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 federal motor carrier exemption from overtime, 29 USC 213(b)(1), which applies to safety workers (e.g. drivers) engaged in interstate commerce, has been found to exempt Ray’s Trash Service, Inc. drivers from their right to overtime under the Fair Labor Standards Act even though the drivers do not cross state lines. They were held to nevertheless be in the stream of interstate commerce. The case is entitled Craft v. Rays, LLC which had been filed in the U.S. District Court for the Southern District of Indiana.

The judge held that the transportation of recyclables across state lines sufficed to bring the drivers into the “practical continuity” of interstate commerce. As the judge noted, “although plaintiffs never transported the recyclables across state lines, the court finds that their transportation was part of a practical continuity of movement across state lines.”

The drivers filed a class action in May 2008, alleging their pay was improperly docked, but the main thrust of their class action was a claim for overtime. The employees claimed that the interstate commerce ended when the movement of the goods was interrupted and because the employer did not have the “fixed and persisting intent” to ship the goods out of state. That intent is necessary to show that interstate commerce still continues despite the fact that the driver drives only within a State.

The judge rejected those arguments, holding that the company did not just have a speculative intention to ship out of state, as more than half of the recyclables were, in fact, sent to out-of-state recipients. The court held that the activities the drivers engaged in – included baling and consolidating recyclables, were no more than “repackaging,” which, under the law, did not interrupt the flow of interstate commerce.

One commentator has suggested that this ruling will have special relevance today, for FLSA motor carrier overtime cases, as all of us are living and working in a “green economy” in which numerous recyclables will be shipped out of state. From my perspective, it means that a lot of drivers will not be seeing or getting any green.
 

• Email This
• Print
• Comments
• Trackbacks

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

• Email This
• Print
• Comments
• Trackbacks

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

• Email This
• Print
• Comments
• Trackbacks

In Chen et al. v. Domino's Pizza Inc. et al., the U.S. District Court for the District of New Jersey dismissed Domino's Pizza Inc. from a proposed class action. The action alleged that the company, and a select number of New Jersey franchisees, failed to pay delivery drivers proper overtime wages in violation of the Fair Labor Standards Act and the New Jersey Wage and Hour Laws. 

Specifically, the plaintiffs asserted that as delivery drivers, they regularly worked 60 or more hours per week without any regular meal or break periods, and that they were required to clock in several hours after they began work. The complaint also alleged the plaintiffs were terminated after they complained about the alleged overtime denial.

The court found, however, that the plaintiffs failed to set forth sufficient facts to show an employment relationship existed between them and Domino’s, and only made a “conclusory statement that Domino's is an employer 'within the meaning of 29 U.S.C. § 203(d) and N.J. Stat. Ann. § 34:11-56a1(g).” In dismissing the company from the action, the court reasoned that the plaintiffs were employees of the franchisee and not the corporation. The plaintiffs also attempted to set forth a joint employer argument, but the court struck down this argument on the grounds that these allegations were not in the complaint. 

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere conclusory statement regarding the employer status of a company will be insufficient to sustain a claim in court. 

• Email This
• Print
• Comments
• Trackbacks

In a case entitled Clifton Sandifer et al. v. U.S. Steel Corp. a federal judge has cut out some claims from a work time class action suit, but has allowed one major allegation to remain in the case. That cause of action involves whether the employees should be paid for the time spent in walking from their locker room to their work stations.

The case is in federal court in Indiana; the plaintiffs filed suit in December 2007. Unlike many class actions I have commented upon, this was not a misclassification lawsuit, but rather a work time case. The plaintiffs sought compensation for time spent donning, doffing, walking, showering and laundering personal clothing in excess of the 40-hour workweek. The employees allege that these “work” activities consumed 9-10 hours per week.

The judge threw out the portions of the case pertaining to the donning and doffing of protective clothing, agreeing with US Steel that the compensability of these activities was addressed in the parties’ collective bargaining agreement. The court also found that showering was not required by the company and therefore was a postliminary (i.e. after work) activity for which no compensation was required.

Similarly, even though instructions were provided on how to launder clothing worn under work gear, transporting and laundering clothing was not required by the Company and thus it was not compensable. The judge kept the walking to work station claim, rejecting the company argument that these were non-compensable preliminary and postliminary work. The judge also rejected the de minimis doctrine argument, finding that walking times varied widely throughout the plant.

Judge Miller also did not accept the argument that these claims were preempted under the National Labor Relations Act as they ostensibly involved interpretations of the collective bargaining agreement, rather than statutory violations of the Fair Labor Standards Act.
 

• Email This
• Print
• Comments
• Trackbacks

In Bailey et al. v. Border Foods Inc., the U.S. District Court for the District of Minnesota dismissed with prejudice a proposed collective and class action against a Pizza Hut franchisee after finding that the lead plaintiffs failed to adequately plead that their wages fell below the required minimum wage. The plaintiffs, former delivery drivers for Pizza Hut, accused the franchise operator of violating the federal Fair Labor Standards Act and Minnesota Fair Labor Standards Act by failing to pay minimum wages, and making unlawful wage deductions and wrongfully retaining employee gratuities in violation of the state law.

The Court also dismissed without prejudice the state claims against the franchisees, noting that once the federal claims were dismissed, he no longer had jurisdiction over the case. In doing so, he declined to exercise supplemental jurisdiction over the state claims.

In making its decision, the Court stated “[i]n this case, plaintiffs have failed to identify their hourly pay rates, the amount of their per-delivery reimbursements, the amounts generally expended in delivering pizzas, or any facts that would permit the court to infer that plaintiffs actually received less than minimum wage.”   Specifically, the complaint merely alleged that the plaintiffs were “systematically deprived” of minimum wage. Further, on the plaintiff’s consent forms, they wrote they did not “believe” they were paid enough to cover expenses, which indicated that they were speculating as to whether their pay actually fell below minimum wage.

