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

In December, I blogged about off-the-clock work in my post Unreported, Off-the-Clock Work.  Off-the-clock work includes meal break time, and issues arise when employees work during these breaks, or claim that they work during these breaks, but are not paid.  Recently, an Ohio federal judge decertified a class of employees who alleged that their employer’s meal break policy violated the FLSA.  The judge decertified the class action suit because the workers’ experiences were too diverse to justify the class. 

The case, Creely v. HCR ManorCare Inc. et al., was filed in the U.S. District Court for the Northern District of Ohio, the case number is 3:09-cv-02879.

The employer, HCR ManorCare Inc., (“HCR”) has more than 44,000 hourly employees.  A class of 318 nurses, licensed practical nurses, certified assistants, and admissions coordinators claimed that employees missed meal breaks and were not properly compensated because HCR failed to  ensure that employees were paid.  Specifically, the plaintiffs claimed that HCR failed to train employees on how to report incidents where they worked during meal breaks, and even in some instances, actively discouraged employees from doing so.  The judge however, decertified the conditional class because the claims presented varying accounts of what instructions these workers received on claiming wages earned while working through meal breaks (since wages were automatically deducted for meal break time). 

Although this class was decertified, this decision demonstrates the overriding importance for employers to maintain reasonable procedures for employees to report ostensible work performed during meal times.  To avoid incidents like this, employers should ensure that employees are properly trained to report their time and managers are keenly aware of their employees working, or seeking to work, through lunch.

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I have been representing an employer in a class action in which Registered Nurses, paid hourly, sought overtime.  We won on summary judgment at the trial court, on the strength of two New Jersey Department of Labor Opinion Letters (one going back to 1975), that held that it was the DOL’s interpretation that as long as the Nurses (or other professionals) performed “professional” work, they were exempt from overtime provided they made the minimum amount required (i.e. $400 per week).  The claimed liability reached into the hundreds of thousands of dollars.  In sum, on the basis of two pieces of paper, we succeeded in securing the dismissal of the case.  The case is entitled Anderson v. Phoenix Health Care, Inc., A-2607-10T2 (N.J. App. Div. Nov. 16, 2011).

On November 16, 2011, the New Jersey Appellate Division affirmed this lower court holding.  The Court noted that courts should defer to an agency’s interpretation of its own laws and regulations if that interpretation was not “plainly unreasonable.”  Against that framework, the Court held that this interpretation was not, in fact, “plainly unreasonable,” even though hourly payment was not ostensibly “allowed” by the applicable regulations.  The Court reasoned that the “critical question is whether the employee is a professional, not whether that professional’s compensation is determined by reference to an hourly rate instead of a salaried rate.”

The Court also concluded that, even if this longstanding, i.e. almost forty years, interpretation was not reasonable, my client could avail itself of the safe harbor, good faith exception found in New Jersey law (and the FLSA and, more likely than not, the wage hour laws of many States).  That good faith exception provides “immunity” for a defendant when that entity has conducted itself in reliance upon or in conformity with interpretations or enforcement practices of a the relevant agency.  That is what my client had done in this case.

So, in essence, we used the Opinion Letters for both of these purposes, in an offensive manner, as a sword, rather than a shield.  First, we argued that the interpretation was not unreasonable, but even if we lost on the ground, we claimed the refuge of the safe harbor.  The lesson for employers is that if they wish guidance on a certain point of law, securing an Opinion Letter provides not only guidance, but also protection, even if the logic or reasoning of the Letter is ultimately struck down by a Court, the particular employer that conducted itself in accord with the Letter will not be held liable.

The irony in this is that as New Jersey has now adopted the FLSA regulations (as of a few months ago), this defense would likely not be available to an overtime claim filed by an hourly paid Registered Nurse.

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In a recent posting in the Wage Hour Defense Blog, Michael Kun and Doug Weiner comment on a recent DOL initiative to actually refer potential wage hour law suits to private attorneys.  This, the authors note, comes on top of the DOL announcing that it will be hiring 350 new investigators to step up the government's enforcement initiatives.

The DOL calls this program the "Bridge to Justice."   Under the program, plaintiff lawyers can sign up for referrals and the agency will make such referrals.   I assume they will have to possess some expertise in the area, although it would benefit employers if they did not.  It is amazing to me that a government agency, which is supposed to be a neutral, call-it-as-you-see-it, down-the-middle institution, would actively facilitate employees suing their employers for (most likely) overtime monies alleged to be due.

There will be many lawyers who will sign up for the program, attracted by the fee-shifting nature of the FLSA.  What will also be attractive is the belief (misplaced as it may be) that employers do not have an understanding of the wage-hour laws, especially on exemption classification matters, which form the basis of many of these suits.

