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

The Ninth Circuit has largely upheld a lower court's grant of summary judgment to the defendant employer in Rutti et al. v. Lojack Corp., Inc.   This case involved an alleged Fair Labor Standards Act violation that accused the defendant of failing to compensate its technicians for off-the-clock work. While the decision was largely affirmed by ruling that the plaintiffs were not entitled to compensation for time spent driving to work in a company-owned car, one vital part was vacated. 

Indeed, the Ninth Circuit found that the lower court erred in holding that the plaintiff should not be compensated for time spent at home each night uploading data about the installations performed that day on a “personal data terminal” provided by the company. The court found the task appeared to be essential to the plaintiffs' principal work activities and the time spent performing the task (15 minutes) was not de minimis.  

Additionally, Plaintiff argued that his commute was compensable because his use of a Lojack vehicle was not voluntary and amounted to a condition of employment, and because Lojack put restrictions on his use of the vehicle, such as not being able to transport passengers. The Ninth Circuit affirmed the lower court's rejection of the both those arguments.

Plaintiff also sought compensation for certain activities he performed off-the-clock in the morning and in the evening. The Ninth Circuit affirmed the lower court's ruling that the tasks he performed in the morning, such as mapping and prioritizing work for the day, were not integral to the job and were related to the non-compensable commute.

While this is a seeming “win” for employers, it also sheds light on what the courts will consider de minimis for purposes of the Fair Labor Standards Act. Notably, for tasks deemed integral to the job, a 15 minute work requirement each day will not be found to be de minimis and will be compensable.  The lesson for employers is that when preliminary or postliminary activities, i.e. before/after work, take up more than a few moments, a court, or a Department of Labor, will likely view that as productive work time, not de minimis.

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The reach of wage hour laws extends even into topless go-go bars, as a recent case has, perhaps humorously, demonstrated. In a case entitled Chaves v. King Arthur’s Lounge Inc. a Massachusetts court has ruled that so-called exotic dancers who performed in a local strip club were employees, not independent contractors. Thus, they were due, at least, the state minimum wages and overtime compensation from their employer.

The nightclub, King Arthur’s Lounge, had contended that the dancers were not employees and thus not entitled to minimum wage and overtime. The state court judge not only rejected this argument, she also certified the lawsuit as a class action.

To add insult to injury, not only did the club not pay any compensation to the dancers, it also actually charged each of the dancers the sum of $35 per night for the “opportunity” to dance and earn tips from patrons. The employer defended by claiming that its primary business was selling food and liquor; the judge noted that the employer sought to posit its use of the dancers as “a form of entertainment it provides for its patrons, akin to the televisions and pool tables in a sports bar.”

The judge quickly rejected that attempt, ruling that “a court would need to be blind to human instinct to decide that live nude entertainment was equivalent to the wallpaper of routinely-televised matches, games, tournaments and sports talk.” She also concluded that “the dancers were an integral part of the company’s business and were therefore more likely to be employees than independent contractors.” The judge continued, holding that “in an age of electronic and Internet access to a wide variety of adult media, exotic dancing is unlikely to offer a commercial opportunity – over the long term—that would rise to an independently established trade for occupation.”

This case highlights the fact that every employer must carefully evaluate the circumstances of their engagement of individuals to perform services for them. If the services are, as herein, an integral component of the employer’s business, or if too much control is exerted by the employer, or the individual does not perform these services for anyone else, then that individual is likely an employee, not an independent contractor.

The fact that they may dance around a pole does not change this analysis.
 

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The issue of what constitutes working time is a gray one for employers.  Especially murky is the question of when on-call time, i.e. waiting time, should be compensated.  In a significant development, in a class action case entitled Green v ATT, filed in the Southern District of California ATT has been charged with depriving its information technology staff of overtime wages for on call hours, which are now claimed as working time.

The employees claim they had to be constantly on call, so they could respond to and fix, e.g. troubleshoot, a wide range of problems associated with the computer systems.  The suit alleges that the “employees were placed onto standby, on-call but were not paid the required compensation for these hours worked, regular and/or overtime during the class period.”