In deciding to dismiss the federal claims with prejudice, the Court noted that the plaintiffs were given fair notice of their pleading deficiencies but did not request leave to replead.

This decision is a win for employers. Indeed, it shows would-be plaintiffs that a mere “belief” of an FLSA violation will not be sufficient to sustain a claim in court. 

• Email This
• Print
• Comments
• Trackbacks

In an unusual move, Rite Aid Corp. is seeking dismissal of an overtime class action filed by a former drugstore employee, asserting it is identical to another class action that had been previously filed and is still working its way through the courts. The case is docketed as Georgianna Gordon v. Rite Aid Corp.

The Company urges that, under federal law, the action filed first takes precedence over this action, which was recently filed in the U.S. Southern District of New York. The earlier action, entitled Indergit v. Rite Aid Corp. and Rite Aid of New York Inc. was filed some ten months before this current action.

As the Indergit action was filed before this case, and as there is considerable identity of the issues and parties, the Company urges that the Court apply the first-filed ruled. This seems somewhat self-evident, as the issues presented in this case are being actively litigated in Indergit. If the federal judge does not dismiss the action, the Company will then seek a stay pending resolution of the earlier case.

Ms. Gordon worked as an Assistant Manager and Manager at Rite Aid from July 2007-June 2009. She alleges that she primarily did non-exempt work, such as stocking shelves. She admits that she opened/closed the store and responded to and resolved customer complaints, but denies that she ever hired or scheduled employees, which would clearly be exempt work. She claims she worked between 50-60 hours per week and earned a salary of approximately $800 per week.

She also alleges that she did not exercise independent judgment. This is an odd allegation, especially under the Fair Labor Standards Act, as the “discretion and independent judgment” component of that exemption test has been deleted under the revised regulations of August 2004.

This is not the first case of overtime “flu” to hit this Company. In July 2009, a class of Assistant Managers in Ohio sued Rite Aid on a misclassification theory. To further complicate matters, similar misclassification lawsuits have been lodged against Rite Aid competitors CVS Caremark Corp. and Walgreen Co.

These Assistant Manager cases are extremely tough to defend, because it is difficult to prove that management remains the employees’ “primary duty” even when they are working the cash register, stocking shelves or waiting on customers. I believe, and have advised numerous clients, the best and most prudent thing to do is to treat these folks as non-exempt from the commencement of their employment, build the overtime into their compensation, assuming they have to work 48-50 hours every week and then never worry about overtime lawsuits. Never worry about overtime lawsuits. Sorry—I’m being redundant.

 

• Email This
• Print
• Comments
• Trackbacks

In a ground-breaking decision, the Ninth Circuit Court of Appeals has set a path down for defendant-employers in Fair Labor Standards Act (“FLSA”) class actions that is breathtaking in its simplicity and conclusive effect. In Vinole v. Countrywide Home Loans, the Court ruled that an employer need not wait until the close of discovery (which is very expensive and time-consuming) to file a motion seeking to deny class certification before the plaintiff moves to have the class certified.

The plaintiffs, External Home Loan Consultants, alleged that they had been misclassified as exempt outside sales employees, resulting in an illegal failure to pay them overtime. The Company, relying on California Wage Orders and the language in the FLSA regulations, had in fact classified these workers as exempt as outside sales people.

Before the pretrial motion deadline and discovery deadlines ensued, the Company filed a motion to deny class certification under Federal Rule of Civil Procedure 23. The plaintiffs opposed the motion, claiming that it was premature because they had not yet filed their class certification motion and further contending that class certification was appropriate, based on the evidence that they had adduced.

In affirming the lower federal court’s denial of class certification, the Ninth Circuit held that too much individual analysis of what the employees did, e.g. outside sales work or lack thereof, was required. As I have written about many times, individuality is the death knell of a class action, as plaintiffs must prove commonality, i.e. a common policy, plan or practice applicable to the entire class.

This can be the start of a trend that might push back on the multiplicity and veritable explosion of class actions. In giving employers a weapon to use offensively, the Ninth Circuit (usually, a fairly liberal, pro-employee Circuit) has signaled that, as Bob Dylan wrote four decades ago, the “times, they are a changin’”
 

• Email This
• Print
• Comments
• Trackbacks

In Albrecht et al. v. Wackenhut Corp., the U.S. District Court for the Western District of New York has dismissed a lawsuit in which approximately 115 security guards accused their employer, Wackenhut Corp., of violating the Fair Labor Standards Act and New York State Labor Law by not paying them for time spent arming up, checking through security and arming down.

The plaintiffs alleged that that these duties took roughly 15 minutes per day and that they should be compensated for that time. However, the Court found that all three of the processes took less than a minute each to complete. On that basis, the Court reasoned that these preliminary and postliminary activities were not subject to compensation under the Fair Labor Standards Act as they were de minimis in nature. 

Additionally, Wackenhut had implemented a daily briefing for all guards at the Ginna facility, and, consequently, the guards had to report for duty 15 minutes before the start of their scheduled shifts. The parties agreed that they were being compensated for that time, but the plaintiffs claimed the briefings were not included in overtime calculations. The Court rejected this contention because it was not included in the complaint nor mentioned in the depositions. Moreover, the Court pointed out that Wackenhut's policy called for the briefing time to be compensated at the guards’ normal base rate for time under 40 hours in a week and at the guards’ overtime rate for time over 40 hours in a week.

