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

A class of table games supervisors sued Harrah's, claiming they were non-exempt and entitled to overtime.  The casino defended by asserting that they were exempt under the administrative exemption.  This exemption remains (even after the August 2004 revisions to the FLSA regulations) the grayest and most difficult (for an employer) to prevail upon in an overtime claim.  Interestingly, in this case, the employer did prevail.

The supervisors performed a number of functions that were non-manual in nature, which were important to the casino's general business operations.   They regularly opened and closed the tables games, approved customer purchases of $10,000 or more in gaming chips, monitored the dealers and the customers and rated the customers' activities at the tables.  This last activity was important in determining whether and how much to "comp" customers, which are, beyond dispute, the lifeblood of a casino's operation.  They also participated in the hiring and development of dealers and their ratings of dealers impacted on whether dealers received raises and the amount of those raises.

Although the plaintiffs argued that their tasks were predominantly clerical in nature, the Court rejected that contention.  The Court stressed the nature of their work as it related to Harrah's customers and also highlighted the supervisors' role in developing, training and disciplining dealers as well as being involved in determining their compensation.  These were clearly administrative functions under the FLSA regulations, according to the Court.

The exercise of discretion and independent judgment is also essential to meeting the administrative test and this is often the Titanic-like iceberg that employer arguments for exemption always run smack into.  In this case, the employer argued that the supervisors displayed the use of discretion in the coaching, discipline and appraisal of dealers, especially on their performance, as well as deciding whether and when to issue comps to customers and when to open/close table games.  The plaintiffs did not directly dispute this, but contended that they performed these functions so infrequently as to render them only "occasional" duties.  The Court disagreed, holding that this utilization of independent judgment need not be exercised on a daily basis, but, rather, when the particular situation called for it.

This case provides valuable guidance for employers on the meaning of the administrative exemption.  Although still the most difficult and esoteric of the so called white collar exemptions to meet, there is still hope.   So, let it ride! 

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A federal judge has ruled that a class of information technology workers in California was exempt from overtime and has granted the employer summary judgment on the overtime claims.  That this occurred in California is fairly significant as that State has been a breeding ground for numerous class actions, many of them involving computer workers.  What is even more significant is that the federal judge had conditionally certified this class in January as a proper class, but now, upon a motion to de-certify the class, changed her mind.

The workers were database administrators, programmers and analysts, who claimed that their work was primarily "production work" and thus did not qualify for either the executive or administrative exemptions.  The court disagreed, finding that they were not "merely" doing production work but performed operations and functions important to the business operations of the employer, Electronic Data Systems.

The plaintiffs also asserted that they were closely supervised and did not possess or exercise the independent judgment necessary to classify the work as exempt.  The judge agreed that the workers were supervised, but decided that their work did require the utilization of considerable independent judgment and discretion.

I wonder why defendants did not argue that the workers fell under the computer exemption as well.  Even if they were salaried, rather than hourly, these employees, if they performed the requisite computer duties called for by the exemption test, would have nevertheless fit within the administrative and/or professional exemptions.  In any case, it is reassuring to see a federal court delve into the details of the actual job duties of a group of workers, stack those duties up against the (still hard to interpret) regulations governing exemptions and reach a correct conclusion. 

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Workers have filed a serious class action against the cell phone division of AT&T.  The workers, who received overtime pay at first, have claimed that the Company's supervisors changed the data base so employees could not enter more than 40 hours of working time in a week.  Thus, these employees were doing productive work for the Employer, but were working "off the clock."  Naturally, part of the alleged scheme, according to plaintiffs, was that the Company was not keeping accurate records of time worked.

These are dangerous case for an employer, because intentionally telling workers to work off the clock or making it impossible for them to enter additional working time, evidences a willfulness that could easily garner an extra (third year) tacked onto the two-year statute of limitations. It also would mean that any damages secured would, in all likelihood, be doubled (i.e. liquidated damages).

