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

These are happy times for management side lawyers, I predict.  The U.S. Supreme Court has heard oral arguments on the issue of whether utilizing the Rule 68 FRCP Offer of Judgment procedure to, essentially, “pick off” the lead, named plaintiff in a FLSA collective action ends up undermining the validity of the entire class if that lead plaintiff turns the Offer down and the Court then dismisses the case for mootness.  The case is entitled Genesis HealthCare Corp. et al. v. Laura Symczyk and comes out of the Third Circuit..

This is a strategy that I have successfully employed, twice, in New Jersey, and that numerous other employers have done.  Some contend this is a way for the employer to get out “cheap” and acting “unfairly” in a FLSA collective action.  When the Third Circuit held in Genesis that this tactic was not appropriate, I have refrained from using it again.  I feel, however, that the Supreme Court is going to rule that the approach is permissible and that it is sanctioned by and under the Federal Rules of Civil Procedure.

The underlying case involved allegations that the automatic meal break deduction policy served to deny employees of compensation for lunch breaks allegedly missed but nevertheless deducted. The Company made a $7,500 offer that would have made the lead plaintiff whole for any of her missed lunches.  The federal district court ruled that the case was moot and dismissed it, but the Third Circuit held that the lawsuit’s “status” as a class/collective action injected a new variable into the calculus, as the lead plaintiff would still have some stake in the matter as the representative of all those similarly situated.

If the Supreme Court rules for the Company, it will be a boon to employers.  Defending FLSA collective actions is an extraordinarily expensive proposition (assuming the employer wins) and a doubly expensive exercise if the employer loses, as it is a fee shifting statute.  If the Court upholds the Third Circuit, however, employers will be barred from using this tool/weapon as a means of resolving FLSA cases at an early, cost effective point in the proceedings.

Why would the Court want to issue a ruling that only serves to facilitate protracted, inordinately expensive litigation and further crowding of already crowded dockets.

I don’t think it does.
 

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A federal judge has dismissed a FLSA class action lawsuit where the theory was the group of employees was improperly classified as exempt.  There were more than one thousand current and former KPMG LLP employees who could have potentially been class members.  The liability would have been, to put it mildly, geometric.  The case is entitled Pippins et al. v. KPMG LLP, and was filed in the Southern District of New York.

The judge concluded, in granting the defendant’s summary judgment motion, that the workers fell within the professional exemption and thus there was no legal obligation to pay them overtime. Many of the opt-ins possessed undergraduate and, in some cases, graduate degrees in accounting, business or finance.  They also received training from the Company and were all ready to sit for the CPA exam, which influenced the Court to reach its conclusion.  A CPA is, by definition, exempt under the FLSA regulations.

Judge McMahon noted that the “audit associates are not bookkeepers or clerks and they should not be treated as anything less than the professionals they both are and aspire to be.”  Waxing almost philosophically, the Court also pronounced that “they are well-educated and they are well-compensated.  They are not the sort of employees the FLSA was intended to protect.”

The case had been conditionally certified in early 2012, as the granting of this conditional certification is not an onerous burden for the plaintiffs.  The action gets more intense, however, and the burden to sustain the class more difficult as the defendant-employer then mounts a decertification attack or, as here, proffers a single magic-bullet theory to eliminate any and all putative plaintiffs.  In analyzing the employees fell within the exemption, the Court examined their actual job duties and concluded that there were performing audits at a professional level of expertise and meeting certain professional standards.  That, coupled with their educational achievements, compelled the Court to rule as it did.

Although the employees performed some clerical tasks, the Court found that these were minor duties and the “primary duty” of the employees remained their professional accounting work.  In a similar vein, if this “clerical work” is closely, integrally related to the “professional” work, it becomes part and parcel of the professional work being performed.

I applaud this result.  It is a rarity that plaintiffs mount a class action where there is a seemingly obvious defense, i.e. the professional exemption.  I imagine the thinking of the plaintiffs’ lawyers was that the amount of clerical work allegedly being done would so overwhelm any professional work performed, as to destroy the “primary duty” element of the exemption.

Not the case.  In this case.

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A FLSA class is usually conditionally certified.  The next tactical step for the employer is to seek that class’ decertification. If it succeeds in doing so, the case is over (subject to appeals).  The key to that effort is to convince the district court that too much individual scrutiny of class members is required so there does not exist the commonality, the “pattern or practice” that binds all class members together.

An employer has adopted this very technique in contending that a class of workers who claim they were misclassified as exempt should be de-certified because the court would be compelled to look at the duties discharged by each employee to ascertain what their primary duties were.  The Court would then have to determine they, that is to say, for each one of them, are exempt or not. The case is entitled Heffelfinger et al. v. Electronic Data Systems Corporation and was filed in federal court in the Central District of California.

The Ninth Circuit had upheld certification for one class of EDS workers but remanded this case to the district court judge, due to a concern relating to significant differences in the job duties/tasks of information technology employees.  The defense argued that ” the mere descriptions of those job categories” could not address or resolve the issue of whether all putative class members were exempt.  In this regard, the company contended that this class sought to include employees whose position descriptions were very similar to employees in another EDS class action where class certification was denied.

Thus, the company argued that individual scrutiny would be required for every member of the class, thus making its continuation as a class action inappropriate.  The plaintiffs have countered by alleging that these employees “do basically the same kind of thing, that is, computer programming, and that is the kind of duty the Ninth Circuit has said is not in and of itself qualitatively exempt.”

The issue has been joined on whether these employees fit within the administrative exemption, which is often the grayest and toughest to fit within.  This decision will turn on whether the putative class members performed administrative work for the Company’s customers.  The employer contends that this fact no longer supports a class, but rather the need for individualized scrutiny.

I can’t wait for the decision, hoping we get another defendant's road map for finding our way to the need for individual attention, and, therefore, the dismissal of the plaintiffs’ FLSA collective action.
 

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I happily note that a positive trend, in my view, is continuing.  That is to say, the defeating of FLSA collective actions by defendants asserting that there is not enough similarity in the putative plaintiffs to warrant their conditional certification into a class.  A federal judge has just rejected a motion for conditional certification, in which 65,000 employees, nationwide, tried to sue Steak N Shake, for overtime.  The case is entitled Beecher v. Steak N Shake Operations Incorporated and was filed in federal court in the Northern District of Georgia.

This was another of these off-the-clock cases, where hourly employees charge that they were not paid for all time worked.  The suit also charged that managers altered time records in order to “save” the overtime that would have otherwise been due.  Parenthetically, I should note that in these chain-store cases, so-called Burger King cases, the individual stores run on tight labor budgets and managers are judged by whether they adhere to these budgets, so there is intense pressure to stay within budget, sometimes resulting in off-the-clock work being done, or allegedly being done.

With that said, the Court concluded that that the plaintiffs had not shown that they were similarly situated to each other or that there was not a commonality, a system wide policy or company practice that could be the “glue” to hold the action together.  This was particularly applicable to the contention that a nationwide practice to falsify and alter records existed.

The court concluded that “even assuming, arguendo, that there exists a nationwide practice of reviewing and sometimes revising hours clocked in and out, and tips received, that is not enough glue to hold this proposed class together; neither is the fact that defendant generally discourages managers from allowing overtime work.”

Thus, the court found that the plaintiffs’ allegations required individual scrutiny because to adjudge the claims would mean to be to call numerous supervisors to testify to their particular practices on these matters.  Merely showing that the putative class members all utilized the same reporting system (and that all of the stores used the same internal reporting system) would not answer the key question of whether the employees were similarly situated or treated.  Thus, given the size of the class and the individualized nature of the allegations, there would have to be several thousand mini-trials, which would make the case unmanageable.  Thus, dismissal was warranted.

What I take away from this is that when faced with a nationwide class action, with thousands (or hundreds of thousands) of possible plaintiffs, the opportunity to argue no commonality/need for individual scrutiny may be actually enhanced.  Instead of being the terrifying specter that such a suit initially raises, it could actually be the salvation of the defendant-employer.
 

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A group of Gold’s Gym employees have filed a FLSA collective action.  Their theory, similar to a rising number of such suits, is that they were required to work off the clock.  The employees claim they have to work between 50-60 hours per week, but are only paid for forty.  The case is entitled Lane et. al. v. Gold’s Gym International Inc., and was filed in federal court in Texas.

In a somewhat ironic twist, the Complaint notes that the Company has a policy prohibiting employees from working more than 40 hours a week without prior approval and so, to comply with this policy, Gold’s general managers allegedly (and routinely) required workers to first clock out and then continue to work off the clock or, allegedly, to falsify their time records to show that they worked fewer hours than they actually did..

The lead plaintiff (still a current employee) alleges that he (and other supposedly similarly situated employees) were compelled to make monthly sales targets and to also train fitness consultants. Those duties required that they often had to work in excess of forty hours, but the Company typically refused to acknowledge any overtime claims.  The plaintiffs claim that this was a company-wide policy, which, under principles of FLSA collective actions, gives the class the commonality and similarity needed for conditional (and ultimate) certification.

On this point, the Complaint asserts that “although the named plaintiffs were employed by Gold’s at two of its San Antonio locations, sales managers at its facilities across San Antonio and the United States are believed to have all worked similar hours and were compensated under Gold’s common policy/scheme of not paying sales managers one and one-half of their regular rate for all hours worked over 40 in a workweek.”