Accordingly, the court dismissed the case. The point is that the de minimis doctrine covers only fleeting, inconsequential periods of time. Although the employer in this case succeeded in having the case dismissed, if the time had actually been shown to be 10-15 minutes per day, or, roughly, an hour per week, that would not have been deemed inconsequential and the class action would have been viable. Repetitive duties, done every day, will not be de minimis if the aggregate time, on a weekly basis, exceeds a small amount of time.

• Email This
• Print
• Comments
• Trackbacks

A few weeks ago, I posted about a procedure that could be used to defeat FLSA collective actions before they got started. That was the Offer of Judgment procedure under Federal Rule of Civil Procedure 68. Although there were cases previously approving that dismissal process, there seems to be the beginning of a tide.  Only a few days ago, a federal judge has dismissed a class action against United Mortgage and Loan Investment LLC, on the basis that the court lacked subject matter jurisdiction because the defendants had offered the plaintiffs the maximum they could recover, which they turned down.  That simple scenario is the essence of the Offer of Judgment process.

In this case, docketed as Simmons v. United Mortgage and Loan Investment, LLC et al., the U.S. District Court for the Western District of North Carolina dismissed the case and denied the plaintiff’s motion for conditional collective action certification.  This was because the “defendants’ May 16, 2008, offer of judgment mooted the action, depriving this court of subject matter jurisdiction.”

As the plaintiffs rejected the offer, they will receive nothing. This really points out the dangers for continuing to litigate when a plaintiff has already been offered everything they could conceivably win. In my view, this represents a (hopefully) growing trend of the federal courts showing that when a plaintiff refuses to resolve a case at an early stage in the litigation process, there are consequences that flow, i.e. dismissal of the case and not receiving the originally offered money (or any portion of it).

Significantly, the May 2008 Offer gave the plaintiffs all they could have won at trial, i.e., back pay, liquidated damages, attorneys’ fees and costs. When they did not take the offer, the result was that the active case or controversy, which is what is needed for a court to maintain jurisdiction, was dissolved.

The Judge agreed there were concerns relating to a defendant-employer's ability to “pick off” FLSA plaintiffs and moot a collective action before it got started.  Rule 68 does exist for a reason, however, and it is there to be used, in the appropriate circumstances.  In this regard, under the FLSA’s opt-in mechanism, only those individuals who affirmatively choose to join a particular suit are actually in it, so an individual who has tried to opt in to a collective action that is mooted through an Offer of Judgment may nevertheless pursue his own case.

I believe this is a very viable mechanism for an employer trying to stop FLSA cases at an early stage, before legal fees mount up and before other putative plaintiffs join in and, especially, before a class gets certified. The key lies in melding proactive action with making the Rule 68 Offer. If the employer is doing something wrong (e.g. misclassification of employees as exempt), it must fix the problem before it makes the Offer of Judgment so that the one active case gets dismissed and even if others then come forward, there will be nothing for them to glom on to, as the problem has been solved and the danger eradicated..
 

• Email This
• Print
• Comments
• Trackbacks

I have often written of the dangers from class actions based on misclassification theories, e.g. administrative exemption. There are working time actions, alleging illegal policies of making employees work off-the-clock as well. In a case entitled Clara Seamands et al. v. Sears Holdings Corp. et. al employees of Sears have filed a class action in federal court in Kansas alleging improper payment of commissions and an outright failure to pay commissions. The employees claim that Sears denied them proper pay and never told them of planned/proposed reductions in their commission arrangements.

In instances in which the workers alleged that their sales records did not match up with their commission compensation, the Company failed to investigate and then did not resolve the situations. Rather, the Company allowed the issues to fester. The plaintiffs allege this was willful, not done through mere negligence.

The lawyer for the putative class stated that “Sears has a systemic problem in the way it processes sales and pays commission.” Clearly these are moneys that should have been paid to employees, and instead Sears retained them.”

There are probably 1,000 employees that could be encompassed by the class. The lawyer believed the number could rise a lot higher. The complaint alleges violations of the employees’ contracts and many state laws. As damages, the plaintiffs seek back commissions and (of course) attorneys’ fees.

This case teaches that commission policies may and should be set by the employer, but they should be in writing and be disseminated to all affected employees. The employees should sign off on the commission policies and any substantive revisions or changes to them. Naturally, the employer must adhere to its own commission policy and pay commissions when they vest. When commissions vest can be open to interpretation, but once commission “vests,” it becomes earned wages and then can form the basis of a Department of Labor complaint, or, as herein, a (potentially) nationwide class action.

 

• Email This
• Print
• Comments
• Trackbacks

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.
 

• Email This
• Print
• Comments
• Trackbacks

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.
 

• Email This
• Print
• Comments
• Trackbacks

This week, Judge Ronald Guzman of the U.S. District Court for the Northern District of Illinois granted class certification in Ervin et al. v. OS Restaurant Services, Inc., a Fair Labor Standards Act suit accusing Outback Steakhouse of failing to pay minimum wage to employees at one of its locations.  

The plaintiffs, former employees of an Outback Steakhouse, filed the suit in February 2008. They all worked as bartenders, servers and other tipped employees and were paid less than minimum wage under the tip-credit provision of state and federal minimum wage law. However, the suit claims that tipped employees were regularly required to do work that did not involve being paid tips, yet they continued to be paid their sub-minimum wage salary.

Judge Guzman decided to certify the class based on the magistrate judge’s conclusion that the plaintiffs had made a modest factual showing for all of their claims under the FLSA sufficient for class certification. However, the Judge denied certification for the plaintiff’s state law claim on the grounds that the state law opt-out component did not comport with the FLSA’s opt-in component. Indeed, under the rules governing class claims, eligible class members in the state law action would be included in the suit unless they opt out, while no one can become a class member in an FLSA suit unless he opts in.