The plaintiffs estimate that 100 people would be involved.  Given that these employees probably earned considerably more than minimum wage, the resulting damages would be geometric

In the industrial world, there is often a great deal of pressure placed on managers (i.e. first level, middle managers) to stay within labor budgets and keep overtime and other personnel costs down.  Maybe this is what gives rise to doing something like this, but there really is no reason to engage in this kind of behavior, for any employer.  There is no defense to the action.  If the  evidence shows that intentional steps were taken to keep employees from accurately recording their actual working time, it becomes almost impossible to maneuver and find a viable defense.

Long story short-don't do it!

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Another financial services industry class action.  It seems like there is one every week.  The same themes predominate.  In this latest JP Morgan suit, the hedge fund accountants are claiming they were improperly classified.  They also claimed  they worked 5-6 days per week and worked many hours more than forty.

The fund accountants were responsible for maintaining hedge fund books and records, preparing financial statements, reviewing materials for audits and assembling reports and special projects.  Whether this work is exempt or not is difficult to tell but if the work at issue was highly standardized, routine work, that was performed according to procedures already in place, then the company could face a real problem.  As the salaries of these employees must be at a fairly "high" level, the damages could be quite significant.

This industry is rife for these lawsuits.  Simply because a person works with numbers, or does accounting-type work does not mean that he is exempt from overtime.  Naturally, if the accountants at issue are CPAs and use their CPA training/education in their work, then this case goes nowhere.

But, if they are more junior type accountants or "staff accountants" and do not possess CPA licenses, then watch out. 

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Food vendors at Fenway Park in Boston have filed a class action against Aramark Sports LLC, their employer, alleging that the company assessed service charges and then did not pay the service charges out to the employees.  The suit also claims improper payment of overtime.

The service charges are added on to anyone buying food at the ballpark.  The workers are paid their hourly wages, but are not given any of the service charge proceeds;  the suit charges that this is "unjust enrichment" to the Company.  The suit also alleges that the Company did not pay wages timely, did not properly calculate overtime and docked employees for breaks they did not take.

The suit was filed in state court, but the Company lawyers have sought to remove it to federal court, based on the theory that this suit is preempted by federal labor law, meaning that the suit is based on interpretations of labor contracts and therefore should not be in a court.  The Company also maintains that as the suit would seek to include more than 100 people, the Class Action Fairness Act of 2005 mandates that the action be heard in federal court.  This fairly new law provides that federal courts have jurisdiction over any class action that involves more than 100 workers and the alleged amount at issue exceeds $5,000,000 must be brought in federal court. 

There have been a number of these service charge/tip cases working their way through the courts.  The recent Starbucks case, that I reported on a few weeks ago, involved similar allegations.  Where a service charge assessed to customers is advertised by the Company (or restaurant) as a "gratuity" or where the company indicates that these service charges will be distributed to employees and they are not, that forms the basis for a lawsuit (and bad employee relations).

Change up or fast ball?  We'll see.

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A state court judge in California has ordered Starbucks to pay more than 105 million dollars in back wages to servers and other employees because the tip pool included managers, which is a clear-cut  violation of the law.

There are 120,000 people covered in the case.  The court also ordered injunctive relief, barring Starbucks from continuing to have management-type people taking part in the tip pool.  The court ruled that the supervisors were "agents" of the company and thus could not share in the tip pool.  This sends the clear message that even huge corporations are not above the law.  The Company plans to appeal.  More to follow.

The lesson---this all started from the complaint of a single employee, which then mushroomed into this gigantic debacle.  Every company, restaurant, trucking company, computer software company, whatever, must continually analyze its compensation practices, with an eye towards the special industry that the employer is in and any special rules (state or federal) that apply to that industry/business.

The ever present danger of a single employee starting a nationwide class action is the specter that should scare employers into such analyses. 

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Many times when an employee or group of employees files a FLSA class action, the plaintiffs will file a state action, making the same allegations, i.e. unpaid overtime, but under a state wage-hour statute.  There have been a host of cases exploring the issue of whether these parallel actions can be maintained simultaneously.  The tension is that a FLSA action is an opt-in action, meaning in order to join (whether for the good or bad) the employee must affirmatively opt in.  A "regular" class action, such as those brought under a parallel state statute, are opt out actions, meaning everyone similarly situated (as determined by the court) is in, unless they affirmatively opt out and decide not to be a part of the case.

