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 applies to drivers, mechanics and other employees whose duties affect safety and who work in interstate commerce.  This exemption applies to truck companies and bus companies.  Any state is free to adopt this exemption, in toto, or to modify it or, in fact, not adopt it at all.

The New Jersey Department of Labor has adopted a version of the federal exemption that applies only to common carriers There is also an exemption, a separate exemption, that applies to bus companies and their employees.  That exemption has caused problems for the employer community so the state DOL is now proposing new rules to clarify when a bus company employer is not required to pay overtime to employees.

The new definition of “common carriers of passengers by motor bus” would now include “any employer which operates an autobus.”  This would establish bright lines so that employers (and DOL investigators/officials) would know exactly whether the employer has to pay overtime.

The DOL issued a communication stating that “the new rule would eliminate any possible confusion among employers and employees with regard to the proper scope of the exemption.”  To its credit, the agency observed that the absence of clear definition of the terms “common carrier" and "motor bus" has caused problems because employers have been unsure (for some time) where the line is drawn between employees who should receive overtime pay and those who should not.

Under the new rule, DOL investigators would need only to confirm whether the Motor Vehicle Commission has classified the vehicle as an "autobus."  Secondly, the investigator would also need to confirm that the proper registration documents are on file.

The lesson for employers, within New Jersey and elsewhere, is to always be cognizant that state law, on exemptions and all other wage hour issues, must be examined, and complied with, in addition to compliance with the Fair Labor Standards Act.  It is not enough to “merely” comply with the federal statute.
 

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The New Jersey Assembly Budget Committee has approved legislation to enhance penalties and sanctions against employers who illegally withhold wages and benefits from employees.  The proposed legislation sets forth increased fines, penalties, and damages for wage and hour violations.  Additionally, the bill imposes criminal sanctions against employers who retaliate against employees for reporting and/or complaining of violations.

In addition to the existing damages for wage and hour violations (unpaid wages, liquidated damages, fees and costs), employers will now be fined $500.00 and penalized 20% of the unpaid wages for a first offense.  Any subsequent offenses will result in the same penalties/damages as well as an increased fine of $1,000.  Additionally, violations can also result in an employer’s loss of any license issued by the State of New Jersey.  Finally, retaliating against an employee for bringing a wage and hour claim will be considered a disorderly persons offense.

The bill is intended to deter wage and hour violations by implementing “tougher penalties” while providing employees with additional safeguards for reporting abuse.  The New Jersey General Assembly is expected to vote on the bill this week.
 

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On Monday, the Northern District of Alabama dismissed sixteen (16) individuals from a federal overtime lawsuit against Mercedes-Benz International Inc. (“Mercedes”) due to their status as “highly compensated” employees.  The Court determined that these individuals were exempt from overtime because they earned more than $100,000 per year and performed “office on non-manual work.”  The case is entitled Hicks v. Mercedes-Benz U.S. International Inc.

The decision is notable in that the “highly compensated” exemption is rarely the subject of litigation.  This exemption applies to certain, white collar employees who earn more than $100,000, and perform one or more of the duties required under the executive, administrative, or professional exemptions.  For instance, an employee who earns more than $100,000 annually will be exempt from overtime if he or she directs the work of two or more employees even though the employee does not meet the other requirements of the executive exemption.

In Hicks, the plaintiffs argued that the exemption did not apply to the sixteen (16) employees at issue because Mercedes included payments such as 401(k) contributions and insurance premiums in the compensation calculation.  The plaintiffs stated that “the only relevant indicator of any employee’s total compensation is the W-2 tax form.”  The District Court rejected the plaintiffs’ argument and held that pre-tax contributions, such as 401(k) contributions, are appropriately included in the calculation.

The lesson from this case is a simple one – employers should keep the “highly compensated” exemption in mind when considering the exempt status of employees.  Employers may discover that their generosity is finally being rewarded.
 

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The surprise of the recent snowstorm in Southern California was nothing compared to the shock created by the California Supreme Court in its ruling in Brinker International Inc., et al. v. Superior Court.  The California Supreme Court found that employers must only make meal breaks available to their workers, but are not required to “ensure that the employee does not work.”  This is a much needed victory for employers, and one that could significantly reduce the number of wage and hour lawsuits filed by employees.  In particular, the decision removes any obligation by employers to police whether their workers take breaks, and could potentially eliminate claims for off the clock time during meal breaks.

