years, not the two year period that specifically governs overtime and other wage claims specified in the New Jersey Wage-Hour Law.   In Meyers v. Heffernan, (Civ. No. 12-2434) the Plaintiffs were commissioned sales representatives for a now-defunct Mortgage Lenders Network USA, Inc., a mortgage banking company until approximately February 2007.  The plaintiffs sought unpaid commissions.

The defendants argued that the Wage Payment Law (WPL) contained a two year statute limitations period and, as the claims were three years old, they were untimely.  The Supreme Court of New Jersey had not yet considered the limitations period applicable to claims arising under the WPL.  USDJ Cooper looked to an earlier NJ Appellate Division decision for guidance.  Troise v. Extel Commc’ns, Inc., 345 N.J. Super. 231 (N.J. App. Div. 2001).

In Troise, the Court considered whether a two or six year limitations period applied to an employee’s private cause of action for underpayment of prevailing wages.  The Appellate Division observed that where the Legislature creates a statutory cause of action without including a limitations provision the court should apply the general limitations provisions which governs that category of claims

The plaintiffs herein were seeking to vindicate their economic rights through recovery of unpaid, accrued commissions.  As the nature of these injuries were more analogous to a breach of contract claim rather than an injury to the person, the Court concluded that the WPL is subject to the six-years statute of limitations that is provided by NJSA 2A:14-1 for breach of contract claims.

This is exciting news, so to speak.  At least it (definitively) clarifies the statute of limitations, unless and until the state Supreme Court rules differently.  Which it likely would not.

When Is It Time For A Wage Hour Audit? Answer—Now!

Posted in Uncategorized

Better safe than sorry is the old adage.  Nowhere is this maxim more applicable than for an employer’s compensation practices, especially on issues of classification, working time, and record keeping protocols and obligations.

In the last several years, there has been an escalation of wage hour lawsuits, single and class action.  These cases can be grouped into certain categories that correspond almost exactly to particular payroll practices and corporate/financial decisions that impact the FLSA and state law.  Some of these flashpoint areas are:

  • Overtime claims arising from classification of employees as exempt or non-exempt;
  •  Independent contractor/consultant classification;
  •  Preliminary and postliminary work claims (e.g. donning and doffing, travel time);
  •   Automatic deductions for lunch (the curse of the smart clock)
  •  On-call cases; and
  • The Blackberry/E-Mail Claims (a “new” type of preliminary and postliminary work).

There is no way to tell when a claim will arise.  Usually, they come from workers fired for eminently good reasons but who complain to the DOL or file suit and, bad luck, have, not been properly paid.  If the “policy” at issue affects a group or, class, of workers, the snow ball rolls downhill.

The best, really, the only protection employers have is to self-audit all of their compensation practices and if there are issues, fix them, but do so in ever so subtle a manner as to “not arouse suspicion.”  The focus should be not only on having/drafting the legally correct (and employer friendly) policies but to exercise oversight to ensure they are implemented and maintained in a consistent manner.

The best defense is a good offense.  Another adage but, here, the best defense is proactive planning.  Such audits do not cost a great deal and the report that I submit to the employer when I do one highlights areas of concern and suggested remedial measures.  Such an audit also provides the ability to mount a “good faith” argument/defense.

An ounce of prevention….

Defeating Conditional Certification Motions in FLSA Collective Actions

Posted in Class Actions

How can an employer-defendant defeat a FLSA class action?

That is the timeless question a defendant’s counsel asks himself when faced with the specter of a FLSA collective action. To this end, I recently read a post in Employment Law 360 where practitioners opined on these methods.

Dig Into the Merits Early 

In days gone by, a defendant would focus on staving off or defeating the motion for conditional certification and would perhaps relegate merits based analysis to the second tier of the case. Now, with the blurring lines between merit based and procedural discovery, if a prompt and accurate assessment of the facts shows that some/many/all of the claims rest on faulty theories, perhaps a motion on the pleadings or early summary judgment motion is doable.

Seek Out Individual Differences 

I always pray at the altar of “individualization” because such a defense dooms the class action. The employer must be arguing that individual differences between putative class members makes the entire premise of a “class” untenable. If the court concludes it has to conduct a mini-trial for each opt-in or putative plaintiff, that totally undermines the validity of the proposed class action.