I believe that dual maintenance of these actions is not proper and such dual actions undermine the validity of the Fair Labor Standards Act and the specific procedures Congress enacted for the enforcement of this federal law.  Many federal judges have agreed.  For example, in Woodard v FedEx Freight East, Inc., decided February 19, 2008, the federal judge in Pennsylvania agreed that a companion state class overtime action to a federal overtime action was the "antithesis" of the FLSA collective action and undermined the FLSA.

The court noted that Congressional intent was to limit the number of participants in such collective actions to people with similar interests.  The prosecution of the companion state action would frustrate that Congressional intent.  The court rejected the argument that dual maintenance was proper as it would facilitate judicial economy and convenience.  Such considerations, ruled the court, cannot override a Congressional mandate.

There have been other courts that have allowed dual suits to go forward in this context.  I believe those courts are dead wrong.  How, for example, would the procedure of identifying class participants be accomplished.  Under a FLSA opt-in process, there is a time limit set for people to opt in and if they do not, they are foreclosed from doing so.  Under the dual maintenance process, this would not matter as those that failed to opt in would, essentially, be in anyway unless they deliberately opted out.  This is too incongruous and contradictory to believe that it could be handled efficiently and it further highlights the contradictions inherent in allowing both actions to continue at once.

I believe this issue will need to be decided by federal appellate courts and/or the United States Supreme Court.  In the interim, the defendant/employer should always make a motion to dismiss the state law overtime claim, as such a motion stands a good chance of succeeding and then all the employer is fighting is federal FLSA claim, which is the more dangerous of the two, all things considered.

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A federal court in California declined to certify a class action under the FLSA, an action that was filed by financial sales representatives of US Bancorp in a case entitled Guess v US Bancorp.  The plaintiffs wanted a nationwide class action, as many of these suits hope for and seek.

In numerous postings, I have observed that the threshhold for obtaining class certification in a FLSA class action is relatively low.  There must be a common policy, plan or practice applicable to all potential, putative class members.  In this case, the employer argued that the job titles and, more importantly, the job duties of the proposed plaintiffs varied tremendously and thus they were not  "similarly situated" for class action purposes.  The court agreed.

The plaintiffs had contended they were misclassified as exempt, were really non-exempt and therefore overtime eligible.  The company argued that it employed 52,000 people nationwide and the job responsibilities differed widely from state to state and division to division.  The key was that the plaintiff failed to make a sufficient showing that the work duties of all other financial services representatives were substantially similar to his.

This gives heart to employers.  These class actions can be defeated if the proper evidence rebutting allegations of "similarity" can be adduced.  The plaintiffs in this case, however, have been given the opportunity to offer additional evidence and re-file the class action motion.  So, maybe, we will hear more of this.  Maybe not.  

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A group of San Francisco police officers has filed a class action, seeking compensation for time they allege was working time that occurred before their shifts.  They claim that they should be paid for putting on their uniforms and taking care of their equipment.  The class has been conditionally certified, meaning that the defendant City will have the ability to try to de-certify the class in the coming months.  It is problematic, however, if that endeavor will succeed.

In opposing the conditional certification, the City had also argued that a two-year, rather than three-year, statute of limitations should control but the Court refused to decide that issue at this juncture in the proceeding.  This is a crucial issue to the case, because if the employer's conduct is deemed "willful," the extra, third year is added on to the calculations, significantly increasing the potential liability.  At the end of the case, following trial, the issue of willfulness is decided.  That may be too long to wait, because by the time a trial commences and ends, thousands of more legal dollars have been expended in the defense.

The issue in these working time, preliminary/postliminary cases, always defaults back to the elements of employer compulsion, if any, and the connection between the preliminary activity and the main, primary job.  It is incumbent upon every employer to determine whether it forces employees to come in early to perform any activity even tenuously related to their job.  If so, the employer must make a determination regarding compensability.  Or, allow the employees to first clock in and then get dressed or attend to the other preliminary duties.