In 2008, the California Supreme Court agreed to hear the case to clarify the meal break standard after an appeals court denied a class action of approximately sixty thousand employees.  The case, for the most part, hinged on the interpretation of California Labor Law § 512, which requires employers to provide meal breaks to individuals working more than five hours in a day.  The employer, Brinker International Inc. ("Brinker") maintained that it merely had to make the meal breaks available, and the plaintiffs argued that Brinker was obligated to make sure that its employees actually took these meal breaks.  In rejecting the plaintiffs’ argument, the Court held, in an unanimous opinion, “The difficulty with the view that en employer must ensure no work is done – i.e., prohibit work – is that it lacks any textual basis.”

The impact of this decision on wage and hour claims outside of California is difficult to predict.  While the California Supreme Court’s decision was based on its interpretation of the state’s Labor Law, counsel for Brinker has predicted that the Brinker International Inc. decision will have “significant implications” nationwide.  Since the question of whether employers are required to ensure that their workers take their meal breaks is not addressed by the Fair Labor Standards Act, or its regulations, its likely that courts in jurisdictions throughout the country will look to the case for guidance.

In the end, the Brinker International Inc. decision should not affect the manner in which businesses deal with meal breaks for their employees. The decision does not mean that employers do not have to pay employees for any time worked during a meal period.  Rather, the significance of Brinker International Inc. is that it places the burden on the employee to report any time he or she works during a meal break. 

For further discussion of the practical affects of this decision, read this post on our California Employment Law blog.
 

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I have been asked on several occasions whether illegal aliens, or unauthorized immigrants, can sue for unpaid wages under the Fair Labor Standards Act (“FLSA”).  Employers are typically shocked when I tell them that the FLSA covers all workers, regardless of their immigration status. The Southern District of New York, in a recent ruling, not only reiterated my statement, but took it a step further, in holding that the immigration status of FLSA plaintiffs cannot be entered as evidence at trial.

Last week, the United States Department of Labor (“DOL”) announced that it had obtained a judgment in Solis v. Cindy’s Total Care, Inc. requiring nail salon, Cindy’s Total Care, Inc., to pay $235,920 in unpaid overtime and liquidated damages to thirty two (32) current and former employees. The lawsuit arose out of an investigation by the DOL that found that salon employees worked more than 40 hours in week but were not paid overtime.  Instead, the employees were paid a fix daily rate regardless of the number of hours worked.

During the trial, the salon attempted to introduce evidence showing that various plaintiffs were illegal aliens.  The court prohibited the introduction of this evidence as irrelevant.  In particular, the court noted that the FLSA expressly protects “any individual,” and does not exclude non-U.S. citizens or undocumented workers.

Solis v. Cindy’s Total Care, Inc. highlights the fact that employers can face liability from undocumented workers just as easily at it can from documented workers.  Any hope that employees will shy away from bringing a lawsuit based on his or her illegal status is simply not realistic.  Rather, the courts and the DOL seemingly provide undocumented workers with a safe harbor to pursue claims for violations of the FLSA.  Similarly, as seen in Solis, employers should be wary of relying on any defense that attempts to ruin the credibility of an FLSA plaintiff based upon his or her immigration status.
 

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On July 14, 2011, several lobbyists and business representatives argued before the House Education and the Workforce Subcommittee on Workforce Protections (“Subcommittee”) that the Fair Labor Standards Act (“FLSA”) needs to be revised.  J. Randall MacDonald, senior vice president of human resources at IBM and chairman of the HR Policy Association, told the Subcommittee that the FLSA is “failing America” because it does not provide employers with enough flexibility in work arrangements with employees, nor does the law provide employers with sufficient certainty regarding their legal obligations.

While the hearing was not called to discuss amending the FLSA, MacDonald and other management side lobbyists blamed the climbing unemployment rate on the influx of wage and hour lawsuits over the past decade.  Similarly, MacDonald argued that employers cannot comply with the law because the standards set forth in the FLSA are not applicable to the modern workplace.  This sentiment was echoed by the chair of the Subcommittee, Tim Walberg, who stated, “It is hard to imagine a law intended for the workforce known to Henry Ford can serve the needs of a workplace shaped by the innovations of Bill Gates.”

Among the proposed changes to the FLSA are: clarification of which computer employees are exempt from overtime; guidance on whether activities such as checking email are considered work; and the designation of well compensated, commissioned “inside” sales employees as exempt.

Judith M. Conti, federal advocacy coordinator for the National Employment Law Project in Washington, D.C., as well as various Democrats on the Committee, opposed these changes to the FLSA.  Ms. Conti stated that revisions to the FLSA could detract from the protections afforded employees.  Rep. Dennis J. Kucinich argued that the business representatives appearing before the Subcommittee were “advocating for a system that is manifestly unfair” and that allowed wages to go down while corporate profits rose.

The proposed changes to the FLSA could provide employers with much needed assistance in complying with the law and avoiding potential lawsuits.  However, employers shouldn’t hold their breath as there is no reason to believe that Congress will be revising the FLSA anytime soon.
 