Given that incompatibility, the magistrate judge recommended, and Judge Guzman agreed, that only the FLSA class should be certified.

The lesson that employers should take away from this decision is to be more aware of the tasks delegated to employees who are paid less than minimum wage pursuant to the tip-credit provision of state and federal minimum wage law.

• Email This
• Print
• Comments
• Trackbacks

In the 1960’s, a movie came out entitled “The Russians Are Coming! The Russians Are Coming!” It was about a Russian invasion of the United States. Well, a different kind of Russian invasion has hit our shores, but it takes the form of a class wage-hour action filed by Russian performers in a Las Vegas ice-skating revue, the “Moscow Ice Circus.” They allege they have not been paid for more than 225 performances, that they were docked pay because they gained weight and were not paid overtime.

Twelve former performers filed the lawsuit in the U.S. District Court of Nevada, alleging that Sergey Ryshkoff’s Moscow Ice Circus LLC and Ice Show Corporation violated the Fair Labor Standards Act. The case is entitled Abrosimov v. Sergey Ryshkoff’s Moscow Ice Circus, LLC.

The Circus is a live show that includes jugglers, acrobats, figure skaters, clowns and gymnasts performing acrobatics on an ice skating rink. The plaintiffs claimed they were hired to perform acrobatics and ice-skating routines for the Moscow Ice Circus show at the Riviera Hotel and Casino in Las Vegas, but allege that their employer refused or neglected to pay them for a staggering 225 performances.

They also allege that they were not compensated for the marketing they did for the show on the Las Vegas Strip. When they engaged in these activities, they had to don costumes and present mini performances while skating and handing out fliers to pedestrians. They also allege that their compensation was subject to deductions for tardiness and weight gain.

This case illustrates the different nuances and forms that a class action can take. Although this fact pattern seems, on one level, humorous, it may not turn out to be so funny for Sergey when he has to pay the back wages.
 

• Email This
• Print
• Comments
• Trackbacks

A FLSA litigation can drag on for an interminable time, drain legal and company resources and ultimately end up in settlement discussions where the biggest issue for negotiations are the plaintiffs’ attorneys legal fees. There is an effective, tried and true manner to bring a FLSA collective action to a dispositive and less costly favorable resolution for a defendant. That is the Offer of Judgment under Federal Rule of Civil Procedure 68.
Under Rule 68, after some time has elapsed in the case, the employer can offer a full remedy, which in a FLSA case means computing wages allegedly owed back three years from the date the plaintiff(s) entered the case and then doubling that amount to account for liquidated damages. The plaintiffs have ten calendar days to accept the offer. If he/they do not, the employer can file a motion under Federal Rule of Civil Procedure 12(b)(1) to dismiss the case on mootness grounds.
Thus, the employer can use this procedure offensively to bring an end to the case. Courts in a number of federal circuits have dismissed cases on these grounds. In a variation on the theme, in Smith v. T-Mobile USA Inc., the Ninth Circuit Court of Appeals held that two former sales employees, who had accepted Offers of Judgment, lacked standing to appeal a lower federal court’s decision to deny class certification to all Company hourly employees because they failed to retain a personal stake in the litigation and their cases were moot.
I believe this is a viable and cost effective manner for a defendant-employer to resolve a FLSA case. There may yet be a parallel state case filed, but the state law may be more favorable to the employer, such as not having liquidated damages or an “extra” third year on the statute of limitations. It also puts pressure on a plaintiff to make a choice and take a gamble---should they accept the offer or expose their case to the chance of complete dismissal. The proper answer for the plaintiff depends on whether he and his counsel have made an accurate computation of his damages.
 

• Email This
• Print
• Comments
• Trackbacks

In a case entitled Sexton v. Franklin First Financial, Ltd, a federal judge has granted conditional certification to a FLSA collective action alleging Franklin First Financial Ltd. failed to pay overtime to a class of loan officers. This is the latest (and surely not the last) of a host of class actions filed under federal and state wage-hour laws, targeted at securing overtime for employees allegedly misclassified as exempt.

The suit emanated from the Company’s West Hempstead, New York office. The primary basis of the suit is the overtime-exemption-misclassification issue. The employees involved in the suit sell residential mortgage loans. In an interesting twist, the Company allegedly paid loan officers on a commission-basis and were not paid unless they made a sale. The allegations are that these commissions did not meet the required minimum of at least $455 per week. This also raises the issue of whether the employees were paid a “salary,” which is an essential component of fitting within the exemption.

The federal judge determined that there was sufficient similarity between the single named plaintiff and others who might opt into the lawsuit. Significantly, in these early steps of class certification, the plaintiff must only make a “modest” showing of pleadings and evidence, a showing that practiced plaintiff-side attorneys are all too familiar with. If evidence of a common policy or practice is shown, the class receives conditional certification, followed by additional discovery and motions and possibly mediation.

The estimate is that there are hundreds of potential loan officers, scattered throughout several branches on Long Island.. Although the court has initially excluded outside loan officers from the suit, if subsequent discovery shows that they are also similarly situated to the inside loan officers, they will be added as well.

If this does not settle the case, or the employer wants to roll the dice on the exemption issue, then a trial ultimately ensues. Before that stage, however, a very careful analysis has to be done of whether there is a viable exemption defense. Ideally, this should be done way before a lawsuit or possible lawsuit is even on the horizon. The stakes in these cases are much too high to wait until a lawsuit explodes and thrusts the entire exemption issue into the forefront. Internal auditing and scrutiny of all salaried positions to make reasoned determinations of exempt status is what is needed, sooner, not later.
 