Just don't ignore the situation.

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When a FLSA class is certified, the defendants then have the opportunity to decertify the class at a later date.  The employer argues that the people who opted in to the class are dissimilar to those who started the suit and should be eliminated.  Thus, the employer hopes to fragment the class and have the court declare it a nullity.

Recently, Starbucks tried to decertify a class in an action brought by a group of assistant managers who claimed they were improperly denied overtime.  In this case, notice had been sent to 11,000 putative class members and 355 opted into the collective action.  The Company claimed the opt-ins were dissimilar and would require too much individualized examination, which is the antithesis of a "class" action proceeding.

The federal judge held that the individuals worked under the same job title and job description.  They all reported to the same supervision chain of command.  The Company had argued that the workers were employed under different immediate managers and worked at widely dispersed locations in thirty states.  The plaintiffs also had evidence that they were compelled to work off the clock.

Starbucks also argued that the small number of opt-ins showed that there was no common, overall policy relating to off-the-clock.  The court brushed that aside, finding that people have many reasons for not wanting to opt into an action.

Thus, employers will have two bites at the apple in defending a class action.  First, the employer argues, at the conditional certification stage, that no "class" of similarly situated people exists.  Second, the employer can then seek to decertify.  The best argument is dissimilarity, but some significant showing must be made in this regard or the class will stay as a whole, to the considerable financial detriment of the employer. 

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Amidst a wave of recent cases dealing with the exempt status of sales representatives, one case has shown what employers can do to eliminate liability for such workers as well as potential pitfalls that need to be avoided. In Barnick v. Wyeth, a judge dismissed a proposed class action against the Wyeth company, ruling that the a group of sales representative plaintiffs were exempt under the California statute they sought to bring suit under.

The judge granted Wyeth’s motion for summary judgment finding that the proposed plaintiff class—“representatives” of pharmaceutical products—were actually functioning as sales representatives, and therefore, were subject to the “outside salesperson” exemption.

This case teaches that the first step for employers to undertake when sued in a wage-hour class action is to examine whether it is a state or federal claim that is being brought against them. Employees may sue under either a state statute, the FLSA, or both and a particular state exemption or overtime law may likely have different, and often stricter, standards than the federal Fair Labor Standards Act (“FLSA”). The California wage and hour statute at issue in Wyeth did have tough requirements on employers—requiring overtime pay, meal breaks, and other benefits, highlighting that the FLSA and state laws are not always parallel, even though they can appear strikingly similar. In Wyeth, the federal judge refused to apply the FLSA’s definition of “sales” to California’s “outside salesperson” exemption, finding the definition to be “not persuasive” in his interpretation of the California statute.

In Wyeth, the salesperson at issue was hired on the basis of his sales experience, his job was referred to by his employer (and also himself) as a sales position, he received specialized “sales training” throughout his time there, and his pay was based in part on the sales he generated. According to the judge, all of these factors were significant in finding that the product “representative” was actually a functioning outside salesperson, and therefore exempt under the statute.

Thus, this claim was defeated in one fell swoop before it even got off the ground. A ruling of exemption for an entire class, or, more particularly, the named plaintiff(s) at a (hopefully) early stage of the litigation will erase the class action. The tough part is to know if there is an exemption defense to be raised and the manner and timing as to how to do it.

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In the continuation of a class action that has been going on for some time, Wal-Mart has recently been ordered by the court to pay a class of 125,304 employees roughly $62 million in liquidated damages for Walmart's violating state wage and break laws by refusing to allow employees to record their hours worked in the computerized pay system. This action had the effect of employees not being paid for all time they worked.  In addition, Wal-Mart prohibited employees from taking need rest breaks which they had been promised, thereby further denying employees rightfully earned wages. The jury determined that Wal-Mart saved $1,031,430.00 by denying employees the right to record their hours in the computerized pay system and $48,258,111.00 by prohibiting promised rest breaks. Taken together, the estimated savings totaled $49,289,541.00.