There has been a veritable explosion of these off-the-clock collective/class cases, in many different industries.  We will see where this goes.  The institutional problem in the retail industry, any retail industry, is that oftentimes labor budgets are set tightly and managers (at all levels) are judged by whether they stay within these budgets.  It is this pressure that may drive the “need” for off-the-clock work.  There are procedures that management can implement, to both stay within budget, as well as the law, but a keen self-scrutiny of compensation practices and corporate goals is necessary.
 

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Maybe a trend is developing.  Maybe employer-defendants are starting to turn the tide of what seems like an incessant trend towards the granting of conditional certification in FLSA cases and the maintenance of those classes in the face of motions to de-certify.  I say this because a federal district court in Alabama recently decertified a class of Dollar Tree Stores managers who claimed they were misclassified as exempt employees.  The case is entitled Knott v. Dollar Tree Stores Inc filed in the Northern District of Alabama.

The defendant argued that the duties of each of the managers would need to be scrutinized and investigated to determine if their primary duty was management and if they fit within the exemption. Thus, the necessary and fundamental element needed to sustain a class—a common pattern, practice or policy, was missing.  The judge agreed.

The judge noted that “while Dollar Tree applied its executive exemption across-the-board, the defense is individuated in this case as plaintiffs’ job duties and employment experiences vary dramatically.  Although some may have performed uniform tasks mandated by a corporate manual, others routinely exercised their independent judgment, and the amount of time they spent performing managerial duties is a matter of individual.”

The court also sounded the death knell of the plaintiffs’ action by asserting that “because they performed a wide array of differing exempt job duties with varying degrees of importance, one group of them cannot reasonably be said to be representative of them all.”

The plaintiffs had argued that because an alleged majority of their time was spent doing manual labor, they could not be exempt.  However, this premise proved to be the plaintiffs undoing as the contention called for the very individual scrutiny that dooms a class action.  It should be noted that the plaintiffs had been granted conditional certification, which entails meeting a much lower, “lenient” standard.  The judge made plain, however, that the plaintiffs did not meet the more stringent second tier standard for the maintenance of a collective action.

The lesson, the strategy, is (again) plain for defense counsel.  Attack the alleged commonality.

Hard.
 

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A few days ago, Daniel Schwartz posted in his Connecticut Employment Law Blog an article about a recent Second Circuit decision disapproving the use of the fluctuating work week (FWW) method of calculating overtime when employees misclassified as exempt are deemed to be non exempt.

In this case, Hasan v. GPM Investments, LLC, the employees were classified as exempt by their employer and then filed a collective action, seeking a determination that they were non-exempt.  The Second Circuit was ruling on the validity of a pre-trial motion to exclude the use of the FWW method to calculate damages if the workers were deemed non-exempt.

The Court held that the FWW method could not be used because the parties had never agreed to be paid at overtime rates that would vary with every week, depending on the number of hours they worked.  The Court also held that employees subject to FWW overtime should also receive their full salary for these weeks in which their hours totaled less than forty, but this never happened.  Indeed, the job description for these so-called Managers specified that they work fifty-two (52) hours per week.

David points out that this case highlights the potential dangers for employers in trying to minimize damages in an exemption case by arguing that the lower-paying FWW method should be used to determine damages.  I agree.  I have often counseled employers that misclassified workers will receive overtime at the FWW rate and other courts have approved this method of payment.  I have also seen the Departments of Labor, federal and state, use the FWW method when they determine that workers have been misclassified.

What this portends for the future is unsure.  A split in the Circuits usually means that at some point the US Supreme Court will decide the issue.

To be continued….
 

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When I begin defending a Fair Labor Standards Act collective action, one of the first strategies I look for is to find some way to kick the named plaintiff out of the lawsuit, whether through, perhaps, a Rule 68 Offer of Judgment or a contention that they are not a valid part of the lawsuit and so the whole thing must go away.  The Sixth Circuit has recently shown that this maxim still holds true. The Court dismissed a collective action in which the lead plaintiff, a Nurse, had not filed the required consent form, i.e. opt-in, prior to the running of the statute of limitations (for the named plaintiff).  The case is entitled Frye v. Baptist Memorial Hospital Inc. et al.

The plaintiffs contended that they were not paid for working through their lunch breaks. The Court noted that the failure of the lead plaintiff to file the opt-in, although, on one level, a minor detail, yet doomed the lawsuit.  The Court observed that “redundant though it may seem to require consents from the named plaintiffs in a class action, the FLSA’s mandate is clear.”  The Court also affirmed the lower court’s decertification of the class, as there was not enough evidence to show that all members of the putative class were similarly situated.

The theory of the plaintiffs was that the automatic deduction of time for a lunch violated the law, but the Court duly noted that such a policy was itself compliant with the FLSA.  As such, the mere existence of the policy could not serve as the linchpin of an argument that all employees were similarly situated.  I believe this is extremely important, as there has been an explosion of class action cases involving so-called automatic lunch deduction cases.

It is also significant from the perspective of attacking the propriety of class certification simply because off-the-clock work may occur amongst a group of employees.  This is because the circumstances that lead to an employee working off the clock or through lunch are individual in nature and cause and this require individual scrutiny, which (as I have often preached) is the anathema of a class action attempt for certification.

The lead plaintiff had argued that the FLSA did not require him to file an opt-in and also that his attorney-services agreement and his deposition satisfied the requirement in a de facto manner. The Sixth Circuit soundly rejected that claim, noting that there was a qualitative difference between an individual action and a collective action.  The Court also specifically stated that an unsigned deposition did not constitute a written consent, although the Court noted that the FLSA does not dictate a particular manner in which the written consent must be done.

In sum, here there was a confluence of two very strong defense tactics—knock out the named plaintiff, by any means necessary, and, hit hard at the need for individual scrutiny. ff
 

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When a labor contract contains provisions that address wage hour issues (such as travel time, or donning and doffing time) a defense argument to dismiss a FLSA suit is that the suit is preempted by federal labor law.  This is essentially asserting that the wage hour issue is inextricably tied with contract interpretation so it for an arbitrator, not a court.  That principle was at the heart of a recent FLSA action where the judge declined the invitation to dismiss a lawsuit alleging overtime was not aid, because the court concluded that it was still an open issue whether the parties’ labor contracted barred the claims.  The case is entitled Fenison et al. v. Prime Healthcare Centinela LLC and was filed in state court in California.

“To avail itself of [a statutory exemption to the overtime law], defendant must establish, inter alia, that there is a valid collective bargaining agreement,” the judge found, in denying the employer’s summary judgment motion. “ There is a triable issue of material fact as to whether there is one. Plaintiffs have submitted evidence which they contend supports the position that there is not, while defendants contend that there is.”

The plaintiffs alleged that they were denied overtime. In California, prior to 2000, there was no daily overtime or “clock overtime” requirement, which means that employees working more than eight hours in a day were entitled to overtime (as opposed to forty hours in a week).  Then, in 2000, the law changed and clock overtime became the law of California.  The plaintiffs allege that the hospital, in response to the law, reduced the regular rate and added on a differential payment to avoid paying the hourly employees any more than it had done when the prior law was in effect, allege the plaintiffs.

The suit seeks to cover some fourteen hundred hospital workers who worked under the allegedly improper system since 2007.  The hospital moved for summary judgment, asserting the labor contract as a defense.  “Plaintiffs’ employment with Centinela has always been governed by the collective bargaining agreement. It follows that plaintiffs’ claims for unpaid ‘wages’ is completely barred by [the statutory exemption]”

The judge, however, denied the motion, finding that there had not been enough evidence submitted to demonstrate that there was a valid labor contract between the parties and that it controlled the issue sought to be litigated.  The court will, notwithstanding this ruling, allow the employer to file a new motion, accompanied by necessary affidavits, so the hospital may still prevail on the preemption defense.
 

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I just read of a report that notes that a record number of FLSA wage-hour lawsuits were filed in 2012  The report notes that more than seven-thousand FLSA cases were litigated, showing an increase from the year before.  If anyone thought that these kinds of suits were starting to slow down, the truth is they are still abundant, with a knowledgeable plaintiff-side bar looking for them, mostly. I think, on the Internet..

The numbers include both single plaintiff and collective (e.g. class) action cases.  There has been, however, an explosion of class actions, as oftentimes, there are numerous employees performing the same duties or with the same job title, especially if it is a company of size or spread out across the country.  The cases become somewhat formulaic, from a plaintiff’s counsel’s side, coupled with the risk that the employer will have to pay out large attorney fee awards the longer that the case goes on.  That is the reason this (to me) disturbing trend is continuing.

The report cited some reasons for this continuing supply of wage hour/overtime cases, such as the poor economy causing layoffs, sending unhappy workers to lawyers’ offices.  I think that is valid, but I agree more strongly with one of the other listed causes---a general ambiguity and grayness to the FLSA (and state counterparts) that makes it difficult for the most well meaning employer, who wants to comply with the law but makes (reasoned) judgments on exemption and working time issues that are all too easily alleged to be violative of the FLSA.

Coupled with the potential risk of large dollar damage awards and equally large fee applications, employers find it more prudent to settle, especially if there is some real risk and the case has not proceeded that far.