• Email This
• Print
• Comments
• Trackbacks

In a proposed overtime class action against mortgage lender Ocwen Loan Servicing LLC, the United States District Court for the Southern District of Florida denied the plaintiffs' request to conditionally certify a lawsuit as a collective action and notify potential class members. The court denied the request on the grounds that the plaintiffs failed to sufficiently show that other similarly situated employees exist.

The suit accused the residential mortgage loan provider of failing to pay its inside sales representatives overtime wages in violation of the federal Fair Labor Standards Act.

According to plaintiffs, the case should have been certified because three opt-in plaintiffs had demonstrated that their job requirements were similar and that they were subject to similar pay provisions and they had indicated that other individuals might also want to opt-in on the action.

The court disagreed with this reasoning. Indeed, the court found that the affidavits filed by two of the opt-in plaintiffs were too vague and too speculative to show that other similarly situated employees actually existed. The affidavits were vague in that no individuals were named and their statements were noncommittal. The court found this to be insufficient. Judge Zloch, who rendered the decision, stated “it gives the court nothing to make a finding upon but the fact that plaintiffs are aware of others. Who these others are, whether they are similarly situated and whether they are actually interested in joining in this suit is all left to guess-work.” If other similarly situated employees did exist but were too scared to come forward, the plaintiffs' counsel could have ensured their names were not disclosed through “a myriad of different devices,” such as filing under seal or asking for a protective order, Judge Zloch said.

The decision reflects the court's aggravation with these cases that are brought so frequently as attempted class actions without evidence, or indication from other employees, that they have also suffered they same. 

• Email This
• Print
• Comments
• Trackbacks

A federal judge in California has certified five sub-classes of drivers alleging FedEx Corp. bilked them of pay for missed meal periods, off-the-clock work and working split shifts. The Judge found that common issues, a requirement of class-action certification, predominated in the five sub-classes of workers.

Three of the sub-classes relate to meal periods. The first sub-class consists of workers not paid for meal periods lasting less than 30 minutes. The second sub-class consists of workers alleging they were not’t paid for missed or untimely meal periods between April 14, 2006, and March 25, 2007. The third meal-period sub-class, meanwhile, consists of drivers alleging FedEx did not’t pay them for meal breaks taken after four and a half hours of work but before five and a half hours of work between March 6, 2007, and the present. The fourth sub-class approved by the judge alleges they never received the extra hour of pay that was due to them for working a split shift. The final approved sub-class consists of workers claiming they performed approved preliminary and postliminary work (i.e. before and after the shift) without pay.

The FedEx drivers’ meal claims relate to a California statute currently in dispute. The law requires employers who fail to provide a meal or rest period to pay the worker for an additional hour of work at their regular rate of pay. California’s wage law also requires employers who fail to provide meal or rest breaks in accordance with certain procedures – such as giving employees a 30-minute meal period for every five hours worked – also must compensate workers for their time.

Two California courts of appeal have ruled that “provide” only means employers must make meal breaks available and not ensure workers take them. However, the California Supreme Court has recently granted review of the two cases.

The point is that one large class can be broken down into component parts. In such an instance, workers are deemed similarly situated to other workers within the overall class, but need be similar to all of the workers in the class.
 

• Email This
• Print
• Comments
• Trackbacks

As I have written, employees need not file class actions in a court in order to band together to seek overtime monies. Arbitration is a distinct possibility. In the recent case of Franco v Athens Disposal Company, Inc., a California appeals court has held that a trial court erred when it held that a class-action waiver in a company’s arbitration agreement was enforceable. The Company had initially defended by asserting that the employee, a truck driver, was exempt from overtime under the motor carrier exemption, but the Court ruled that this was also for the arbitrator to decide.

The trial court also misinterpreted a decision of the California Supreme Court finding that a class-arbitration waiver was unconscionable when prohibition of relief for all of the putative class members would undermine vindication of the employees’ statutory rights to overtime, which they could not legally waive. The trial court had held that this holding did not apply to a driver’s state-law claims against his employer for not providing meal and rest periods or pay additional compensation for missed meal/rest periods.

The employer had contended the meal and rest period “rights” were subject to waiver. The appeals court held that, as state law required employers to comply with provisions of state Wage Orders, which mandated meal and rest breaks and since the law stated that no provision of law could be set aside by a private agreement, the statutory right to meal and rest periods could not be waived.

In sum, the court ruled that the class-arbitration waiver in the company’s arbitration agreement was unenforceable, where the driver (and other employees) alleged violations of California law regarding meal and rest periods. The court believed that class arbitration would be a more effective way of vindicating the employees’ statutory rights than individual arbitrations, given that the size of the potential individual recovery was small. Finally, the court held that a possible award of attorneys’ fees would not provide a sufficient incentive for an attorney to take an individual case, especially since the allegation was that all hourly employees were subject to the same unlawful conduct.

The lesson is that simply because an employer builds into arbitration agreements (whether found in employee handbooks or freestanding) a waiver of wage-hour (or other) class actions, there is a good chance they will be found unenforceable.
 

• Email This
• Print
• Comments
• Trackbacks

Not every allegation of FLSA violation or class action must weave its way through the courts for a resolution. Union members who feel aggrieved may challenge alleged improper pay practices through arbitration. In these settings, the Arbitrator will apply and incorporate federal laws, such as the FLSA, in order to render a decision on the alleged labor contract violations.

