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.
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.
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.”
*This post was written by our Summer Associate Julius Suarez.
 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).
 Verma, 2014 WL 2957453, at *9.
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
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.
I had recently blogged about the discovery dispute in the FLSA class action case involving Quinn Emanuel Urquhart & Sullivan LLP and how I believed the plaintiffs were overreaching and should not get the information. They wanted data concerning every attorney applicant for a document review assignment that contract attorney-plaintiffs were working on. The case is William Henig v. Quinn Emanuel Urquhart & Sullivan LLP et al., docket number 1:13-cv-01432, and was filed in the Southern District of New York.
The District Court Judge, Ronnie Abrams, had permitted plaintiff William Henig access to more information concerning the person who had interviewed him for his temporary position, but denied him from securing information about other applicants. The law firm then sent a letter to the Court, advising that it had turned over every document relating to the practice of law by Mr. Henig in the month and half he was there and urged that more data, of which there were thousands of pages, was irrelevant.
The Magistrate then determined that the information was relevant and ordered its production. Then, in another loopy turn of events in this meandering saga, Judge Abrams has recently concluded that “the qualifications of other individuals working on the project — and the qualifications of individuals who applied but were not selected to work on the project — have little, if any, probative value, and the burden of producing this information ‘outweighs its likely benefit.’”
This is a solid defeat for the plaintiff(s) and one that I believe was anticipated and, on the law/merits, eminently correct. The law firm had argued that the magistrate judge had exceeded the parameters of an earlier Court Order and they were vindicated in that position. Allowing this production of thousands of documents would have led to infinitely more questions and disputes and would have undeniably been used as a leveraging tool in any settlement discussions or demands that the plaintiffs would have made or be making.
This bodes well for the defendants. I believe all of these cases should be dismissed, because the individuals are in fact exercising the kind of knowledge and discretion that they went to law school for in the first place, even though it may not be in the context they idealized when they wanted to become lawyers.
Beach. Amusement. Sunshine. School is almost out and eager teenagers will soon be knocking on your doors seeking summer employment. If you plan on hiring teenagers this, or any summer, here are a few facts to keep in mind.
N.J.S.A, section 34:2-21.3 prohibits New Jersey minors under 18 years old from working more than 6 consecutive days in a workweek. These minors are also prohibited from working more than 8 hours in a day and more than 40 hours in any given week. A written permission from a parent or guardian is required when hiring a minor of age 14 or 15 to work beyond 7 pm on a summer (period beginning on the last day of the school year and ending on Labor Day) day. With permission from a parent or guardian, a typical workday in the summer for a 14 or 15 year old minor may extend until 9 pm. Minors under 16 may not be legally employed to work in factories according to section 34:2-21.2.
Additionally, section 34:2-21.4 encompasses hourly restrictions on when an employee who is a minor should receive his or her lunch break. Wage and hour laws prohibit minors under the age of 18 from working more than five consecutive hours without, at least, a thirty-minute break.
Need more info? The New Jersey Department of Labor and Workforce Development is a great place to start. Visit: http://lwd.dol.state.nj.us/labor/wagehour/lawregs/child_labor_law.html to learn more about employing minors today!
*This post was written by our Law Clerk Dionne N. Julius.
Calculating federal overtime requirements is no easy task. As such, the Department of Labor’s website provides a phenomenal resource to employers: the Overtime Calculator Advisor!
The Overtime Calculator Advisor provides employers with comprehensive info to understand federal overtime requirements. We all know that the FLSA requires that covered, nonexempt employees in the be paid at least the federal minimum wage for each hour
worked and receive overtime pay at one and one-half times the employee’s regular rate of pay for all hours worked over 40 in a workweek. Additionally, overtime pay is due on the regular pay day for the period in which the overtime was worked. No matter what, the overtime pay requirement may not be waived by agreement. Furthermore, absent only a narrow exception, the overtime pay requirement cannot be met through the use of compensatory time off.
The Overtime Calculator Advisor is a great resource for employer’s to understand their requirements under the FLSA overtime rules. It’s a great starting point to ascertain the parameters of who should be receiving overtime, and how to effectuate such payments.
I have posted several times about the rash of attorney FLSA lawsuits where the claim is “I was only doing clerical work” theory. In one of these cases, involving Quinn Emanuel Urquhart & Sullivan, the plaintiff is seeking what the law firm has deemed a “fishing expedition” and needlessly expansive discovery demands. The case is entitled Henig v. Quinn Emanuel Urquhart & Sullivan LLP and is filed in the Southern District of New York.