For an employer, the most proactive way to defend against such a lawsuit is to conduct a keen, objective self-audits, scrutinizing job descriptions and matching them up against actual duties, for exemption determinations as well as examining whether, if at all, pre/post shift activities are engaged in as they might be alleged to be “work.”  In this manner, employers can bestow upon themselves some measure of confidence that, although they may have to pay their lawyers to defend a case, they won’t be paying the other side’s!
 

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I have written many times about making Offers of Judgment in a FLSA collective action case, in an effort to eliminate the lead plaintiff and perhaps then dispose of the entire case before it escalates into conditional certification and beyond.  I had utilized the procedure to defeat such a motion and, as my client had fixed the procedure that was allegedly broken, we broke the back of any future possible class action.  Then, the tide started to turn and some cases came out holding that such an a tactic was an attempt to “pick off” the named plaintiff and unjustly and unfairly stymie the action.  The Third Circuit (where I practice) had in fact come down strongly against the use of the Offer as a means of disposing of a case.

Well, maybe things are going to change.  The United States Supreme Court has agreed to review this Third Circuit case to determine whether an employer's offer of judgment that fully satisfies the named plaintiff's FLSA claim moots the underlying collective action in a scenario in which the named plaintiff is the only party in the case and before he has moved for a collective action.  The case is entitled Genesis Health Care Corp. v. Symczyk.

The plaintiff worked for the Pennyback Center in Philadelphia and alleged that her employer automatically deducted a half-hour for lunch every day, notwithstanding that the employee(s) claimed that they often worked through lunch.  The Company answered the Complaint and, simultaneously, filed a $7,500 Offer of Judgment under Rule 68 of the Federal Rules of Civil Procedure.  The plaintiff rejected the Offer, although she conceded that it would have completely satisfied her alleged injury/claim.

The federal district court ruled that it had no jurisdiction and dismissed the entire case as moot. The Third Circuit reversed, ruling that this could allow employers to “pick off” the individual named plaintiff(s) before there could a ruling on whether class certification was warranted. Genesis has contended in its cert petition that this case presents “an ideal vehicle” to resolve splits in the federal Circuits as to whether such an unaccepted Rule 68 Offer of Judgment does moot the entire action.  The Fourth, Seventh, and Eighth Circuits would find the case moot, the Third, Fifth, Ninth, and Tenth Circuits would not.

Since Article III of the Constitution constrains federal courts to hear only actual “cases and controversies,” the theory is that once plaintiff turns down full relief, her case cannot proceed and as she has not achieved the granting of class certification, there is no case, unless another lead plaintiff is found.  This is rather straightforward law, but the Third Circuit seemed to inject a policy basis into its holding, taking strong objection to what it must have perceived as an “unfair” tactic to get out of a class action.  The problem with this reasoning is that FLSA collective actions are very different from Rule 23 class actions, where the Third Circuit found its support, because the FLSA lead plaintiff is not the “representative” of other allegedly similarly situated employees who may later join the suit.

I am hopeful that the Company will prevail.  I think, under Rule 68, it should.  How great would that be?

To be continued…
 

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There have been literally dozens and dozens of cases involving the exempt status of bankers, loan officers and other similar job classifications.  In a scenario that I find somewhat off beat, a HSBC Bank employee has filed a proposed collective FLSA action.  The category of employee are so-called “relationship bankers,” which is not the traditional kind of employee filing such a suit.  The theory, however, is very traditional.  The employee claims that he and similarly situated people were misclassified as exempt, worked more than forty hours on a regular basis, and were not paid overtime.  The case is entitled Hauer v. HSBC Bank USA and was filed in federal court in the Southern District of Florida.

The plaintiff stated that the relationship bankers earned a base salary.  Their job duties were primarily providing customer service.  That encompassed the solicitation of new customers, the opening of accounts and the selling of financial products.  They were classified as exempt under the administrative exemption.  The plaintiff alleges (as he must) that the failure to pay overtime was intentional and, therefore, a deliberate policy or practice that allegedly applied to all relationship bankers..

The suit seeks to add additional individuals employed as relationship bankers (from June 2009 forward) and is seeking, at this time, a nationwide class.  Significantly, this is not the first time HSBC has been sued over its overtime policies.  Last autumn, a fund accountant sued the bank, in another class action, also based on a misclassification theory.  In California, an operations officer had also filed a proposed state class overtime action, but that case was settled.

It appears that the only applicable exemption for the relationship banker position is the administrative exemption.  On that score, however, the duties they discharge appear to be the “white collar production” work that courts, in a long line of cases, have found is not suited for the exemption.  This is because their duties do not appear to impact “general business operations,” as required under the regulations.  Moreover, they appear only to exercise skill and appear to apply established methods to different factual circumstances, as opposed to using discretion and independent judgment.
 

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Since the Supreme Court decision in Wal Mart Stores, Inc v Dukes, there has been considerable litigation about whether its holding applies to other kinds of class actions, most notably FLSA class actions, with courts coming down on both sides of the issue.  Now, in a case involving a proposed class of loan officers, a federal judge has taken the view that Dukes is not dispositive on the class certification issue.  The case is entitled Myles v. Prosperity Mortgage Co., filed in federal court in the District of Maryland.

The judge rejected Prosperity Mortgage Company’s contention that Dukes applied to all class actions. Instead, the judge held that the Supreme Court holding in Dukes applied only to Rule 23 actions and not to the collective, opt-in action that makes a FLSA case unique (and somewhat different from the Rule 23 action).  The Dukes principles were certainly not germane to the question of whether so-called conditional certification should be granted..

The Dukes rationale focused on the premise that a class cannot be certified where each class member might be entitled to a different remedy from the defendant than other members of the class.  The judge found that “no local management discretion is at issue and no individualized inquiry is necessary to determine why individual loan officers were disfavored. " Thus, the class was homogeneous and not in need of scrutiny for each class member.  Conversely, in FLSA cases in which Dukes has been held to apply (as I have written about) the defense won based on an “individualized assessment” defense.

The plaintiffs claimed that they were misclassified and therefore denied payment of proper overtime.  Then, in April 2011, the Company changed their status to non-exempt and began paying overtime after forty hours.  This raises the interesting side note of whether this re-classification (whether voluntary or prompted by the lawsuit) could be used as “evidence” of a prior errant classification.  That remains to be seen.

My two cents as a management side practitioner.  Keep advocating the application of Dukes and the “scared” dogma that the need for individualized scrutiny undermines the viability of the proposed class.
 

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Since the Supreme Court decision in Wal Mart Stores, Inc v Dukes, there has been considerable litigation about whether its holding applies to other kinds of class actions, most notably FLSA class actions, with courts coming down on both sides of the issue.  Now, in a case involving a proposed class of loan officers, a federal judge has taken the view that Dukes is not dispositive on the class certification issue.  The case is entitled Myles v. Prosperity Mortgage Co., filed in federal court in the District of Maryland.

The judge rejected Prosperity Mortgage Company’s contention that Dukes applied to all class actions. Instead, the judge held that the Supreme Court holding in Dukes applied only to Rule 23 actions and not to the collective, opt-in action that makes a FLSA case unique (and somewhat different from the Rule 23 action).  The Dukes principles were certainly not germane to the question of whether so-called conditional certification should be granted..

The Dukes rationale focused on the premise that a class cannot be certified where each class member might be entitled to a different remedy from the defendant than other members of the class.  The judge found that “no local management discretion is at issue and no individualized inquiry is necessary to determine why individual loan officers were disfavored. " Thus, the class was homogeneous and not in need of scrutiny for each class member.  Conversely, in FLSA cases in which Dukes has been held to apply (as I have written about) the defense won based on an “individualized assessment” defense.

The plaintiffs claimed that they were misclassified and therefore denied payment of proper overtime.  Then, in April 2011, the Company changed their status to non-exempt and began paying overtime after forty hours.  This raises the interesting side note of whether this re-classification (whether voluntary or prompted by the lawsuit) could be used as “evidence” of a prior errant classification.  That remains to be seen.

My two cents as a management side practitioner.  Keep advocating the application of Dukes and the “scared” dogma that the need for individualized scrutiny undermines the viability of the proposed class.
 

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In FLSA collective actions, every person who joins the suit must opt in by signing an opt-in form. Even the lead plaintiff must do that in order to officially be part of the class.  On several occasions, I have argued to plaintiff's counsel that the failure of the lead plaintiff(s) to themselves execute the op-in form has further eroded away that person’s possible recovery period and/or abrogated the entire class action.  (And it has worked). Now, in an interesting case that cuts against this premise, a federal judge has permitted a collective action filed by a class of exotic dancers to proceed, notwithstanding the failure of the lead plaintiff to sign and file the (I thought) required opt-in form.  The case is entitled D'Antuono et al. v. Genna and was filed in federal court in the District of Connecticut.

The employer had argued that the lead plaintiff, who separated in December 2008, never filed the consent form and therefore had not stopped the statute from running, effectively eliminating any recovery on her part.  This was consistent with the law, which mandates all plaintiffs sign in to the suit.  The plaintiff, Cruz, argued that a 2011 Affidavit she had submitted evidenced her consent to join the suit and should be taken as the equivalent of an opt-in form.