One of the downfalls of an employer on-call policy, meaning that all of the on-call hours are converted into working time, is requiring employees to respond in a very tight window.  The allegations herein are that ATT required the affected employees to respond within 15 minutes to a call-in; they were on call twenty-four hours per day, seven days a week.  This was above and beyond the “usual” forty-hour week.

The other component of a bona fide on-call policy is that the employees must be able to pursue their leisure activities, their “lives” in a manner not unduly restricted by the policy.  The employees (naturally) alleged that this was an overly restrictive policy and they unable to enjoy any leisure activities or engage in their own pursuits.  Therefore, they seek to be compensated.

The plaintiff seeks class certification.  Of equal, if not more, concern is that the plaintiff is asking the court to create a “fluid fund” so that the alleged violator can deposit funds for restitution and back pay purposes.

Examine your on-call policies. If the response time is less than thirty minutes and/or if there are other conditions that may be argued as “unduly restrictive” you may need to revise the policy or practice. In the AT&T case, computing the potential damages, i.e. on call pay at hourly and overtime rates for hundreds of employees, for thousands of twenty-four hour days sounds staggering just to contemplate and will be even more frightening to actually undertake.
 

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In these economic times, employers are classifying more workers as independent contractors in an effort to save costs, but employers should be warned that companies adopting this strategy may be abusing classification rules-and State and Federal entities are noticing.

In June, eight attorneys general sent a letter to FedEx Corp. expressing concern about the company's practice of classifying drivers as independent contractors. This warning follows the 2008 misclassification ruling by the California Supreme Court that cost the company $26.8 million.

The Montana Supreme Court also recently ruled against a company for misclassifying its staff of exotic dancers. In May, the court held in Smith v. TCAD Inc. that the dancers were employees and were entitled to wages for all hours worked, plus overtime.

Similarly, the U.S. Court of Appeals for the Second Circuit, addressed the issue in the 2008 ruling Salamon v. Our Lady of Victory Hospital. In this case, the doctor plaintiff had presented a genuine issue of material fact as to her employment status. The court vacated summary judgment in favor of the hospital, which had argued that the doctor was an independent contractor, not an employee, and could not therefore make a claim for sex discrimination under Title VII.

Even Congress is weighing in. According to Rep. James McDermott, Congress is introducing a bill that would amend the Internal Revenue Code of 1986 “to modify the rules relating to the treatment of individuals as independent contractors or employees.”

All this scrutiny means it's paramount for employers to ensure that they are properly classifying their workers.

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In a relatively rare occurrence, but one of special interest to financial services employers a federal judge has rejected an effort by a putative class of Citibank NA employees whose job duties focused on the recruiting of businesses to participate in the company’s Bank at Work program. The workers claimed, as usual in these cases, that they were misclassified as exempt.

In a crucial ruling, one that might provide a blueprint for employer defenses of these cases, the court ruled that individual examinations of the duties of many, if not all, of the class members would be required. As “individuality” is the antithesis of a class action, which is founded on commonality, e.g. a common policy or practice, the motion for class certification was denied.

In this case, docketed as Miranda v Citibank NA, Judge John F. Walter of the U.S. District Court for the Central District of California concluded there were numerous inconsistencies in the motion, which sought to include approximately 100 workers. The job duties of these employees was to locate and then pitch businesses whose employees could possibly seek to utilize/purchase Citibank services. The employees had the same companywide job description, which included recruiting new accounts.

The plaintiff had argued that the administrative exemption did not apply because she did not utilize discretion and independent judgment, which is often the downfall for employers to claim the administrative exemption. The plaintiff argued that all she (and the others) did was “a series of routinized tasks.”

Under well-established precedent, the court was required to conduct an individual specific study of what each employee did and whether the amount of exempt work performed by each one. This meant, especially, the court needed to determine how much discretion each employee used on the job.

The judge refused to accept blanket, umbrella like allegations that common issues predominated and found that the plaintiff had failed to show the existence of a common policy. To the contrary, the affidavits submitted by both sides demonstrated that the amount of time these employees spent off-site “varied dramatically from one individual to the next.” Thus, individual analysis of whether each of the one-hundred employees qualified for the outside sales exemption was also necessary.

The lesson for employers defending these cases is clear—attack the “commonality” contentions and argue that individual scrutiny is called for. If accepted, that defense argument dooms a class action.
 

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