What this case highlights is that liquidated damages are a real possibility in a class action.  Such damages are not viewed under the law as a fine or penalty but are deemed to be more in the vein of “waiting time” damages.  The employees are awarded the liquidated damages as a remedy for the long delay in their receiving their justly deserved wages, at the time they were due. In this case, 98.81% of the 125,304 class employees were owed liquidated damages as determined by an expert. The dollar amount arrived at was $62,253,000.00. The number could have been much greater as the state law at issue required a $500.00 penalty for each violation of rest break violation.

This award is, to put it mildly, exorbitant.  The ostensible excessiveness of the liquidated damages portion of the award does not detract from the fundamental fact that such damages are an all too common component of a successful class action. The basic lesson to be taken from this is for employers to be ever cognizant that their failure to comply with all wage-hour laws and regulations may provide the fodder for the filing of a class action lawsuit and the imposition of large-dollar damage awards.

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Everyone knows (all too well) what constitutes “work,” but do we really? Naturally, if we are performing our primary job, we know we are working (and the employer must pay for that time). What about activities that are performed either before the start of the “bell” or following the formal end of a “shift.” Depending on what they are, these activities may or may not constitute compensable working time. Indeed, the focus of numerous class actions is an allegation that such preliminary and postliminary activities are “work.”

The issue of what constitutes compensable working time is often confusing because reasonable minds can differ as to whether the performance of “work” requires some degree (however small) of physical (or mental) effort or exertion. That may not, however, be the best prism through which an employer should consider the matter. The better view, and one recently adopted by the Third Circuit Court of Appeals, is whether the activity at issue is integral or indispensable to the performance of the “primary” duty of the employee. This analysis is often at play in so-called “donning and doffing” cases, such as in De Asencio v. Tyson Foods Inc.

These employees worked in a chicken processing plant of Tyson Foods. Before/after their shift and for their breaks and lunches, these employees had to put on (“don”) and take off (“duff”) safety and protective clothing. The workers filed a collective/class action under the Fair Labor Standards Act (“FLSA”), claiming that the time was compensable. The jury found against them, primarily because the trial judge had instructed the jury that for the activity to be deemed “work,” it had to involve some degree of exertion, rather than being an activity controlled/required by the employer or for the benefit of the employer. The workers appealed and the Third Circuit reversed.

The Third Circuit reasoned that the proper test was not an “exertion” test but rather whether the activity was linked so closely to the principal job performed that the principal job could not be performed if the preliminary/postliminary activity was not engaged in. In this case, the connection was clear—the chicken processors could not engage in their jobs if they did not wear the sanitary/protective clothing. Thus, whether or not they engaged in any physical exertion was of no consequence.

Other activities may well fall into the category of “indispensable” when compared to the main job function. Consider a cashier whom the employer commands to report ten minutes early to count the money in the cash register, before commencing their shift. Similarly, consider a nurse who comes in early, before the start of her shift, to receive information from the nurse finishing her shift on the status and needs of patients. Although these are not donning and doffing cases, the principle espoused in the Tyson Foods case nevertheless remains applicable. Without the early arrivals of these employees, they would not be able to perform their primary job. What is also crucial here, as in Tyson Foods, is the element of employer compulsion---the employer is ordering the early reporting, for its benefit, i.e. ensuring smooth continuation of operations.

The lesson for employers is to ascertain what, if any, preliminary/postliminary activities are engaged in by employees. If employees are doing any such activities, the degree of employer compulsion and, most importantly, the relation of that activity to the principal job must be examined to conclude if the time is compensable

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Pursuant to a decision by a federal court judge in Los Angeles, thousands of Ortho McNeil sales representatives will be given the opportunity to opt into a Fair Labor Standards Act class action, which will encompass the entire nation. The issue is whether they have been properly classified as exempt under the “outside salesman” exemption. There is not often litigation involving what kind of work constitutes outside sales, but the unique structure of the pharmaceutical industry has lent itself to these kinds of claims and these lawsuits are gaining a foothold. At stake is millions of dollars in unpaid overtime wages. Plaintiffs have also lodged similar class action suits against other pharmaceutical giants, such as Pfizer, Astra Zeneca and Johnson & Johnson, cases which are still pending.