The court concluded that the affidavit was sufficient to meet the notice requirement and noted that the issue would not have even become a problem, if the consent had been filed when the complaint was originally filed.  The court stated that “despite this lapse, the court reads Ms. Cruz' affidavit broadly as implicitly verifying the complaint, expressing an interest that legal action be taken to protect her rights and expressing an interest in being a party plaintiff."

The lawsuit centers around allegations that the plaintiffs were not independent contractors, another in a long string of these so-called stripper cases, where the crux of the theory is that the employer did not properly pay minimum wage.  Some of the plaintiffs were ordered to arbitrate their claims on the basis of the holding in AT&T v. Concepcion, but plaintiff Cruz had not signed the "entertainment lease" that contained a mandatory arbitration clause.

The Court’s taking the Affidavit as a de facto opt in form is disturbing.  What other “slippage” will there be in the kinds of documents and filings that a court will accept as the equivalent of an opt-in form?  Put differently, a defense previously available to employers to defeat a class action by kicking out the lead plaintiff may be endangered.  We will see if other courts follow this lead, or whether this decision is more aberrational in nature.
 

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In FLSA collective action cases, there has been a doctrine of law prevalent for a number of years. Federal claims and state law claims are not compatible and cannot be maintained in the same lawsuit.  I have successfully moved to sever New Jersey state claims when made components of a FLSA action.  What that does is to erode away the state statute of limitations, while the motion is pending and decided.  The Third Circuit, in a case entitled Knepper vs. Rite Aid Corporation has now changed this longstanding principle.

This brave new world has emerged because the Third Circuit has held that state law class-action, overtime claims and FLSA collective action claims were not, ab initio, incompatible.  In a precedential opinion, the Third Circuit has reversed a district court, which was following the long-established rule.  The Court “disagree[ed] with the conclusion that jurisdiction over an opt-out class action based on state-law claims that parallel the FLSA is inherently incompatible with the FLSA’s opt-in procedure.”  Although the Court reversed on the inherent incompatibility issue, it affirmed the portion of the decision finding that the FLSA did not preempt state law on this matter.

The plaintiffs were Assistant Managers and had opted in to the FLSA collective action.  They then filed state law claims in Maryland and Ohio.  The plaintiffs contended that under the Class Action Fairness Act, the state law claims could be maintained due to diversity jurisdiction and allowed to proceed, although the actions would be parallel to the federal case.

The district court held that the Rule 23 opt-out class actions, founded on laws that provided the same remedies as the FLSA, were incompatible with opt-in process of the federal court..  The lower court extended the incompatibility doctrine because it had usually been applied to scenarios in which the federal and state claims were filed together, i.e. the hybrid cases.  In this situation, separate state lawsuits were instituted.

The Third Circuit disagreed. “We join the Second, Seventh, Ninth and D.C. circuits in ruling that this purported 'inherent incompatibility' does not defeat otherwise available federal jurisdiction."  I disagree.  I think this is a way of giving plaintiffs the ability to circumvent the FLSA, which is the reasoning adopted by the courts that had applied the doctrine in these hybrid cases.
 

More to follow, I am sure...

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I have often written that conditional certification in a FLSA collective action is fairly easy to get and de-certifying a class is difficult, once that conditional certification has been achieved.  Well, every rule has its exceptions.  A federal district court judge has recently de-certified a class of IBM call center employees who were claiming compensation for preliminary work.  The case is entitled Seward v. IBM Corp. and was filed in federal court in the Southern District of New York.

The court concluded that too much individual assessment was warranted, thus destroying the needed commonality for the class to exist.  The court stated that the “plaintiff did not show he shares common factual and employment settings with all of the opt-in plaintiffs due to the existence of a sufficiently uniform and pervasive policy requiring off-the-clock work.”

The plaintiffs had requested that the judge assign them to sub-classes as opposed to a single “large” class, but as they had not raised that issue before the Magistrate Judge (who had issued a report recommending de-certification) the Judge refused to consider that request.  The response from the plaintiffs is that they will file individual suits.  Their lawyer asserted that they "intend to file dozens of individual cases to protect our clients' rights."

This case is similar to others I have posted on and is typical of this new wave of class action suits based on off-the-clock working time that is allegedly not being paid.  The lead plaintiff claimed that he (and the others) were not compensated for their time booting up their computers and the computer programs that were necessary for them to do their work.  Thus, their theory is that these preliminary activities were integral to the performance of their primary job.

The company seized upon the “individual” defense.  It argued that the workers worked on a number of different teams, in different departments and also their work procedures differed as well.  The Magistrate Judge agreed, finding that there was not the requisite commonality or overall practice that required off-the-clock work.  The Magistrate found that as there were differences in their job duties, as well as management expectations of the various teams, commonality was lacking.

I applaud this result.  I emphasize again that the first line of defense in collective actions is the individuality theory.  A caveat----don’t wish for something because you may just get it. If the defense succeeds in destroying the class, the employer, as here, may be faced with and left to defend dozens (or hundreds) of individual lawsuits.
 

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There has been a lot of legal news being made recently concerning arbitration agreements and the Fair Labor Standards Act. Many of these cases have gone for the employer.  In a recent case, however the Fifth Circuit on ruled that a class action could proceed judicially, despite the existence of an arbitration provision, where the arbitration agreement included an “escape hatch” for the Company that rendered the agreement unenforceable.  The case is entitled Carey v. 24 Hour Fitness USA Inc.

The problem was that the agreement permitted the Company to retroactively change the agreement or completely terminate it.  That unilaterally reserved right to change the terms and conditions of the employees’ employment showed an improper balance of “fairness” weighed disproportionately in the employer’s favor.  The Fifth Circuit stated that if “an employee sought to invoke arbitration with the company pursuant to the agreement, nothing would prevent 24 Hour Fitness from changing the agreement and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest.”

The Company had sought to compel individual arbitrations, under the policy in the Employee Handbook and it asked the Court to honor the arbitration provision.  The lead plaintiff countered by contending that the arbitration clause was illegal under Texas law because one party could avoid arbitration (possibly depending on its view of whether it was going to win the case).  The district court agreed and the Company appealed.  The Company argued that the arbitration provision was proper because the Company was duty-bound to notify the employees of the changes and secure their acknowledgment of those changes.

The Fifth Circuit disagreed, concluding that these procedures did not save the provision from being “illusory.”  The Court held that “the fundamental concern driving this line of case law is the unfairness of a situation where two parties enter into an agreement that ostensibly binds them both, but where one party can escape its obligations under the agreement by modifying it.”

The lesson for employers is simple—make any arbitration provision one that is genuinely fair and does not allow wholesale, unilateral modification.  I believe the strategy of channeling these claims into arbitration is often the right one, but not if the employer starts out with a serious, self-induced, obstacle.
 

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The U.S. Supreme Court’s recent holding in AT&T Mobility LLC v. Concepcion has been increasingly used by employers in defending against and, in seeking dismissal of, FLSA collective actions.  This tenet received new emphasis in a recent decision by the US Supreme Court in which the Court vacated a California court decision holding that an employee could proceed before the California Department of Labor Standards Enforcement (DLSE) with wage claims against his employer, notwithstanding that he had executed an arbitration agreement.  The case is entitled Sonic-Calabasas A. Inc. v. Moreno in the U.S. Supreme Court.

The Court sent the case back to California state courts for further processing in light of the April 2011 decision in Concepcion.  The essence of that earlier holding was that “states cannot require a procedure that is inconsistent with the [Federal Arbitration Act], even if it is desirable for unrelated reasons.”  Counsel for the plaintiffs stated that he could not understand how the Concepcion holding applied to the facts of the case.  The case involved a claim by an employee against a car dealership for allegedly unpaid vacation days.

Although he had signed an arbitration agreement, the employee submitted an administrative wage claim with the DLSE, under the state Labor Code.  The Company petitioned state courts for an order compelling arbitration.  The Company argued that the worker had waived his right to proceed judicially and had to utilize arbitration for a resolution of his claim..

Although the Concepcion holding applied to a consumer transaction, where arbitration provisions are commonplace in consumer contracts, a number of federal courts have extended its reach to collective and class action overtime cases.  In this case, the rationale was applied to a wage payment action where no wages are sought but rather only accrued vacation time.

I am still cautious, however, about urging clients to incorporate arbitration provisions and class action waivers in every employee handbook as I worry about the specter of a dozen (or hundred) individual employee arbitrations where the claims and defenses are the same, which is why the “class action” manner of proceeding was “invented.”
 

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When plaintiffs file a FLSA collective action, they always claim that the employer acted willfully, so the plaintiff (and class) can reap the benefit of an extra year, a third year, on the statute of limitations. One of the defenses to such a claim is that the employer acted in good faith on the recommendation or advice of its counsel in putting into practice the compensation practices at issue.

When an employer, however, does not take the advice of counsel, then (obviously) the good faith defense to willfulness is lost.  That is precisely what happened in a case entitled Mumby v. Pure Energy Services (USA), Inc., which came out of the Tenth Circuit.  The issue concerned whether an employer could legally pay its field service employees a “day rate.”  As the employer did not take the advice, the extra statute year was found warranted.  The defense was denied because, in a strange twist, the employer claimed it could rely upon and then disregard the advice of its lawyers.  Can’t have it both ways, ruled the Tenth Circuit.