That is exactly what just happened in National Council of EEOC Locals No 216, AFGE and Equal Employment Opportunity Commission, Case No. 0761012-00226, in which Arbitrator Steven Wolf ruled that the agency violated the FLSA rules on payment of overtime. The Arbitrator also found that the violations were willful and also that the grievants were entitle to liquidated (i.e. double) damages. These last two findings represent a direct application of FLSA statutory remedies to the arbitration forum.

What prompted this case was the agency’s reclassification of many individuals to exempt status, following the recommendations of an outside consultant. When these employees then worked overtime, the agency did not give them the choice between cash overtime and compensatory time, as it was obligated to do.

Another issue was the ostensible failure of the employees to work overtime that was “authorized.” The Arbitrator resolved this by applying the long-established maxim that work that is “suffered or permitted” to be done is work that must then be compensated, whether or not the employees had formalized permission. That is what happened here.

There are many ways for a plaintiff or group of plaintiffs to come after an employer and it need not be in a court proceeding. These working time cases are particularly perilous. They become more dangerous when there is a triggering event, such as a reclassification of employees from non-exempt to exempt so people that used to receive overtime are, all of a sudden, not receiving it.

 

• Email This
• Print
• Comments
• Trackbacks

Most of my postings about class actions have concerned white collar, service or retail sales occupations and whether employees fit within certain FLSA exemptions. A few have concerned working time (e.g. donning and doffing) in factories. None has concerned so exotic an occupation as loggers, or, as the TV show likes to label them, “Ax Men.”

A FLSA class action lawsuit, entitled Maudlin v. Johnny Kynard Logging, Inc., has been filed by a logger who claims he always worked from about 5AM-6PM, without being paid the required premium rate (i.e. time and one-half) for overtime hours. In an important victory for him and other putative plaintiffs, his case has been granted collective action certification, which means that more plaintiffs will throw their axes in with this gentleman and seek overtime.

Judge Kristi K. DuBose of the U.S. District Court for the Southern District of Alabama granted the plaintiff’s motion for class certification, as well as an Order facilitating notice to other loggers who may wish to join the suit. Evidently, according to the plaintiff’s attorney, there have been a number of suits filed against logging companies and this industry is rife for other overtime suits.

The attorney asserted that failing to pay loggers proper overtime is “somewhat of a common practice” among logging companies. For example, in this case, it is claimed that the employees were all paid on a flat per-day or per-week basis that did not account for the actual number of hours the employees worked, with an appropriate overtime calculation then made. Such a calculation would be based on the total remuneration received (i.e. adding all of the day rate monies) divided by the total hours worked in the week to arrive at a regular rate. Half-time overtime would then computed on that week’s regular rate.

The named plaintiff and the opt-in plaintiffs in this action worked as loggers cutting, gathering and delivering timber. The lesson here is that no occupation, business or industry is immune from these kinds of overtime suits, albeit based on different theories.

If a tree falls in the forest and no one is there, does it make a sound? If the tree is felled by a logger not being paid proper overtime, it will indeed---a big one.
 

• Email This
• Print
• Comments
• Trackbacks

Sales representatives of Novartis Pharmaceutical Corporation who brought a class action have been determined to be exempt employees under the Fair Labor Standards Act, thus bringing an abrupt end (for the plaintiffs) to the litigation. Federal district court Judge Paul Crotty, sitting in the Southern District of New York, has ruled that these employees were “outside salespersons” and exempt under that provision. Then (although it did not have to reach the issue), the court also found that they were “administrative” employees, also exempt from overtime requirements.

The representatives argued that they did not make “sales” as that term is defined under the law. Note that there is a very technical, precise meaning given to the term “sales.” The judge rejected that argument, finding that they made sales by “obtaining commitments” to prescribe Company drugs from the physicians that they solicited. The judge noted that the workers were credited with sales and were compensated by incentive payments. Thus, under the FLSA (and New York State law), they were exempt outside salespersons.

The representatives contended they were not administrative employees because they lacked the requisite discretion and independent judgment. The judge rejected that as well, finding that their work directly related to general business operations and, in contrast to the contention, that the representatives did utilize discretion and independent judgment, with regard to matters of significance, the FLSA requirement.

There are 500 potential plaintiffs. They have vowed to appeal.

This is a tremendous victory for this employer and for employers in general. It shows that the administrative exemption can be successfully argued, as applicable to a class of workers. It demonstrates that perhaps the courts are viewing the discretion/independent judgment component of the exemption test with some real-world flexibility. That is precisely the necessary prescription.
 

• Email This
• Print
• Comments
• Trackbacks

A former Assistant Manager at a Starbucks has filed a collective action under the Fair Labor Standards Act (“FLSA”). The suit is for overtime on behalf of himself and a class of Assistant Managers who worked more than 40 hours per week but were not paid overtime compensation. The plaintiffs assert that they were compelled to perform non-exempt duties a disproportionate amount of their work day and this amount of rank-and-file work destroyed the exemption.

Starbucks is no stranger to FLSA class actions by Assistant Managers. In March 2008, the Company settled with 356 Store Managers in several States, who accused the company of compelling them to work off the clock. This was ironic because, as far back as 2002, Starbucks had changed the compensation of Assistant Managers to an hourly basis, eliminating the exemption controversy, but then violated the law in another way. Due to the tightness of labor budgets, the Managers encouraged/pressured the Assistant Managers to work off the clock. In other words, the Company traded one headache (i.e. the exemption dilemma) for another (i.e. uncompensated off the clock work).

Another case, which settled in August 2008, also was based on a theory that too much non-exempt work was performed, undermining the exemption.

The Assistant Manager classification has always been problematic from an FLSA exemption perspective. These employees must be endowed with some actual/real authority relating to hiring and firing as well as other employee terms and condition or the employer will be an easy target for a class action suit. Moreover, they must supervise and manage the majority of the time. This becomes a fine line that often gets crossed in the hectic world of store operations, where the job has to get done.