This new development only reinforces what I have been preaching about for years--the need for a self-audit, self-analysis process by which all salaried classifications are examined for possible classification problems, as well as work time issues (e.g. preliminary and postliminary activities).  This development does not bode well for employers and signals another wave of  FLSA collective actions in 2011.  The best defense, the only defense, really, is a proactive scrutinizing of compensation practices and  fixing what is broke, in a "soft" subtle manner so as to not arouse "suspicion" and trigger calls to this new network of plaintiff lawyers.  

Happy New Year! (I think).

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I have written many times on the questionable exempt status of mortgage loan officers, brokers, mortgage originators and other similarly titled employees.  I have called attention to the proliferation of class/collective actions against mortgage and banking companies on this issue. Now, the US Department of Labor has issued definitive guidance.  Now, except in certain circumstances, mortgage loan officers will not qualify for the administrative exemption under the Fair Labor Standards Act.

If they perform supervisory duties, they may still fall under the executive exemption, but the most commonly urged exemption for them, i.e. administrative, is now foreclosed.  The DOL concluded that “mortgage loan officers typically have the primary duty of making sales on behalf of their employer; as such, their primary duty is not directly related to the management or general business operations of their employer or their employer’s customers.”  The interpretation continues on to note that mortgage loan officers will not qualify for the administrative exemption because their primary duty is production work, i.e. sales.

The DOL issuance makes specific note that the DOL was not aware of any court holding that such employees have any other duty other than sales work as their primary duty.  Significantly, the issuance rescinds two DOL opinion letters that were more favorable to employers on the exemption issue.

This is a momentous development, but it has been “a long time coming” in my opinion.  Many courts have held these employees to be non-exempt and many large institutions, such as Bank of American NA, JP Morgan Chase & Co., Wells Fargo & Co. and Washington Mutual have been, hit and hit hard, with these kinds of actions.

 My advice is to conduct an internal audit and ensure that these employees (and other salaried) employees classified as exempt in fact are properly classified.

The DOL Interpretation letter is available at  www.dol.gov/WHD/opinion/adminIntprtnFLSA.htm

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A federal judge has dismissed a possible class/collective action concerning an alleged failure by Butterball, the giant poultry company, to pay workers for donning and doffing time.  I have written many times on this subject, but this case is different because the court found that the employees’ union had agreed to the policy of not compensating workers for this time. The case is entitled Salazar et al. v. Butterball, LLC and was filed in federal court in the U.S. District Court for the District of Colorado.

The workers are unionized and represented by the United Food and Commercial Workers, Local 7. The court ruled that, during negotiations, the union had waived or given away the right to be compensated for this time.  The employees in this lawsuit maintained that, notwithstanding this provision, it was illegal to force the workers to negotiate for something that they were already legally entitled to, i.e. compensation for donning and doffing time.

Significantly, the court noted that the union had filed a grievance over the nonpayment of donning and doffing time, but never channeled the grievance to arbitration.  Thus, the company also had the argument that the Union had abandoned the grievance and had “doubly” waived its right to press for compensation, i.e. through collective bargaining and the dropping of the grievance and failure to pursue it to arbitration.

The Company argued that since payment for donning and duffing time concerned wages, it was a so-called mandatory subject of bargaining; the union had never pursued the matter at the bargaining table and therefore the Company contended that these unionized workers could now not come after it through the back door.

The plaintiffs argued that if the federal judge adopted the magistrate judge’s findings, that would, “contrary to law, create a requirement that a union must use its right under federal law to be paid for all time worked as a bargaining chip in collective bargaining or lose that right.”  The court rejected that argument and did in fact adopt the magistrate’s findings.

The lesson to be learned---if an employer is unionized, it can, through collective bargaining, either “win” a provision that such time is non-compensable, or agree with the union that “some” modicum of such time is also compensable.
 

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Five years ago, the Class Action Fair Act (“CAFA”) was enacted to deal with the onslaught of class action cases and to ensure, if I may say, fairness in the manner in which these cases were litigated but it appears that the ever active and creative plaintiffs bar is coming up with new ways to allow cases to remain in state court, rather than going to federal court where perhaps they feel or believe that the chances of winning are slimmer.  Defense counsel must adjust and adapt, quickly.

What some plaintiff counsel are doing is structuring and narrowing their Complaints so they can circumvent the jurisdictional diversity that the law mandates be applied. The fact is that CAFA was enacted to prevent abuse of the class action procedure/device.  The law eased the rules for establishing diversity jurisdiction so plaintiff lawyers could not engage in ting forum-shopping and lodge their suits in what they believed were states friendly to the plaintiff’s side. In this manner, defendants were able more facilely to remove cases to the federal courts.