The employees, who worked for an oil company, worked twelve-hour shifts, seven days a week, making a total of eighty-four hours for each work week.  As compensation, they received a lump sum for each day, a so-called “day rate.”  Under the plan, the employees received the same compensation, regardless of the hours worked in any week, which were always in excess of forty (entitling them to overtime payment).  The employer also neglected to keep records of the hours worked, whether on a daily or weekly basis. Although overtime hours were worked, the employer did not pay any premium compensation.

In 2005, a new management team took over and a payroll manager became concerned that the compensation practice did not comply with the FLSA.  The Company then sought an attorney’s advice; the payroll manager confirmed that the method of payment was appropriate, as long as the day rate was separated into straight time and overtime rates and the number of hours worked in a day did not exceed twelve.  The Company, however, ignored the advice and continued not to properly pay employees, i.e. by showing the breakdown of hourly rates and also had employees work more than twelve hours in a day.

Under these facts, the Tenth Circuit refused to allow the employer the benefit of the good faith defense.  That was a costly refusal for the employer as, depending on the number of employees involved and the hourly rates at issue, that extra year could produce hundreds of thousands of dollars of additional liability.  The lesson for employers is plain----always check with labor counsel conversant in wage hour law as to the legality of certain compensation practices (e.g. classification issues, computation of overtime) and follow the advice.

It pays off on the front end, by effecting compliance with the law and pays off on the back end (if it gets that far) by avoiding a third year of potential liability in a FLSA collective action.
 

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Two years ago, I made an Offer of Judgment in a collective action FLSA case where the named plaintiff refused the Offer, which then allowed me to make a motion to dismiss for mootness, which was granted by Honorable Susan Wigenton in the District of New Jersey.  Plaintiff’s counsel argued that we were picking off the named plaintiff in an attempt to thwart and diffuse the collective action, where the stakes were geometrically higher.  The Court rejected that contention and granted my FRCP 12(b)(1) motion.

After a very recent Ninth Circuit decision, the result I obtained might not be tenable today.  This is because the Ninth Circuit has affirmed a ruling where the district court refused to dismiss a collective action in the context of a refused Offer of Judgment, holding that the case is not moot as long as the named plaintiff (who had been offered full relief) was still able to file a timely motion for conditional certification.  The case is entitled Pitts v. Terrible Herbst Incorporated.

The plaintiff alleged a failure to pay overtime and couched his case as the garden variety FLSA collective action. In the interim, and before the plaintiff sought conditional class certification, the Company made him an unconditional Offer of Judgment for $900; his computed “actual” damages were only $88.  The Offer also included (as they all should) a statement that “reasonable attorneys fees” would be paid in addition to the dollars offered Pitts.  That Offer completely satisfied Pitts’ individual claim of $88 and when he failed to accept it, the Company moved to dismiss.

The district court, however, denied the motion, ruling that the Offer did not render moot the class action as a certification motion could still have been timely filed.  The Ninth Circuit agreed.  The Court held that allowing this tactic would permit a defendant to kill a perhaps otherwise valid class action by picking off or “buying off” the named plaintiff(s) and thereby escaping from a possibly significantly higher liability.

This is a dangerous ruling for employers. In the case I referenced above, the liability could have been significant.  We knew that and strategized the Offer of Judgment tactic in a legal “atmosphere” where there was a good deal of favorable case law, although at the district court level.  Now, as time passes, the law changes.  Given this holding and another holding from the Fifth Circuit a few years ago, the tactic of using Rule 68 to “pick off” the named plaintiff seems to have fallen into disfavor, forcing employers to litigate on the merits.

More often than not, that is not where we want to be.
 

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There is no job classification or category that is immune to “sponsoring” a FLSA collective action.  A recent case highlights this maxim.  A group of personal trainers and sales counselors who work for 24 Hour Fitness USA, Incorporated have filed two collective actions, charging that they were not paid proper overtime.  One case is entitled Constanza v. 24 Hour Fitness USA, Inc. and the other is docketed as Lee. v. 24 Hour Fitness USA, Inc.  Both were filed in federal court in Florida.

The allegations include not only claims of unpaid overtime, but also, more significantly, allegations that the supervisors were directed to alter and change time records, if the records showed that employees were entitled to overtime.  The plaintiffs claim that the “official” company policy was to not pay overtime and to do what was necessary, i.e. altering records, to accomplish that goal.  This, plaintiffs contend, was in the face of company knowledge that the plaintiffs ordinarily worked more than the maximum of forty hours per week.

The implications here are troubling, if not staggering.  It is a sufficiently damaging violation to not pay overtime properly, but when there is a deliberate corporate policy to control labor budgets by directing managers to alter records, the stakes are raised geometrically.  Not only does this allow plaintiffs to essentially allege they worked an inflated number of hours of overtime, with little or no way to refute such claims, the alleged wrongdoing robs the company of any pretense of any good faith defense and may well expose the Company to significant additional liability.  If the plaintiffs prove there was an intent to deny them overtime, it is hard to say where that could lead.

The first plaintiff, Constanza, seeks to represent a class of fitness managers from any club in the entire United States; these workers give personal training lessons and sell training packages.  The second set of named plaintiffs seek to certify a class of sales counselors who sold health club memberships and who were paid on commission, again, in a nationwide class.

As the classes sought are nationwide and if plaintiffs can establish the commonality of an overall corporate practice to not pay overtime and/or falsify records, this class has the capacity to generate, literally, millions of dollars in exposure and (requested) attorneys fees.  As an exemption defense is likely not possible, the only defense is that the hours claimed as work hours are not, in fact, work hours.  But, with the allegation that records were falsified, I fear for the viability of such a defense.
 

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For those of us on the management side, we have been fighting back from a seemingly endless stream of Fair Labor Standards Act class actions, where, in many cases, conditional certification seems to be too easily granted.  The case then proceeds on dangerous ground for the employer, because to fight a case to trial entails tremendous possible exposure, but to settle the case, after conditional certification is granted, will also involve no small sum, particularly as the FLSA is a fee-shifting statute and there is often intense negotiation and debate over legal fees for plaintiffs’ counsel.  Well, as I have been writing about recently, perhaps the tide is turning the other way, just a bit.

I say this because a federal judge has last week dismissed a class action filed against hospitals affiliated with the Caritas Christi network, where the allegation was improper payment of overtime to a class that encompassed more than 12,000 employees.  The court ruled that the plaintiffs failed to adequately state their claims under the FLSA.  The case is entitled Pruell et al. v. Caritas Christi and was filed in federal court for the District of Massachusetts.

The court granted the defendant’s motion to dismiss, concluding that the Complaint did not make out a collective action under the statute.  The judge stated that “it is not sufficient simply to repeat the statutory standard in other language; in other words, to say, ‘I worked over 40 hours and wasn’t paid’ is equivalent to saying. ‘ The statute requires payment for over 40 hours.  I have a claim under the statute.”

The defendants had essentially contended that the allegations were “pressed from a mold” and were “almost entirely hollow recitations of legal elements and provided no information about even the entities for which the named plaintiffs worked, much less the activities that they claimed they were due compensation for.”  The judge agreed and dismissed the class action.

I have seen many cases where the plaintiffs submit canned, cookie-cutter affidavits in their attempts to secure conditional certification.  This case presents a hard lesson for future plaintiffs and is instructive for defense attorneys in that they now have another weapon to defeat a motion for conditional certification.
 

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When the decision in Wal-Mart Stores, Inc. v. Dukes, recently issued, I opined in this Blog that its rationale could be used in defeating and defending FLSA collective actions, although Dukes itself was a discrimination case and not a wage-hour lawsuit.  Other commentators disagreed.  Well, it does not seem to have taken long before the results are in and it seems I was right.

Relying on the Dukes decision, a federal judge has decertified a class of managers employed by Dollar Tree Stores, Inc, who had filed a misclassification collective action, alleging that they were really non-exempt and entitled to overtime pay.  The case is entitled Cruz et al. v. Dollar Tree Stores Incorporated and was filed in federal court in the Northern District of California.

In Cruz, the district court concluded that this major development represented by the Supreme Court decision made it plain to the court that letting the case proceed would entail “unmanageable difficulties” in determining whether particular employees spent the majority of their time performing managerial duties or, put differently, whether management was and remained the workers’ “primary duty.”  The court stated that the “plaintiffs have failed to provide common proof to serve as the ‘glue’ that would allow a class-wide determination of how class members spent their time.”

The judge was very hesitant about permitting the case to remain a class action, as the plaintiffs were going to base their case on a good deal of individual testimony and other proposed proofs of the necessary commonality aspects of the proposed class were deemed lacking.

I have often written about and “preached” the defense of “individuality” when employers are responding to a class action, especially when the issue is misclassification and the proposed class seeks to span several states or the entire country.  I now see, and believe even more, that these kinds of defenses have an enhanced vitality under Dukes that management-side, defense counsel should make the most of in current/upcoming FLSA cases.
 

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In a recent posting in the MS & K Employment Alert, Steven Schneider and Ivan Perkins wrote about the recent Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes.  In Dukes, the Court de-certified a class of more than one million people.  Although the Court held that the individual plaintiffs were entitled to determination of their damages on an individual basis, rather than by the application of a “formula” to their situations, the narrow majority (5-4) severely restricted the scope of class actions.

The Court essentially rendered the “commonality” requirement in class actions a much more tougher hurdle for plaintiffs to satisfy.  This is particularly true if the plaintiffs proposed class “suffers” from the malady of all workers not being subjected to a uniform, allegedly discriminatory company practice or policy.