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In a May 9, 2011 posting in the Connecticut Employment Law Blog, Daniel Schwartz took a look at the recent decision of the Second Circuit in Kuebel v. Black & Decker.  He notes that the Court held that home-to-work commute time does not become compensable time, merely because the employee has performed work-related tasks before commuting in the morning or when he returned to his house at night.

I applaud this decision because it represents another rejection of employee claims and theories in which the employee seeks to transform commute time into compensable time.  Numerous courts have rejected such attempts in a number if scenarios.

The continuous workday theory encompasses both preliminary and postliminary tasks which are defined as those integral to the performance of the employee’s primary task and thus these tasks act to “elongate” the compensable workday.  Here, the Court concluded that there was no employer induced compulsion to perform these activities either just before the employee left for work or in the morning or immediately after he returned home in the evening.

About ten years ago, there were a number of so-called canine cases. In those cases, police officers who used dogs in their work and took the dogs home claimed, in various jurisdictions, that the fact that they transported the dog converted their home-to-work commutes into compensable time.  In an interesting published decision that I handled, which also went to the Second Circuit, Kavanagh v. Grand Union, 192 F.3d 269 (2nd Cir. 1999), the employee, a refrigeration mechanic for a chain of supermarkets, claimed that because he carried specialized tools in the trunk of his car (and his commute was very long), his commute time was compensable.  His claim was rejected on summary judgment and upheld by the Second Circuit.

Employees seem to sometimes look to try to extend their compensable work day and hook things onto their travel time or claim that the attributes of that commute time (e.g. carrying tools in trunk) make it worthy of compensation.  The best defense (as it usually is) is to be proactive.  I recommend implementing a well drafted travel time/ pay policy that specifically outlines the Company’s position on such matters, with an emphasis on the fact that home-to-work commuting is never compensable.  A variation on the theme is to agree to pay for some portion of the travel to work, e.g. after one hour.  By doing that, the Employer is spending a nickel to save a dollar in that it is evidencing that some payment will be made for the commute time, helping to negate any claim that compensation additional to that is legally mandated.

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In the November 30, 2010 issue of Employment Law 360, Alfred Robinson posits three continuing trends in FLSA litigation: 1) donning and doffing cases; 2) exemption misclassification cases; and, 3) off-the-clock work cases.  I concur, with the addition of a group of cases that I will call “blackberry cases” or “checking e-mail” cases.

The issue of donning and doffing concerns clothing and protective gear.  It raises the more global issue, however, which is when are preliminary and postliminary activities sufficiently related to and integral to the main job that the time spent doing them becomes (somehow) compensable.
Mr. Robinson identifies three factors that go into the calculus of whether the time is compensable, but two of them—compulsion by the employer and benefit (if any) to the employer are within the employer’s control.  The third is whether the activity is connected. I go a step further—if the activity is somehow mandated by an outside government agency or other governing body, then the activity will likely be deemed compensable.

The next category are misclassification cases.  He points to the fact that the US DOL has stopped issuing Opinion Letters and now will only be issuing so-called Interpretations.  Interestingly, the first of these involved whether Mortgage Loan Officers fit within the administrative exemption.  I predict that more class actions will target classes of employees deemed administrative.  Of the three white collar exemptions, the toughest one to defend is the administrative exemption.

The last category are “off-the-clock” cases, which means employees allegedly working through lunch and not being paid, especially where the employer has an automatic deduction policy. These cases also include instances where employees claim they started/reported early or stayed late and were never paid.  Again, with the use of smart clocks, which may automatically punch people in and out at their assigned shift times, the employer may have a tough time proving that employees did not report early, did not start work early, but were prevented from punching in to reflect that work was performed because the smart clock would not allow it.  These are dangerous cases.

The blackberry and email cases are going to become a real nightmare, I believe.  Everybody does it, even when they are off work at night and on the weekends.  The pressures of business, of employment in these complicated times and the unceasing desire to show our employers that we dedicated and diligent contribute to this perpetual “need” to check e-mail.  If employers do not have policies addressing such usage, i.e. prohibiting it, I believe a rash of class actions involving claims by dozens/hundreds of workers that their checking of e-mail pre/post work is compensable time is headed for the employer world like a rocketing comment.  That is the specter before us and I fear it will raise its head in the coming year(s).
 

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A federal judge has conditionally certified a class action which was instituted by a group of production line workers in a turkey processing plant.  They claim they are owed compensation for donning and duffing activities as well as other activities that they claim were “working time.”  They claim compensation for changing into protective gear (the donning and doffing component) washing their tools and time spent in travel to and waiting at their production lines.  The case is entitled McLaurin v. Prestage Foods Inc and was filed in the District of North Carolina.