The trick that has been discovered is to plead the case quite narrowly, in a real focused manner. For example, if the case is filed for less than one-hundred plaintiffs and damages of less than five million dollars are sought, the lawyers may be able to salvage keeping the case in state court, which they may perceive as a tactical advantage or may, in fact, be a tactical advantage.   In this analysis, the particular venue and/or the particular judge that preside over the case.

Often, class action cases settle. Rarely do they go to trial, given the enormous risks for the employer, i.e. fee-shifting, as well as for plaintiffs and their lawyers, who stand to realize nothing from a case if the class action motion is defeated or the case falls on the merits, e.g. employees found exempt, as a class.  Thus, there is much machination to get a case before the “right” judge who may broker. Whether with heavy hand or not, a settlement.

A recent, illustrative example. In a 2008 case involving Abbott Laboratories, a federal judge in the Eastern District of Tennessee ruled that the plaintiffs were trying to evade the dictates of CAFA by filing eleven class action Complaints, which mirrored each other, except that the period of time for which recovery was sought was different for each  “class.”   The various complaints defined the class period as various one-year periods ranging from 1990-2008.

However, each of the discrete Complaints included contentions relating to the entire reach of the charged conspiracy for all of the separate time periods in the ten years at issue.  The judge held that these artificial time demarcations were an attempt to ensure that the damages in each case were less than five million dollars, in order to circumvent CAFA. Essentially, he found that the plaintiffs were “gerrymandering” the cases to avoid the application of the CAFA.

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I have posted a few times about Fair Labor Standards Act donning and doffing cases. The general rule is that donning and doffing is compensable if these preliminary and postliminary activities are integral to the performance of the employee’s primary job.

For a rule, there is always an exception. In a case entitled Johnson v. Koch Foods Inc., filed in the Eastern District of Tennessee, a federal judge has ruled that because the parties’ labor contract applicable to covering chicken processors working at a cut and kill plant explicitly excluded compensation for time spent donning and doffing certain sanitary and safety gear, the workers were not entitled to compensation for the time it took to put and remove the gear.

The judge analogized the putting on/taking off of the gear to “changing clothes,” which is not compensable under Section 203(o) of the Fair Labor Standards Act. The court did warn, however, that of a jury determined that such activities were integral and indispensable, they then could be compensable under the “continuous workday rule.”

This result seems anomalous because the workers were required to put on the protective gear prior to reporting to the production line, to begin their primary work, but they were only compensated for the time actually on the line.

There is a divergence in the federal Circuits as to what constitutes “clothes.” The Ninth Circuit has held that the “changing clothes” safe harbor applies only when the items at issue are clearly and unmistakably clothing, as is commonly understood. However, the Eleventh Circuit has held that the term applies to hairnets, gloves and hearing protection equipment. The US Department of Labor has issued an Opinion Letter concluding that the Section 203(o) definition of clothes “includes items worn on the body for covering, protection, or sanitation.”

This issue may ultimately have to be decided by the US Supreme Court. In the meantime, employers need to make assessments of the indispensability of the preliminary activity to the main job and start the analysis of compensability from that vantage point.
 

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A federal judge has ruled that a dispatcher, who was suing as the named plaintiff in a FLSA collective action seeking overtime, was not able to prove that he was “similarly situated” to other employees and this the judge refused to grant even the conditional certification necessary to keep the case going.  The case is entitled Landry v Peter Pan Bus Lines and is being litigated in the District of Massachusetts.

Although dismissed, the case raises the specter of the exempt status of dispatchers in the trucking and bus industry.  I believe this is a pervasive issue/problem for this industry, as many trucking and bus employers classify their dispatchers as exempt from overtime, believing that they are part of “management.”

Although, in a real-world sense, these important employees are part of the management “team,” under the FLSA exemption regulations, they must meet certain criteria. If they do not meet the criteria, both work duties and salary minimums, they are non-exempt and overtime eligible, notwithstanding their importance to the transportation operations.

The plaintiff had alleged that his job did not require the exercise of independent judgment, which is the hallmark of the administrative exemption, nor that he performed any “managerial responsibilities,” which impacts upon both the executive and administrative exemptions.  These theories were never tested, as the plaintiff sought to secure class certification too early, before any discovery had been taken. If the case was re-filed with another lead plaintiff and the plaintiff’s lawyers were a littler more patient, i.e. allowing for a period of discovery, the case might have turned out differently.

Employers in the transportation industry should pay special attention to the job duties of their dispatchers.  If the employer concludes that these employees are currently non-exempt, it is possible to enhance their job duties so that they evolve into exempt employees.   Another possibility is that the dispatchers may fit within the motor carrier exemption, but they must affect safety for this exemption, rather than simply dispatch vehicles.

In any event, the time to analyze the dispatcher exemption issue is now, before the threat of a lawsuit looms.
 

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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.

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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’”
 

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