The gravamen of the case was that the plaintiffs believed they were discriminated against because of their sex in compensation and opportunities for promotion and advancement.  The plaintiffs’ case was founded on statistical paradigms, such as the fact that women held two-thirds of the hourly jobs, but only one-third of supervisor/management jobs.  Both lower courts found that certification of the class was proper, a class defined as “[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26 1998.”

The majority held that Federal Rule of Civil Procedure 23(a), i.e. that “questions of law or fact common to the class,” was the so-called commonality requirement and then the majority ruled that commonality did not exist because the plaintiffs were unable to show that there was a general, overall “common” policy related to the discriminatory allegations raised.  In this regard, the best proof offered by the plaintiffs was a sociologist who proved he did not have any real idea how widespread the “discrimination” was.

The authors do not believe that a Dukes defense would be viable in a FLSA action, as such class actions take issue with specific company policies, such as methods for classification of employees or determining if so-called off-the-clock work is compensable, as opposed to making vague contentions that a particular manner of “thinking” exists within the managerial hierarchy. They believe that plaintiffs will be easier able to show a common policy applicable to wage hour issues than to show common thinking and/or a policy related to discrimination.

I understand their point of view, but I believe there might be a use for Dukes in FLSA/state law class action defenses, especially if there is no written policy and the plaintiffs are trying to make their case by showing or establishing a practice.
 

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Amanda Haverstick just penned something in a recent edition of Employment Law 360 concerning the use by employers in FLSA collective actions of demanding an early trial plan from plaintiffs’ counsel.  She writes that by requiring counsel to submit a plan at an early stage in the proceedings, the court can review it and (hopefully) conclude that the proposal for proceeding on a class basis is insufficient, which would then impel the court to decertify the class or deny class certification.

The recent case of Espenscheid v. DirectSat USA LLC, 2011 WL 2009967 (W.D. Wis. May 23, 2011), is illustrative of this newly emerging phenomenon.  Although the trial court initially certified the classes, just before the trial was to begin, the court changed its position and de-certified the classes.  This followed the court’s examination of the plaintiffs’ trial plan.

Scrutiny of the trial plan convinced the court that the case would not be manageable.  The court believed that the rights of absent class members and, importantly, the employer, would not be protected.  This is because the plan outlined that approximately forty plaintiffs would give so-called “representative testimony” which would, in theory, be representative for 2300 class members.  The plan then outlined that damages could be determined by calculating another representative (i.e. average) number of overtime hours for the forty representative plaintiffs and then extrapolating that average to the balance of the class members.

The court deemed this to be unacceptable and held that, notwithstanding the commonality and uniformity evidenced in the complained-of practices, which warranted an initial class certification, the case could not proceed as a class action.  In other words, the court determined that proving the claims of the plaintiffs would be contingent upon individual scrutiny of how they conducted themselves under the uniform policies.

I have written many times that the best defense of the employer in collective and class actions is to argue that individual issues dominate and that individual scrutiny is needed.  This presents a variation on that theme.  By requiring the plaintiffs to present a trial plan, the details of that plan may evidence or be argued to evidence a need for individual scrutiny and then the class will fall.  This should be done, as Amanda writes, as early in the case as possible to cut the case (and the attorneys fees) off at the pass.
 

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Just the other day, I posted about an off-the-clock class action that involved field technicians.  In this off-the-clock FLSA collective action, bus drivers claimed that they were not compensated for time that spent driving routes to become familiar with those routes.  They must have had a case because a federal judge has now approved a settlement between the Chicago Transit Authority (“CTA”) and the class of bus operators in which these plaintiffs will realize some recovery.  The case is entitled Reyes v. Chicago Transit Authority and had been filed in federal court in the Northern District of Illinois.

The settlement will compel the CTA to pay out up to $300,000 to resolve the plaintiffs’ claims. The CTA will also pay $350,000 in attorneys fees.  The entire issue involved claims of worked, but unpaid for, time. It appears that the drivers engaged in a practice labeled “cushioning,” which entails their driving various routes that they shifted over to, so they could learn the routes. Therefore, the service would run efficiently and not be impacted.  There were approximately 1100 current/ former bus operators who opted in to join the lawsuit (which was filed in February 2010.)

The Complaint charged that the CTA shut down a garage as part of a restructuring plan to deal with a budget crisis.  Some employees were laid off, others were transferred to different garages which meant that routes had to be changed.  The plaintiffs allege that the drivers who selected a new garage were ordered to learn (i.e. drive) every route operating from that garage and the drivers staying in their existing garage were mandated to train (i.e. drive) any routes transferred to that garage.

Not only were the drivers required to drive the new routes, the Complaint alleges they were supposed to do it outside of their regular shift and working hours.  The plaintiffs allege that the CTA stated that it would not pay any compensation for this extra driving work

Employers must be very wary of such off-the-clock work.  As I have often stated, if there is any element of employer compulsion in the activity, then the employees feel they must comply with the directive, even though they are not paid, or else they will (possibly) lose their jobs.  If the “work” at issue or being directed is at all related to the primary job (as this work obviously was) a court or an agency will certainly find this time to be compensable.  If the work is preliminary or postliminary and directly tied to performance of the main job, it will be compensable.

There is an explosion of such cases in recent years and I expect more.  Careful monitoring of workplace rules and practices is essential.  If an activity is found to be “work,” it is better to deal with that issue sooner rather than later, such as when standing in front of a federal judge (or jury). .
 

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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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A North Carolina-based employee has filed a FLSA collective action and a state law class action alleging, among other things, breach of contract, against Foot Locker Incorporated.  The Complaint alleges that the Company essentially deprived sales associates, cashiers and stockers from properly due wages and overtime through a systemwide policy and practice of managers altering and changing time records.  The case is entitled Kennedy v. Foot Locker Inc., and was filed in the Western District of North Carolina.

As evidence of the necessary commonality, the plaintiffs allege that the employment terms are found in the employees’ written employment offers, the Employee Handbooks disseminated by the Company, its corporate policies as well as other documents.  The gravamen of the plaintiffs’ theory is that they were ostensibly required to log work hours into the computer system, but they allege they were prevented from doing so, whether by accident or otherwise.

The Complaint’s most serious allegation is that “managers ... with the knowledge and/or complicity of the company, regularly altered the computerized records .... to reflect a lower number of hours worked by the retail employees.”  This was done because managers are under constant pressure to meet labor costs budgets and if they manipulated the time records to show that no overtime was worked and/or fewer hours were worked, they would be within budgetary constraints.

There may be hundreds of employees, current and former, involved in this matter.  In a similar case, in which a class was certified in September 2009, approximately 5,200 current or former Foot Locker workers have opted into the action.

The Company’s best defense is to show that this was not a widespread or systemic practice, but, at worst, involved but a few “rogue” managers.  The case does highlight, however, the increasing pressure on managers in every industry, but particularly in chain store/franchise situations to stay within imposed labor budgets and what some managers will resort to in order to accomplish that often difficult chore.
 

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A federal judge has conditionally certified a FLSA collective action which was instituted by a production workers in an action in which the plaintiffs claim that many kinds of payments were not included when the company calculated their overtime.  There were lump sum payments, flexibility payments for working during certain operational contingencies, various night work premiums, holiday premium pay and annual payments for certain employees when they renewed their licenses.

Production bonuses or other promised payments must be factored in when paying overtime to non-exempt employees.  Unless a bonus or other kind of payment is not dependent on the occurrence of a particular event (e.g. attaining ten years of service/longevity) and is given completely at the whim of the employer, these payments increase the regular rate.  They must be allocated over the period of time (week, quarter, annual) that in which the bonus has been earned and then overtime paid accordingly.

When the payments are promised to employees in company policies or documents, the Fair Labor Standards Act is even clearer and more emphatic that they be included in the calculation of the regular rate.

Although these calculations add in very little to labor costs on a week-to-week basis, if they are not undertaken, then the potential liability should a lawsuit ensue may conceivably escalate quickly.  This is because it is likely that many employees are subject to the same policy and these smallish weekly amounts, when multiplied by (perhaps) several hundred employees over two or three years (the possible statute of limitations in a FLSA action) become an amount that may be daunting.
 

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When piece-rate workers work more than forty hours, the Fair Labor Standards Act has developed a formula for determining and computing their overtime pay.  It is first essential, however, to realize that such workers are due overtime and to understand that workers who work “with their hands” such as mechanics or technicians, are entitled to overtime.

The failure to comprehend these truisms has been demonstrated in a class action involving satellite television technicians, where a federal judge has just confirmed a $2.33 million settlement in an overtime collective action for such employees in Wisconsin and Michigan.  The case is entitled Wilcox v. Alternative Entertainment, Inc. and was filed in the Western District of Wisconsin.

The satellite installers claimed overtime and also alleged that their wages suffered improper deductions  The workers claimed that they were paid per installation, which is a piece rate, but when they worked in excess of forty hours, they received no additional compensation.  Thus, their theory is not only were they not paid overtime, but there were weeks when they worked so many hours in that particular week that their hourly rate did not even meet the federal minimum wage standard.