The plaintiffs claim that the Company paid them only for time that the production lines were supposed to be operating.  The plaintiffs estimate 300-1000 members in the class and wanted individuals who worked “on or near” the processing line to be part of the class.  The Company is contending that the class definition proposed was too broad because employees working “near” the line were paid differently than those who actually worked on the line.

Naturally, the plaintiffs wanted the broader definition to apply, contending that the true parameters could be worked out “later.”  The defendants also contended that there were factual differences in the kinds of protective gear worn by the workers, which hearkens to the individual scrutiny defense, but the judge rejected this contention.  The court held that if there was a common policy or practice that applied to all of the workers, the fact that there might be individual differences from worker to worker would not detract from the validity of the class.

There will be probably considerably more discover in this matter.  The case will likely be settled sometime in the future, as these working time cases are different than and harder to win than an exemption misclassification issues.  In the exemption case, if the employer has strategized correctly and preemptively and is proved correct on the exemption question, the entire class evaporates in a flash.  With working time cases, where there lies any modicum of employer compulsion or compulsion by an outside government agency that operates through the employer (e.g. FDA, Health Department) then there likely will be recovery by the plaintiffs and attorneys fees for their counsel.
 

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Bimbo Bakeries has been hit with another wage-hour collective action in which the allegation is that the delivery drivers claim they have been classified as independent contractors, when they are really employees.  They seek wages and the employment benefits they would be due as statutory employees.  The drivers also allege that the company makes them pay for the trucks and the rights to distribute the products. The case is entitled Scott et al. v. Bimbo Bakeries USA and was filed in the Eastern District of Pennsylvania.

Bimbo Bakeries manufactures Thomas’ English Muffins, Entenmann’s and a host of other products.  The complaint alleges that the company has imposed an “unlawful and unconscionable” distribution agreement on the drivers.  The complaint also contends that although the company exercises significant control over the manner and means of the delivery business, it nevertheless deems them to be independent contractors to cut down on company business expenses, at the same time transferring many of these business expenses to the drivers.

In this regard, the workers allege that Bimbo has illegally transferred the obligations of purchasing and maintaining trucks and equipment to them and that they are, in essence, really subsidizing the company operate its business.  The workers contend that, through this contrivance, Bimbo has avoided all state and federal employment taxes, workers’ compensation and unemployment compensation obligations.  The company’s answer to these issues has been to compel the drivers to pay those business costs themselves.

They also charge that the unfair and skewed distribution agreement compels the delivery drivers to purchase the distribution rights for an area, at the same time the company is maintaining rights over the distribution.  The company takes monies out of the plaintiffs’ compensation for the truck payments, gasoline, payments for computers, insurance and other business expenses.

There are approximately sixty (60) alleged members of the class; the plaintiff who filed the suit worked in Mt. Laurel, New Jersey.  Bimbo, however, maintains many depots throughout the country and it is alleged that the same policies are in effect at these other locations.  In other words, the specter of a nationwide class action now may be baking in the oven for this company.

In any independent contractor analysis, the two crucial analyses are whether the putative employer exerts control and whether the worker is in an independently established business.  From the allegations in the complaint (and that is all they are at this point), it may be that too much control is exerted.
 

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I have often lamented that the administrative exemption is the grayest of the three white-collar exemptions and the toughest to prove.  There are, however, some notable exceptions to this rule.  A federal court has granted summary judgment to a temporary employment recruiting firm, where the former employee, an Account Recruiting Manager, alleged he was non-exempt and entitled to overtime under the Fair Labor Standards Act (“FLSA”).  The case is entitled Andrade et al. v. Aerotak Inc. and was filed in the District of Maryland

The court held that the recruiters were not so-called white collar production workers and fit within the administrative exemption.  Interestingly, although the suit was originally filed as a class action, the court denied conditional class certification, because there were too many individualized determinations necessary.  In other words, the plaintiff failed to demonstrate a common policy, practice covering these workers.

The duties of the recruiter involved finding and placing financial services professionals in various contract positions with the staffing company’s clients, the contracts usually ranged from 6-12 months.  The company claimed the exemption and the court agreed; on the critical issue of discretion utilization, the court found the workers used independent judgment involving matters of significance.

The court essentially held that the recruiters were performing the functional equivalent of work performed by Human Resources people and they were not simply churning out the employer’s “goods,” which is the crux of the white-collar production “doctrine.”

The toughest line to draw is whether an individual is using skill and experience or discretion and independent judgment.  The employer defense of administrative exemption usually, in my experience, founders on this very point.  Perhaps this case gives a roadmap for future defenses as to how the discretion component of the administrative exemption should be presented and argued.

I think it does!
 

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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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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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