The law firm asserts that it provided all documents relating to whether the named plaintiff did/did not perform “attorney work.” In this regard, the plaintiff only worked there for six weeks, performing document review work in 2012. The firm claims that the documents prove Henig conducted himself as a lawyer.
Henig is seeking information relating to every applicant for the document review project, as well as the names of the interviewers of all applicants and all the papers concerning the firm’s decision to use the staffing agency named Providus to find contract attorneys. This demand is based on a Magistrate’s Order that the firm contends went well beyond the limitations imposed by a prior Order; in his recent decision, the Magistrate has determined that interrogatories and requests aimed at the “document review project overall” that Henig participated in, with other reviewers, is appropriate. Thus, the plaintiff claims the work histories of these other reviewers are fair game.
The plaintiff’s theory is that the “extremely routine nature” of his duties took him out of the professional exemption and essentially made him a clerk, a paper pusher (although he used a computer, instead of his hand, to push the paper. The firm has contended throughout that his work did fall within the safe harbor of the exemption, but Judge Ronnie Abrams would not dismiss the Complaint, finding factual issues concerning Henig’s actual work still remained.
I think the only documents relevant are those pertaining to whether Henig himself did or did not perform attorney work. It seems to be this might be a plaintiff tactic designed to facilitate or leverage a settlement.
We often blog about how important it is for employers to carefully evaluate their practices to ensure they are not misclassifying employees who are legally non-exempt, as exempt employees, and failing to pay them overtime.
A large national shipping company was ordered to pay $2 million dollars to settle managers over time claims after it violated the FLSA when it mislabeled line-haul service managers as exempt from overtime and failed to pay them for the time they worked beyond 40 hours a week.
The argument against classifying the employees as exempt was based on employers’ common misperception of how to classify employees. It’s important for employers to know how to do it… The FLSA advises that some jobs are classified as exempt by definition. For example, “outside sales” employees are exempt (“inside sales” employees are nonexempt). For most employees, however, whether they are exempt or nonexempt depends on (a) how much they are paid, (b) how they are paid, and (c) what kind of work they do.
With few exceptions, to be exempt an employee must (a) be paid at least $23,600 per year ($455 per week), and (b) be paid on a salary basis, and also (c) perform exempt job duties. These requirements are outlined in the FLSA Regulations (promulgated by the U.S. Department of Labor). Most employees must meet all three “tests” to be exempt.
I posted last week on the issue of raising the minimum wage for tipped workers in New Jersey, but that State is not alone in these efforts. There are a number of these initiatives afoot and the effort in New York State is particularly significant. Although, at first blush, raising the minimum wage may sound like the “decent” or “humanitarian” thing to do, but the fact is there are a number of untoward consequences for the business community that should give legislators (some) pause when launching into these efforts in almost a blunder buss manner.
Democratic legislators are leading this push. Senator Daniel Squadron claims that the statute would exempt small and medium-sized businesses from the new wage level, but would force bigger companies to assist their workers in escaping what the Senator deemed their “crushing poverty.” A lawyer for the National Employment Law Project, which is pushing hard for the legislation, took the “rob from the rich and give to the poor” perspective. He opined that, as these large companies, i.e. McDonalds, are earning millions and millions in profits, they should be able to and, more importantly, ought to pay their workers more.
What would happen in actuality? If bigger entities raise their wages, there would be inherent pressure on smaller employers to raise their wages to keep pace and seek to attract better qualified workers. Larger companies would, however, marshal their arguments and forces and seek to avoid the application of the law, in order to avoid the large dollar liabilities the law would engender. This arises from the vagueness in the law as to coverage, such as what constitutes a large employer and what constitutes a formula retail store. These coverage issues by themselves would keep lawyers quite busy in litigation. A “formula retail store” is an entity with eleven or more outlets is covered, but litigation would immediately ensue over the definition of such a business.
As the law also applies to subcontractors and franchisees, this facet would lead to another whole “chapter” in litigation. In this regard, a franchisee who owns a Subway shop has the name of a big company but in reality is likely a very small employer. Thus, franchise owners could file equal protection suits, if they believe they are being singled out or unfairly treated compared to other similar entities. Another possible fallout is that the law could make current rules relating to tipped workers very confusing and costly, causing bigger restaurant chains to severely cut costs, e.g. lay off workers. That effect would have the equal and opposite effect of causing plaintiff side lawyers to ferret out violations, or what they think are violations.
End result. More litigation. Just what we need.