Stay on Top of Evolving Case Law

The pendulum is swinging towards defendants on a number of crucial issues pertaining to certification. Lawyers should always be citing the most current developing law, especially cases clarifying or interpreting major Supreme Court cases. This includes staying abreast of pending cases if they could be useful, as well as scanning similar lawsuits in the particular industry that may also provide unique guidance (and tactics).

Don’t Underestimate Seemingly Minor Defenses

In the state law, Rule 23 action that invariably accompanies the FLSA collective suit, employers often don’t put a lot of effort into disputing, for example, the adequacy of the class representative or numerosity of the proposed class. Don’t take those factors for granted. You don’t know what when these “side issues” turn into winning arguments.

Make Use of Expert Witnesses

Think about using experts, even at this early stage of the litigation. One size does not fit all. Experts do not have to be used “just” for the merits, but may lend a hand in fighting the class certification bid.

The Lesson

Start perhaps by focusing on the individualization issue/defense, but all of these tactics can and should be used. They work!!!

Paralegals Sue For Overtime In NJ Federal Court: I Thought This Was Settled?

Posted in Overtime Issues

I have blogged numerous times about lawyers suing law firms, claiming that they were really clerks, not lawyers and therefore entitled to overtime. This situation presents a different scenario. An employee has sued the law firm of Pasricha & Patel LLC in a FLSA collective action, claiming that the law firm misclassified paralegals as exempt employees and thus did not pay overtime. The case is entitled Barros v. Pasricha & Patel LLC et al. and was filed in federal court in the District of New Jersey.

The paralegal Jason Barros, is suing the firm and the individual co-owners (who can be found liable under the FLSA for wages). The Complaint alleges that the firm paid the paralegals on a salaried basis but the nature of their duties nevertheless rendered them non-exempt. As in all of these suits, the plaintiff alleges willfulness. The Complaint alleges that the “defendants’ method of paying plaintiff and others similarly situated in violation of the FLSA was willful and was not based on a reasonable belief that its conduct complied with the FLSA. In this regard, in addition to defendants being attorneys, this firm has itself represented employees who have alleged that their employer unlawfully failed to pay them overtime pay in violation of the FLSA.”

“We think that they’re entitled to overtime pursuant to Department of Labor regulations,” stated Mitchell Schley, the attorney for the named plaintiff Barros. I think he might be right, at least superficially. If these folks are doing traditional paralegal work, their status has been settled since the 2004 FLSA revisions. Surmounting the clear language of the regulations will be a challenge.

One possible defense is that they qualify for the executive or, more possibly, the administrative exemption. Perhaps another is that the overtime was built into the “salary.” Getting to that, however, would mean that the firm lost on the exemption issue.

Or—settle this case and change the system. Fast.

Independent Contractor Status

Posted in Uncategorized

Since the Fair Labor Standards Act (“FLSA”) only benefits employees, the status of a business’s workers as either “employees” or “independent contractors” is extremely significant in FLSA actions.  By misclassifying an “employee” as an “independent contractor,” businesses, small and large, may be surprised when they are subject to liability for overtime and minimum wage violations.  Certainly, the adult entertainment industry is in a state of shock after the Eastern District of Pennsylvania’s decision held that exotic dancers are “employees” of an adult nightclub protected under the FLSA.[1]

The Plaintiffs were exotic dancers who filed a collective action against The Penthouse Club in Philadelphia alleging they were employees benefitted under the FLSA.  As discussed in previous blogs, the court assesses the “totality of the circumstances” under the economic realities test to determine whether a worker is an independent contractor or employee under the statute. Since the dancers were not compensated by the nightclub, were responsible for marketing themselves through word-of-mouth, and set their own schedules, surely The Penthouse Club thought they were safe from any employment liability.  Shockingly, the court found the dancers were employees after assessing the “control” the nightclub has with the premises.  Specifically, the Court noted with importance that the nightclub provided rules and guidelines regarding the facility’s maintenance and the dancers’ appearances.

While the federal court’s decision directly affects the nightclub industry, all employers should take note of this decision due to its effect on future FLSA cases. Even after taking appropriate steps to prevent exposure from liability, businesses may be vulnerable due to speculative results arising from the court’s balancing test.  For example, as noted by the Eastern District of Pennsylvania in its assessment: “[m]any other courts have previously found that little specialized skill is required to be a nude dancer.”[2]

*This post was written by our Summer Associate Julius Suarez.

 


[1]              The case referred to in the blog above is Verma v. 3001 Castor, Inc., No. 13-3034, 2014 WL 2957453 (E.D. Pa. June 30, 2014).

[2]              Verma, 2014 WL 2957453, at *9.

Why “Working Time” FLSA Lawsuit Settlement Irritates Me

Posted in Working Time

I have blogged many times about the use of automatic lunch deduction time clocks and the inherent dangers that reside in such a procedure. Well, as if more proof was needed on the dangers of this protocol, a major medical center has agreed to pay $1,500,000 to settle a case under the Fair Labor Standards Act in which a class of nurses claimed that this timekeeping system docked them for meals they never took and for time that they worked through lunch. The case is entitled Manning v. Boston Medical Center Corporation and was filed in federal court in the District of Massachusetts.

The plaintiff had sued five years ago, claiming that the automatic timekeeping system unfairly and improperly deducted time for meals and breaks from employee hours worked, but there were numerous times that the employee(s) worked through their breaks. Nevertheless, the supervisor would yet deduct the “lunch time” from the total hours worked. A lot of time and effort and attorney fees would have gone to calculating (or determining) how much each individual should “truly” receive. Thus, the parties indicated to the Court that the “proposed settlement agreement will provide a fair and reasonable recovery to BMC’s patient care employees who had potential claims challenging BMC’s pay practices under the FLSA.” The case has meandered up and down the federal system for five years.

The settlement fund is given the interesting moniker of a “maximum gross settlement amount.” It will handle administration/mediation costs and employer payroll taxes. The lawyers will receive 33% of the settlement. The Company got the typical non-admissions language as a part of the settlement. The Medical Center defended by asserting that the plaintiffs could not show that the alleged lunchtime work was performed with the Center’s knowledge. To date, there are four plaintiffs, over 71 valid opt-in plaintiffs and more than 5,000 putative class members. The joint motion contended that “if the proposed agreement is not approved by the court, the parties face an extended and costly battle.”

This could have been prevented. Future suits like this can be prevented through the simple use of a fail-safe system, like overtime approval sheets or time sheets that are certified to by the employees. When being proactive is this easy to do and class actions still seep through, it really bothers me

Really…

Recent FLSA Exemption Changes Under Attack (Already?)

Posted in Exemptions

OMG!!

I knew this was coming down the pike. It isn’t enough that the exemption tests remain (even after the 2004 amendments to the FLSA regulations) an oftentimes gray morass that leaves employers and their counsel constantly guessing about who is and is not exempt. Now, Senate Democrats have introduced a bill to amend the FLSA to make even more salaried workers overtime eligible.

Right now, 12% of salaried employees are overtime eligible, that is, they do not fall into one of the three “white collar exemptions.” Under the new tests, this number would geometrically rise to 47%, under the proposed Restoring Overtime Pay for Working Americans Act. Senator Harkin, who is leading the push for the bill, stated that “every worker deserves a fair day’s pay for a hard day’s work, but because our overtime laws are out-of-date, Americans around the country who work long hours away from their families are denied a paycheck that reflects that work. That hurts their families and our economy.”

As currently constituted, in order to meet the exemptions, an individual must receive a salary of $455 per week, up from the admittedly low $250 per week that existed prior to the 2004 revisions. Under the proposal, this salary threshold would rise (over some years) to $1,090 per week and then be tied to inflation. “Highly compensated” employees, who now must earn at least $100,000 annually to be exempt, would need to earn at least $125,000 per year.

The legislation would also focus on the (already thorny) issue of “primary duty,” which means the percentage of time that workers spend performing exempt work. Now, a worker (under ordinary circumstances) must spend 51% of their time doing such work and can still be considered exempt if the percentage falls below 51% of the facts show that they retain management as their main job duty. Under this legislation, the person would have to spend the “majority” of their time performing exempt work (such as is currently the law in California).

This, to me, is an unwarranted “attack” on the relatively new regulations only in existence for about a decade. If passed, the law will make it more difficult for businesses to operate and may likely impel employers to keep more workers as straight hourly, rather than risk a misclassification challenge. In certain industries, like the retail and restaurant industries, this may create havoc. If anything, the regulations, especially the administrative regulation, should be revised to make them more understandable and easier to apply in practice.