In the Ortho-McNeil case, the judge granted what is referred to as a “conditional class certification” finding that the named plaintiff has established a modicum of similarity between himself and those seeking to join the suit. At a subsequent juncture in the case, the defendant will have another opportunity to show that there are sufficient dissimilarities such as to preclude continuing the certification of the class.

The sales representatives have, as their primary job function, the promotion of pharmaceutical products to health care providers. They allege that they are non-exempt because, technically, they do not sell anything. Their counsel claims that all they do is drop off brochures and information packages for doctors. If the representatives actually sold product, they would clearly be exempt as outside sales persons, but the allegation is that they do not sell anything.

A few days ago, a federal judge in New Jersey allowed an additional 211 sales representatives to join an action against Merck. Sales representatives have brought a similar lawsuit against Pfizer but the judge there has not yet rendered a decision on the scope of the class.
Once this ball starts rolling, it is hard for the “next” employer to stop it. It is plain that the pharmaceutical industry is under siege from these actions. If one class of plaintiffs succeeds in one action, whether in California, New Jersey or elsewhere, the ripples will be felt across the county. The best protection against this contingency obtaining is a proactive approach, designed to keenly scrutinize all employees classified as exempt, to ascertain if those designations actually pass muster under the revised FLSA regulations (and corresponding state laws).

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It is always possible for one person to sue their employer for wages or alleged back due overtime. What is far more pernicious and what is, regretfully, happening far too often over the last several years, is a so-called “class action.” In a class action, a group of employees, ranging anywhere from a handful to several thousand, sue their employer, sometimes in a class that encompasses the entire nation. In that scenario, the stakes are geometrically multiplied.

Importantly, FLSA collective actions differ in one dramatic way from class actions filed under other federal or state laws. In FLSA cases, the employee(s) must opt in, meaning that they must affirmatively sign a document evidencing that they wish to be a part of the lawsuit. In other class actions, the employee is presumed to be a part of the class and if he wishes to refrain from the litigation, he must opt out. The difference between the FLSA and other laws can often work to the employer’s advantage, especially if the employer believes that it has arguably broken the law, because of the statutory framework. There is a two-year statute of limitations (with limited exceptions) for FLSA overtime claims; an action for opt-in plaintiffs only commences when they sign a written consent to become a party and file it with the court.

The most crucial element is the necessity that the employees be deemed “similarly situated” for purposes of a collective action. Employees are “similarly situated” for purposes of FLSA collective wage suits if they are subject to a common policy, plan or design, that stretches across company departments or locations. If there is no commonality, there is no collectiveness and the action will be dismissed. On the other hand, “similarly situated” does not mean “identically situated.”

Part of the process by which a court will certify a class occurs in the so-called “notice stage.” In this preliminary stage, the trial court will make an initial decision as to whether notice of the action should be given to other potential class members and will make that decision based on any existing commonality (or lack thereof). Certification at this point is seen as a “conditional certification” and is based on a fairly lenient standard. This certification also begins the process of court-authorized notice.

The crucial, proactive strategy is to quickly and at an early stage of the litigation assess: 1) whether a common policy or practice exists which would likely militate a finding that a collective action is appropriate; and, 2) determine if the policy/practice at issue is illegal or questionable. If so, the prudent course is to change the offending practice or policy and then allow the course of the litigation to continue. The change in improper policy stops the clock from running, as it terminates any valid claims from that point forward. Remember---an individual’s own lawsuit does not start until he signs the consent and opts in. If the issue is an alleged misclassification of employees as exempt, a careful and objective internal audit of the positions at issue should ensue because these classification decisions are fact sensitive and are coupled with an overlay of highly nuanced federal regulations. In addition, classification decisions carry numerous implications besides whether the employees should receive overtime.

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