Additionally, and this is the lesson learned from this case, in industries that historically utilize tight labor budgets (e.g. fast food franchises), the pressure to stay within budget must be resisted if the “price” paid is Assistant Managers (or other employees) are forced to work off-the-clock. This will only come back around and leave a bitter taste.
 

• Email This
• Print
• Comments
• Trackbacks

Continue Reading...

• Email This
• Print
• Comments
• Trackbacks

I have often observed that when a class is certified in a FLSA action, it is very difficult to cut that class down, or, in legalese, to de-certify that class. In a recent FLSA collective action involving CVS pharmacy technicians, entitled King v. CVS Caremark Corp, Dkt No. 1:07-cv-21824-dig, brought in federal court in Florida, that is precisely what has occurred. Now, only two plaintiffs remain in a case in which they alleged that CVS Caremark Corp. did not pay them for overtime and meal breaks that they could not take due to the demands of their job. The federal court has granted summary judgment for the employer.

The was filed in July 2007 by pharmacy technicians who alleged CVS failed to compensate them for overtime, the lunch breaks, and preliminary and postliminary duties, that is, job functions which were performed before they began their primary work functions and functions allegedly performed after the “normal” workday ended. The plaintiffs sought not only compensatory damages, but also interest, liquidated damages and their attorney fees. In December 2007, the class was granted conditional certification.

In order to sustain a collective action, the employees must be subject to a common policy, practice or design under which they work. The technicians contended that their action was proper because there was a countrywide timekeeping and payroll system that applied to all of them. They contended that the timekeeping system was fundamentally flawed because it did not allow employees to accurately record their start and end times, which in turn acted to deprive them of overtime compensation. The federal judge disagreed. He concluded that the class must be decertified because there was no uniform timekeeping system and that individual managers used various and different methods for keeping track of employee time.

The judge found a number of variables that affected the processing of time records by store managers in the far-flung CVS “empire” and noted that “a trier of fact would need to engage in an individual assessment of the procedures instituted at each store and the particular allegations of what occurred after each plaintiff accessed the [payroll] system.” Thus, the collective action was dismissed, although the plaintiffs who had sought to join the action by opting in could purse individual claims.

This is a rarity. Usually, once a class is certified, it stays certified. De-certification is a difficult goal to achieve, but, as here, if proof can be adduced that there are individual differences in the personnel actions or policies that affect the putative class members, an employer can succeed. Hard to do, yes. Impossible. No! The employer here should be given significant credit for achieving what is a difficult task, but when the facts do not bear out a pattern or practice de-certification is what should happen.
 

• Email This
• Print
• Comments
• Trackbacks

In a recent case entitled Gonzalez v. Tanimura & Antle Inc., a federal court in Arizona ruled that farm workers who waited in their employer’s parking lot until the ice melted from the crops they were going to pick were “engaged to be waiting,” rather than “waiting to be engaged” and therefore entitled to compensation for the time they spent waiting.

The court ruled that the named plaintiff and fifty-five other should have been paid for the time they spent waiting in the parking lot. The fact that they could buy coffee, or play cards or even play soccer while they waited for the crops to de-ice did not turn the time into non-compensable time. The judge stated that these “personal activities” were more like time-filling activities, rather than personal pursuits that the workers would engage in if they had not gone to the parking lot to commence their work for the day.

The workers picked lettuce and broccoli. The majority of them lived in Mexico and walked about an hour to arrive at the parking lot. From that meeting place, they rode on company-provided buses to the fields, some 10-40 miles away. Every day during the harvest season (November-March), the workers were told when to report to the parking lot on the next day. If frost was predicted, the workers were told to report later, as the harvest could not commence until the ice melted. On occasion, ice was found on the crops after the workers got to the parking lot. Thus, they were unable to commence work and they stayed in the parking lot, although some bought coffee, or played cards, dice, or soccer. The plaintiffs alleged that they were required to wait for their employer’s convenience and benefit, turning their waiting time into compensable time.

The employer defended by contending that it did not owe any monies because the ice in the fields was an “act of God.” The court rejected this defense, concluding that “the ice actually was foreseeable because it happened quite often in Yuma during the winter months.” The court noted that the supervisors would set later start times for “the next morning based on their belief that ice would form” and that “because of the predictability of the ice, defendant could have set a later start time during the winter months.

This case raises the difficult and gray issue of what constitutes working time. Again, as in so many of these instances, it is the notion of employer compulsion or direction that is at the heart of the matter. The workers were directed to report by the employer at a certain time to a certain place. That conditions outside their (or anyone’s) control delayed the commencement of their “real” work did not render their waiting time non-compensable.

Engaged to be waiting to waiting to be engaged? It depends.
 

• Email This
• Print
• Comments
• Trackbacks

A collective/class action lawsuit against Merrill Lynch, which is just getting under way in the US District Court for the Southern District of New York (sitting in Manhattan) has been temporarily placed in limbo while the litigants wait for the decision of an Oregon court, which may approve a $43.5 million settlement in a similar type of a case.

The potential settlement could resolve a number of similar cases involving allegations of misclassification under the exemption rules. In these eleven lawsuits, financial advisers allege that they are due overtime because they are really non-exempt employees who have been erroneously classified as exempt. As a side issue, the plaintiffs also contend that that suffered illegal deductions. Incredibly, these settlements could involve almost 22,000 workers.

Under the terms of the deal, Merrill Lynch would distribute as much as $43.5 million and the majority of this sum would go to the class members. The Company would also hold back some of the monies for unclaimed funds. The settlement would entail, as a starting point, an agreed-upon designation (and certification) of a collective group in connection with the FLSA claims and another designated class for Rule 23 purposes for inclusion in the state claims.