To add supposed insult to alleged injury, the workers also charge that the Company improperly deducted monies for poor workmanship, lost/stolen property or damage to the property of the homeowner where the satellite dish was being installed.  Not only was there no written authorization to do so, but the law in many States is clear that such deductions are illegal (although the employer may take disciplinary action against the offending employee).

There are approximately 900 employees who might be involved in the class.  Given that figure, the potential liability is/was geometrical, as the settlement shows.  Significantly, the judge awarded an attorneys' fees award of $776,666.  This is the other big danger in FLSA class actions—the law is a fee shifting statute, meaning that the employer must pay the plaintiffs’ attorney fees, which (as here) is often a large sum.

There has been a sharp rise in lawsuits in the cable and satellite industries.  The lesson to learn is that technicians or installers or similarly titled employees are non-exempt and if they work in excess of forty hours, they are owed overtime, regardless of the mode of their compensation (e.g. piece-rate, hourly, commission).

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In a FLSA collective action, a federal judge has denied conditional certification to a class of bus drivers and bus aides, who claimed overtime violations.  The denial was founded on the premise that the employees did not make even the modicum of a showing required for the obtaining of conditional certification.  This is usually an easy hurdle for the plaintiff(s) so this case becomes instructive for employers on how to fight such actions.  The case is White et al. v. Rick Bus Co. and was filed in the District of New Jersey

All that the plaintiffs produced/adduced were paycheck comparisons between the named plaintiff and his co-workers.  Even though the standard for conditional certification is a “modest factual nexus,” which is generally interpreted by federal judges to mean a variety of things, such as a few (identical) Affidavits, the evidence submitted here did not even reach that level.  The theory of the case is an overtime denial coupled with a contention that the Company’s record keeping system was faulty, thereby resulting in further wages owed to the employees.

The judge concluded that the plaintiff “provided mere generalizations and legal conclusions. ” The plaintiff also failed to “put forth any relevant facts for the court to consider, such as the names of any similarly situated employees.”  The judge did note there are two standards for conditional certification “dueling” in the Third Circuit in that some judges require no more than an allegation that the plaintiffs are subjected to the same company practice or policy.  Most judges, however, in the Third Circuit, require more than this and need some modicum of a showing of similarity between the named plaintiff and fellow class members.

The plaintiffs have also thrown in a “rounding” allegation, alleging that the Company practice of rounding down time was improper and also violated the FLSA.  Employers are allowed to round up and down, provided that, over time, employees are not short-changed.  This will be a tougher allegation for the plaintiffs to prevail upon.

I think this case sends a message on what is actually needed to secure even conditional certification.  I believe in those cases in which the plaintiff(s) submit only naked Affidavits, which nine times out of ten are identical, the Employer is better able to defeat a motion for conditional certification on the “modest factual showing” test, especially if the employer itself can demonstrate (i.e. deposition testimony) that there were “qualitative” differences between the named plaintiff and the others.
 

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A class of Loss Prevention Managers are suing their employer in a Fair Labor Standards Act collective action, contending they have been incorrectly classified as exempt.  Their cause has advanced a step, as a federal judge has just granted conditional certification to their proposed class. The case is entitled Templeton v. Fred Meyer Incorporated and was filed in the U.S. District Court for the District of Oregon.

As I have written many times, the essence of a collective/class action is that the employer has an overall policy or practice that applies to all allegedly similarly situated employees.  The plaintiffs here allege just that, asserting that the Company had a single policy, consisting of giving all of them the same title and, more importantly, job responsibilities and that all of the plaintiffs worked more than forty (40) hours per week.  As they were classified as exempt, they did not receive overtime and there is the crux of the matter.

The Company had opposed the conditional certification motion, contending that the Loss Prevention Managers were not similarly situated.  That essentially is the only defense, i.e. that individual scrutiny is necessary because there is not an overall/common policy or practice.

The judge, however, disagreed.  “It is premature at this early stage, however, to resolve that factual dispute primarily because plaintiff has not yet been provided with discovery sufficient to test defendant's contrary assertion that other LPMs are not similarly situated to plaintiff;” stated the Court.  The judge also noted that “moreover, it is speculative to presume LPMs who performed their jobs differently from plaintiff will, in fact, opt-in to this collective action if given notice.”

There is no dispute that these workers all worked more than forty hours per week.  The lead plaintiff, Templeton, claimed that not only did he work sixty (60) hours per week.  Indeed, the Company itself had a policy (according to a certification submitted by the plaintiff) requiring that Loss Prevention Managers to work at least forty-eight (48) hours week.  The Company claimed the protection of the administrative exemption for these workers, asserting that they regularly utilized discretion and independent judgment in the performance of their duties.

Again, the administrative exemption is very tough to prove, especially on the discretion and independent judgment prong.  If these employees follow established regimens and protocols and make decisions but within defined contours and limits, they are using skill and experience, not discretion and independent judgment.

Interestingly, there is a United States Department of Labor Opinion Letter holding that Loss Prevention Managers are exempt under the administrative exemption.
 

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When employers are compelling employees or “suggesting” to employees that they engage in work-related activities before or after they go on and off the clock, trouble is brewing.  In the latest of these working time class actions, a group of employees working for Lululemon Athletica Inc. have sued the company under the Fair Labor Standards Act ("FLSA"), claiming pay for time worked beyond their normal shifts.  The “work time” at issue is the watching of inspirational DVDs and the taking of exercise classes.  The case is entitled Brown v. Lululemon Athletica Inc. and was filed in the District Court for Northern District of Illinois.

The plaintiffs claim that the company had a system-wide policy on this issue, so the papers filed in court seek a class that may extend to at least three states.  These employees, dubbed “educators,” have alleged that the company, whose primary line of business is yoga-inspired athletic gear/clothing has compelled them to work a number of extra hours each week, which would take all of them into overtime situations and generating considerable liability.

The employees claim that they were required to view inspirational DVDs in their homes and attend mandatory staff meeting on a monthly basis, which took two hours.  They seek compensation for this alleged work time as well.

The employees have filed an amended complaint, where they specify that the possible class encompasses 1,400 current/former Lululemon employees who worked at least two overtime hours per week.  In frightening fashion, the complaint hypothesizes that damages may top five million dollars.

If the employer actually compelled these employees to engage in these activities and the activities can be demonstrated to have some integral connection to their work, there may be liability.  The flip side also applies---if the employees’ positions and their employment would be in jeopardy if they did not partake in these activities, or they reasonably feared their jobs would be in jeopardy, liability might also lie.

The underlying “moral” is for employers to self-audit their compensation practices, particularly as applied to these sideline-type activities, which are often hidden in the compensation radar.
 

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A class of former Domino’s Pizza LLC delivery drivers has succeeded in gaining conditional collective action certification in a Fair Labor Standards Act lawsuit in which they allege that the gigantic pizza chain paid them below the minimum wage, through the device of making them buy their own gasoline!  The case is Luiken et al v. Domino’s Pizza LLC. and was filed in the U.S. District Court for the District of Minnesota.

In the conditional certification stage, the burden for the plaintiffs is light.  They need to present some evidence that an overall policy or practice of the company was applied to all of them and from the application of that policy/practice, they were improperly paid.  Once they do that, they receive conditional certification, which can be challenged at a later time by the employer in a de-certification motion.

In response, Domino’s took the “traditional” employer position/defense, i.e. that conditional certification is inappropriate because the plaintiffs are not similarly situated and the court would need to engage in individualized examinations of the various employee claims.  The company also claimed that additional individual factors, such as the particular car model, route and total mileage affected reimbursements for gasoline expenses

The plaintiffs argued that there were but minor regional differences and were really nothing more than computational variations on a common theme, which was the overall unfair and wage-hour violative policy.  The court agreed with the plaintiffs, noting that at the conditional certification stage, all that is required of a class of putative plaintiffs is they establish a reasonable basis for their claims, meaning that all plaintiffs were subject to the same policy or decision,  This lenient standard was met through the submission of twelve affidavits from employees in four states. All of the affidavits (not surprisingly) made the same allegations and assertions.  The court also ordered the notice be sent to all possible class members, to stop the statutes of limitation from running, as each plaintiff’s own statute of limitations and recovery period is determined by the specific date he/she opts in to the case.”

This lawsuit highlights the fact that a collective action can emanate from anywhere, even from a company policy that, at first blush, appears innocuous and of little concern. 

We will wait and see if the plaintiffs end up saying “fill it up!” but not referring to their gas tanks, but rather their wallets.
 

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A group of employees has filed a lawsuit against a high-end Greek restaurant situate in the vacation haven of the Hamptons.  The plaintiffs, servers, are alleging that the employer improperly implemented a tip-pooling policy that violated the Fair Labor Standards Act (“FLSA”).  Four employees filed the case, but the allegation is there are 75 others similarly situated.  There has lately been a rash of tip pool class and collective actions filed, with large settlements and verdicts inuring to the plaintiffs.

This is because unless a tip pool is correctly implemented, the employer loses a significant advantage that it enjoyed, namely, the taking of the tip credit and then major minimum wage violations occur.   The case is entitled Sierra v. Orama Inc and was filed in the Southern District of New York.

Under the federal law (and most states), employers may take a tip credit, as concerns their tipped employees, i.e. waiters, busboys, bartenders, etc.  This means that the restaurant need not pay the full minimum wage (i.e. $7.25 per hour) but it pays only a small fraction of that (approximately 50%) with the assumption that the employee will derive the balance of at least the minimum wage from customers leaving tips.

If, however, employees who do not “customarily and regularly” receive tips are included in the pool, or a management employee shares in the pool, the validity of the pool is destroyed and with that destruction, the tip credits that had been taken by the employer are also ruled invalid.  That means for each hour worked by the tip employee, there is a shortfall for payment of the minimum wage. That means large-dollar violations.

The plaintiffs’ theory herein is that managers shared in the tip pool.  This has been the allegation in a number of cases emanating out of New York City restaurants, some of them very famous.  The lesson for restaurant employers is to ensure that managers have no share in the tip pool.  If uncertain as to whether someone is a true “manager,” it is safer to consider them as such and not to include them in the tip pool.

The downside is a very, very upset stomach for the employer.
 

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The Seventh Circuit Court of Appeals (based in Chicago) has reversed a district court judge who dismissed two Fair Labor Standards Act overtime collective actions instigated by a group of Chicago paramedics because the lower court judge found the claims were “hopelessly heterogeneous.”

Such a finding means that there is not the overall, common pattern, practice or policy that is the hallmark of a collective or class action. Instead, the federal appellate court ruled that the judge should have considered sub-classes, thus allowing the litigation to be maintained.  The case is entitled Alvarez v. Chicago.

The paramedics charge that the City of Chicago did not pay them proper overtime in ten different manners, but not every paramedic was impacted by every one of the allegedly improper pay practices.  Thus, on one hand, the plaintiffs argued that they were “similarly situated “ as to the overall premise of being denied overtime, but also that they each fit into one or more sub-classes. They claimed that once they were properly cubby-holed, the calculation of their individual damages would be relatively easy and a mechanical process.

“If common questions predominate, the [paramedics] may be similarly situated even though the recovery of any given [paramedic] may be determined by only a subset of those common questions,” the Court concluded.  The Court ruled that the federal district court judge erred by not even considering the establishment of sets of sub-classes.

The lower court was also criticized (and reversed) for not determining whether paramedics could proceed as individuals or via a series of separate classes, which would have been an alternative to a single, unified collective action.  There are currently about 300 paramedics involved in the litigation as they have signed the necessary opt-in forms, necessary under a FLSA collective action.

I believe this case presents an important question.  When is there sufficient dissimilarity, or a lack of a common policy, as to warrant a denial of conditional certification or a decertification of the class once certified.  When is there a sufficient overall similarity so as to allow a court to conclude that something is wrong for everybody, but that “something” is different for various groups so that they deserve their own sub-class.  A gray, gray issue, which may have to go beyond the Seventh Circuit to the US Supreme Court.
 

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A federal judge has thrown a nationwide collective action against Black & Decker out of court.  The suit alleged that the company did not pay employees for time allegedly worked off the clock.  The court found that the plaintiff did not prove that he had worked overtime.  The case is entitled Kuebel v. Black and Decker (U.S.) Inc. and was filed in the federal district court in the Western District of New York.  There could have been more than 200 employees involved.

This is a rare occurrence.  The granting of so-called conditional certification is usually a fairly easy hurdle for a plaintiff to overcome.  A few affidavits, perhaps some deposition testimony and that’s it. The key remains that some showing of similarity must be made, some showing that an overall policy or practice applied to all of the employees potentially involved.  That this plaintiff could not make the showing is significant.

The court found that the plaintiff “has not explained when and for how long he performed the off-the-clock work.”  The court continued and stated that “ because the undisputed facts demonstrate that plaintiff has failed to meet his burden, his claim for off-the-clock work fail as a matter of law.”

What is interesting in the context of this particular case is that the company had stipulated to the conditional certification of a class that was solely confined to the company policy of paying retail specialists for travel time, but only if the employee’s commute was more than sixty miles or sixty minutes.  The judge had found this policy legal in May 2009. (Note: Home-to-work travel is always non-compensable, so a company can legally implement a policy of paying for some component of this travel time if it so desires).

This does not often happen and that is why I write about it when it does.  The lesson for employers, on the merits of the controversy, is that they must never direct employees to do productive work off-the-clock and should have a policy in place relating to that issue.  Also, maintain accurate records of employee working time and, most importantly, have employees self-certify their working time (e.g. sign off on time card) every week.  That is the employer’s fail-safe, best protection against such suits.
 

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There are employers whose “smart” time clocks automatically make a thirty minute deduction every day for lunch, supposedly and assumedly taken.  I have railed against this practice, advising that the far safer thing is to have employees punch out and then back in for lunch, because someone, somewhere down the line, will assert that they worked through lunch but nevertheless had that half-hour deducted.  That chicken has now come home to roost.

A hospital/nursing home owner, Kindred Healthcare Inc. has been accused, in a proposed class action, of not properly paying employees because this employer has an automatic lunch deduction system, that deducts time for lunch, even if the employee allegedly did not take the lunch.  The case is entitled Samuel v. Kindred Healthcare, Inc. filed in the U.S. District Court for the District of Massachusetts.  It is couched as a collective action under the Fair Labor Standards Act (“FLSA”).

The Complaint alleges that there are “thousands” of potential class members.  This timekeeping system automatically deducts a 30-minute meal period from employees, but the employees contend they often have to work through lunch on patient care issues.

The Complaint also alleges that employees must stay at their desks or posts during their breaks and continue to work.  Work, according to the Complaint, “includes responding to pages, answering the telephones, replying to requests by patients, co-workers and management, and performing all other duties and responsibilities that are required.”

These cases are very tough for the employer to prevail upon, especially in a health care environment, where it is not beyond the realm of possibility that patient tasks and responsibilities might keep a worker (or workers) busy during their lunch.  To the contrary, it is also impossible to imagine that one thousand employees never took lunch for two years.  The worrisome thing is that by making the automatic deduction, without having some “fail-safe” mechanism in place so that employees can report that they worked through lunch, have the claim investigated and, if true, the time paid, then the employer has left itself very little wiggle room and a tough case to defend.

Smart clocks may be silly policy!
 

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In yet another case involving Assistant Managers, the named plaintiff in a exemption misclassification case has moved for conditional certification, after successfully defeating the defendant-employer’s Rule 68/Offer of Judgment strategy.

I have written about Rule 68 many times and have urged that this is a viable way for a defendant to close a case out, without going through the torture of protracted, extraordinarily expensive litigation. In this case, however, the federal judge concluded that this was an attempt to “pick off” the lead plaintiff and thwart the case for everyone else, so he denied the motion and is allowing the case to proceed.  The case is entitled Nash v. CVS Caremark Corp and is in federal court in the District of Rhode Island.

The employer moved for dismissal, on mootness grounds, as I have done, after making an offer of full relief to the named plaintiff in July 2009.  When the plaintiff rejected the offer, the company argued that the court no longer had jurisdiction over the case, because by rejecting the offer that would have provided him the maximum possible recovery, the plaintiff could not legally pursue the matter.

The court disagreed.  The judge saw this as an effort to cut the head off the case and prematurely terminate the litigation.  The judge wrote that “the present motion underscores the unique danger of tactical manipulation in FLSA cases.”  The court went on to note that “nothing in Rule 68 itself suggests that it should be used as a vehicle for sabotaging claim-aggregating devices.”  To the court, this defense action created a “virtually unwinnable” situation for plaintiffs in collective actions.

The judge saw the tactic as forcing the plaintiff to either pursue discovery very early in the case, when a court likely will deem it premature, or seek class certification and/or notice before discovery, which runs the risk of harming the interest of these as-yet undiscovered class members.  The judge decried this “moot-and-dismiss” tactic, as it might allow the company to forum-shop as well as plaintiff-shop.

I disagree with this judge.  Rule 68 exists and it exists for just this purpose.  I believe if the named plaintiff (and any early opt-ins) turns down the Offer, the case is and should be amenable to dismissal. Another response is to make the Offer to all class members, i.e. those who properly opt in to the action.  Then, the pick off argument fails.
 

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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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A federal judge has agreed to a settlement between the parties in a Fair Labor Standards Act (“FLSA”) collective action where a group of former employees sued the employer, a cement company, for overtime. The case, filed in federal court in Florida, is entitled Webster v. Cemex Inc.

Interestingly, the lead plaintiff, Timothy Webster, will recover only $2,600. Payments to the other class members have not been disclosed. The basis of the suit was that the Company paid the drivers by the delivery and did not pay overtime when the actual work hours exceeded forty (40).  The plaintiffs sought compensation for unpaid overtime for three years (seeking a willfulness finding) as well as liquidated damages and attorneys’ fees.

Although the Company asserted it had strong defenses against the claim, it settled this case, which had been consolidated with a second FLSA action against Cemex; that action was also lodged by drivers.

The issue comes back to exemption status.  If the drivers were non-exempt, they were entitled to overtime when they worked more than forty hours.  There is a computational formula built into the FLSA for determining how to compute overtime to workers paid by the delivery, or by the “stop” or on a commission basis, or a day rate, or any other form of compensation.  Ultimately, the employer must figure out the regular rate and then determine the overtime.

These drivers might or might not have fit within the motor carrier exemption, but likely no other exemption, certainly not the white collar exemptions as they were not paid a salary.  The lesson for employers is simple----absent an applicable exemption, all workers are entitled to overtime, regardless of the applicable computational methodology.
 

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