These employees were not earning “minimum wage.” They are likely to be high-end earners and that is why the exposure on these cases is so astronomical. Employees who perform these jobs are likely being classified as exempt under the administrative exemption. This is a problem. This exemption is the toughest one of the three white-collar exemptions to qualify for as the employees must use discretion and independent judgment, which is difficult to define and even more difficult to implement as a job function in this industry. The more regulated an industry is, with significant reliance upon guidelines and procedures manuals and practices, the tougher it is to argue that the requisite amount of discretion is being utilized.

One answer is to ensure, insofar as operationally possible, that the job description and actual operating practice make clear that manuals are used only for guidance and the employee must then use discretion and independent judgment to evaluate courses of action (e.g. financial investments) and then choose from those the best alternative for a particular client.  As is evident, the stakes are dramatically high.
 

• Email This
• Print
• Comments
• Trackbacks

In a lawsuit entitled Newark v Executive’s Den, filed in federal court in the Northern District of Ohio, dancers at a go-go bar, so-called exotic dancers, are suing their employer in a class action for failing to pay them the minimum wage and for, allegedly illegally, taking a portion of their nightly tips. The plaintiffs allege that the class could contain between 50-75 members. The club, called Executive’s Den, is charged with calling the dancers “independent contractors” rather than employees. The derivative allegations are that the club failed to pay them minimum wages and overtime compensation.

One of the criteria for showing an employment relationship is “economic dependence.”  Herein, the plaintiffs claim that they were economically dependent on the club because the club set their fees and schedules, mandated that they solicit drink orders from customers and set a nightly order of performance on the club’s center stage in a rotation. Thus, the crucial focus of the case will be on the (usually first) prong of “control” in the independent contractor analysis. If the dancers were not free to make their own decisions vis-à-vis their employment, they could well be classified as employees.

The tip issue revolves around the allegation that the club directed that the dancers pay a “club fee” from their nightly tips. The problem for the dancers and the trigger that might have sparked the lawsuit is that the dancers had to pay these fees, whether they earned five hundred dollars or ten dollars for their night’s endeavors.  In other words, the workers still had to pay the house back, which essentially, allege plaintiffs, is paying your boss for the “privilege” of working there.  The dancers seek liquidated damages for their unpaid wages under the Fair Labor Standards Act (“FLSA”) and treble damages under Ohio law, as well as the return of all tip dollars. The named plaintiff seeks a class defined as all dancers employed by Executive’s Den in the three years prior to the complaint being filed.

Whether working on a construction site or gyrating around a pole in a club, if individuals are found to be “employees,” rather than independent contractors, then they are entitled to all statutory protections, such as time and one-half overtime under the FLSA.  There are many factors which go into the calculus of determining who is and who is not an independent contractor.  It is a totality of the circumstances test, but under any construct, state or federal, whether the workers’ compensation law, the unemployment law, or an anti-discrimination statute, the initial focus is on control.  If the putative employer succeeds in defending that front, the focus switches to whether the person is in an “independently established business.”  Employers should note that states are cracking down on these classification issues, because if workers have been misclassified, the particular State will derive revenues from unemployment contributions and other contributions and taxes that have not been made or paid.

 

 

• Email This
• Print
• Comments
• Trackbacks

A class action has been filed against DHL Express Inc., the well-known package delivery company, its contractor, Sky Land Express, Inc., and the individual owner of the contractor. The complaint was brought by a delivery worker, who was an employee of the contractor, alleging a failure to pay overtime. The delivery worker, plaintiff Leandre Layton, alleges that he worked over 40 hours a week, but was not paid overtime.

According to the complaint, filed in the U.S. District Court for the Northern District of Alabama, DHL is alleged to be a "joint employer" of Layton and the putative class under the Fair Labor Standards Act ("FLSA") because DHL allegedly supervised and controlled their work schedules and required them to wear DHL-logo uniforms, drive DHL-logo trucks, carry DHL-logo ID badges, report to a single establishment at the DHL building in the Birmingham International Airport every day by 6AM, to use DHL hand-held scanners, and to drive to delivery and pick-up stations designated by DHL.

In addition to these requirements, Layton was required to follow DHL rules and regulations which administered DHL policy and codes of conduct with regard to customer service and delivery truck maintenance matters. Further, DHL tracked the travels of these delivery workers through what the complaint calls "a sophisticated computer tracking system," which "closely supervised by latitude and longitude the exact location of the Plaintiffs and putative class who worked as drivers."

This case, although similar to other cases reviewed on this blog about independent contractors, involves employees working for a contractor that were almost entirely controlled by the other party to the contractual relationship. Employers, and the contractors working with them, should not rest easy believing that their relationship, or how they choose to couch their relationship, will magically dispel all confusion about the economic reality of the relationship between them and their employees. Similarly, an employer's relationship with a contractor will not release the employer from obligations that it would otherwise owe to employees, such as overtime. Under the FLSA, the true nature of the relationship will be scrutinized, and thus, if you are an employer and your contractor's employees are wearing your hat, your uniform, and/or your logo, you should probably re-examine the level of control you are exerting over those employees.
 

• Email This
• Print
• Comments
• Trackbacks

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! 

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks

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!

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks

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.

 

• Email This
• Print
• Comments
• Trackbacks

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. 

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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.  

• Email This
• Print
• Comments
• Trackbacks

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.

 

• Email This
• Print
• Comments
• Trackbacks

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. 

.

 

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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

• Email This
• Print
• Comments
• Trackbacks

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).

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks