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

The National Association of Medicaid Directors (“NAMD”) is challenging the proposed rule to extend minimum wage and overtime protections to home health care workers.  Currently, home health care workers are exempt from the minimum wage and overtime requirements under the Fair Labor Standards Act.  Pursuant to the proposed change, any home health care work assigned to a household by a third party, such as a staffing agency, will be entitled to minimum wages and overtime.  However, home health care workers that are directly employed by an individual or household will continue to be classified as exempt employees.

In December 2011, the United States Department of Labor (“DOL”) announced the proposed rule change.  To date, it is still not clear when the revised regulation will be enacted.  Part of the delay may stem from the controversy that the proposed regulations has generated.  Labor rights advocates have argued that home health care workers are typically minorities and deserve to be fairly paid.  On the other side of the debate, the NAMD has argued that the added cost of paying home health care workers minimum wage and overtime would result in a diminished level of care.  Additionally, disability rights groups claim that the elderly and disabled will be forced into nursing homes due to the expected skyrocketing cost of home care.  Nursing homes will not be affected by the proposed rule as their workers are exempt from minimum wage and overtime requirements.

Staffing companies should be prepared for the likelihood that the proposed rule will eventually be enacted.  In the meantime, these businesses should examine which policies and procedures need to be put in place to comply with the rule change.  In particular, businesses will need to consider how to track and record the time worked by home health care workers so that they can be paid on an hourly basis.
 

• Print
• Comments
• Trackbacks
• Share Link

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

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

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

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

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

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

• Print
• Comments
• Trackbacks
• Share Link

I have noticed that there are not many lawsuits (e.g. class actions) brought that test the limits of the professional exemption.  That exemption, geared towards anyone with an advanced degree (lawyer, doctor, CPA, engineer) is fairly well defined and a lawsuit easily defended.  That rule, however, has its exceptions, as demonstrated by the granting of conditional certification to a class of more than three-hundred PriceWaterhouse auditors who claim that, since they were not CPAs, they were not exempt and are entitled to overtime.  The case is entitled Kress et al. v. PriceWaterhouse Coopers LLP and was filed in federal court in the Eastern District of California.

This development is another in a long saga of claims by such employees that the Company has, in a wholesale manner, misclassified them and denied them overtime.  The employees contend that they typically worked fifty-five hours per week during the tax season but were always denied overtime.

The Company has defended with the only defense that it can, the professional exemption as there seems to be little dispute that these employees worked the hours that the Complaint alleges. In other words, the Company is in for a dime, in for a dollar—if the defense is successful, then every member of the class gets nothing.  If it is unsuccessful, the liability will be astronomical (in all likelihood).  The plaintiffs counter by alleging that the Company’s required training regimen for its auditors coupled with the absence of additional training requirements renders the professional exemption inapplicable, as there was no advanced course of study required for the position.

The Company has also defended by contending that the actual duties and work of each associate must be scrutinized on a weekly basis, which means that too much individual scrutiny (my favorite defense) is necessary, thus defeating the class action.  This may actually turn out to be a better defense than the exemption defense?

When defending a professional exemption case, I always ascertain if an advanced degree is required and held by the employees at issue or an advanced license, like a CPA license. The difference between “staff accountants” or “junior auditors” which are non-exempt jobs and an exempt professional is that degree.  Management side practitioners must always start and end the analysis with that inquiry.
 

• Print
• Comments
• Trackbacks
• Share Link

The status of employees in the financial services industry has been the subject of numerous lawsuits and controversies.  The “new” FLSA regulations (from 2004) even postulate that a financial services employee can fit the administrative exemption, if their main job duty is not the selling of financial products.  Then, in March 2010, the US Department of Labor issued a “white paper” in which it went into great detail, explaining the (frankly) limited circumstances under which financial services employees (e.g. Loan Officers) could be exempt.

The Mortgage Bankers Association (MBA) has now taken this initiative to task, claiming that a lower court decision affirming the white paper should be overturned.  The case is entitled Mortgage Bankers Association v. Solis and is before the Court of Appeals for the District of Columbia Circuit. The Association argues that the agency violated the Administrative Procedure Act and a long line of cases holding that the DOL (as well as any other agencies) must go through the usual process of notice-and-comment rulemaking when the agency intends to “clarify” or “interpret” a regulation.

The MBA claims that the 2010 interpretation conflicts with the holding (by the DC Circuit) in Paralyzed Veterans of America v. D.C. Arena LP.  In that case, the Court ruled that “once an agency gives its regulation an interpretation, it can only change that interpretation as it would formally modify the regulation itself: through the process of notice and comment rulemaking.”  The organization contends that the “DOL issued the March 2010 [Administrator’s interpretation] without any prior public notice of its intent to reverse its definitive interpretation of the FLSA without providing any prior opportunity for MBA or other interested parties to comment on the new interpretation; without conducting, or offering to conduct, any prior public hearings; and without providing MBA’s members any time to alter its established pay systems.”

The new interpretation triggered a number of class action lawsuits alleging misclassification and claiming overtime.  The MBA suit, filed in January 2011, contended that the 2010 interpretation illegally reversed the DOL’s earlier interpretation, but it deprived interested parties the right/ability to comment.  That violated the Administrative Procedure Act.  The district court judge, however, granted summary judgment to the DOL, finding that the 2010 interpretation was not inconsistent with 2004 regulations and was not arbitrary, capricious or an abuse of discretion.

I was not a big fan of the 2010 Interpretation.  I have always believed that many finance employees, including Loan Officers, are in fact exempt under the administrative exemption because they analyze and evaluate their clients’ financial needs and goals, which then (inevitably) leads to the recommendation and sale of certain financial products.  I don’t believe the “mere” fact that a sale ultimately results negates all of the administratively exempt analysis that has preceded it.  I also agree that the DOL overreached on this endeavor and exceeded its authority.

Let’s start the New Year off right!

• Print
• Comments
• Trackbacks
• Share Link

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.

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

I have written before on these tip pool cases involving Starbucks and other restaurants where the tip credit (which allows an employer to pay a sub-minimum wage) is destroyed.  This happens because “improper” people (i.e. managers) share tips along with rank-and-file employees.  Suffice to say that the liability in these cases can be astronomical, because the employer must pay the difference between the tip credit wage, usually $2.13 per hour and the minimum wage ($7.25 under federal law).  The First Circuit has recently demonstrated how devastating this principle of law can be, ordering Starbucks to pay class action members $14.1 million in damages over tips that were improperly taken from them.  The case is entitled Matamoros et al v. Starbucks Corporation.

The class action was launched in 2008; the latest incarnation of this long-running battle goes back to March 2011, when the First Circuit ruled that the shift supervisors were actually managers, as that term is defined under the state law entitled the Tips Act; the same principles obtains under FLSA regulations.  Thus, they were precluded from sharing in the tip pools.  Indeed, the Court was rather harsh in its description of the Company’s defense.  The Court wrote that Starbucks' "protest is disingenuous.”  The Court further observed that “Starbucks is the architect of these tip pools, which flout the law and lump together eligible and ineligible employees. If there is an inequity, the fault lies with Starbucks — not with the Tips Act.”

The Company contended that because the shift supervisors spent a great deal of time doing the same work as their subordinates, i.e. making coffee, working the cash register, that their “primary duty” which is the FLSA test for the executive exemption, was not management.  The Court rejected this argument, as did the federal district court below.

The lower court decision, however, left both sides dissatisfied.  The Company appealed, claiming that summary judgment had been inappropriately awarded to the plaintiffs.  The plaintiffs cross-appealed, contending that the lower court erred by not giving them treble damages (as was allowable under the Tips Act).

A “manager” will still be deemed a manager, under the law, even if they perform a fair/large amount of non-exempt work, if they retain management/supervision as their primary duty, even when they are performing non-exempt duties.  This is a gray line, or perhaps a slippery slope, but employers have to be keenly aware of this legal doctrine, if they seek to defend a tip pooling case by contending that their managers have lost their supervisory status.

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

The health care industry seems to draw more than its fair share of class action lawsuits.  In another example of this trend, home-health workers have filed a FLSA class action in federal court, alleging that their employer misclassified them as exempt and thus improperly denied them overtime.  The case is entitled Cook v. Amedisys, Inc. filed in federal court in the District of Connecticut.

The theory of the suit is that the employer did not pay for actual hours worked but had implemented a point system for determining compensation.  Counsel for the plaintiffs stated that the Company’s “compensation scheme encourages employees to take on more patient visits and work longer hours, while Amedisys reaps the benefits by reducing their labor costs and boosting their profit margins.”  As the Company has more than four hundred locations and more than 16,000 employees (in 38 states), the potential expansiveness of this lawsuit is staggering.

The classifications of workers involved are home-health registered nurses, physical therapists, occupational therapists and speech language pathologists.  These employees are paid on a per-visit rate, with each visit worth between 1-2 points; there are “estimated” hours built into the system, based on an assessment of how long each type of visit should take.  Travel time is not paid for, nor is the time that must be taken to prepare necessary paperwork or to drop off the collected samples.  On the travel time issue, the complaint alleges that even travel during the day (which is clearly compensable under FLSA regulations) is unpaid.

This suit could be a real problem for the employer.  I do not believe that the exemption defense (i.e. professional) is available, as technician and technologist types of employees (with few, if any, exceptions) are non-exempt, notwithstanding that they may be highly skilled and have studied in specialized programs.

Even if the exemption argument is available, on the duties prong, the Company then has to establish that these workers are paid on a “fee basis,” which is an alternative to payment on a salary basis, which the exemption tests otherwise mandate.
 

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

In order for an employee to be exempt, he must receive a set salary (as well as performing the requisite duties) and that salary cannot be subject to improper deductions.  In a recent case, a warehouse manager asserted that improper deductions and the recording of her hours had destroyed her exempt status, entitling her to overtime.  The federal court rejected those assertions, as well as her contention that requiring her to comply with the company policies and procedures also undermined her exempt status.  The case is entitled Sander v Light Action, Incorporated and was filed in federal court in the District of Delaware.

The court granted the defendant’s summary judgment motion, finding that the employee was paid a guaranteed annual salary of $60,000 and she could also receive additional compensation (which is allowable under the FLSA regulations).  The court noted that the FLSA regulations posed "additional obstacles" to theory that the employee was not salaried.  The court asserted that 29 CFR 541.604(b) allowed an employer to compute exempt employee's earnings "on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement," as long as: (1) the employee is paid a guaranteed minimum weekly amount for the salary basis test, regardless of hours worked, and, (2) a reasonable relationship exists between the guaranteed amount and the amount actually earned."  That provision also allowed additional compensation to be paid, as long as the minimum salary was paid.

Thus, the court concluded that the employee was salaried.  The judge ruled that “there is simply no basis in the record to make any finding other than that Plaintiff was paid a guaranteed base of $60,000 annually.”  Therefore, there was no basis to conclude that the employee was not salaried.

The employee also contended that her exemption was undermined because her employer tracked her work hours.  The court rightly rejected this contention, concluding that it is the nature of an employee’s job duties that governs the exemption analysis, not an administrative, ministerial tracking of hours.  The court also rejected the assertion that allegedly improper, partial day deductions, made in nine weeks (out of a total of 156) undermined her exemption,  The employer was able to explain "in careful detail" how the employee’s contentions were factually wrong and did not evidence allegedly illegal deductions.

Two lessons emerge for employers: 1) Simply keeping “time records” for exempt employees does nothing (good or bad) for the exemption analysis; the duties and salary basis test control; and, 2) Partial day deductions must be avoided at all costs; if the employee herein had shown such improper deductions, those actions might have undermined not only her exempt status, but the exempt status of all employees classified as exempt.
 

• Print
• Comments
• Trackbacks
• Share Link

I have written that it is a rarity that a class is denied conditional certification in a FLSA collective action.  When that happens, it is (often) the result of the individuality defense that is the best weapon to deflect the class.  Another way to defeat the motion for certification is to argue that the evidence submitted does not allow the conclusion that a bona fide “class” exists.  This principle has been recently applied in a case where the federal judge has denied conditional class certification for a proposed class of Assistant Managers claiming overtime. The suit alleged that these employees, who worked at Home Goods, were misclassified as exempt under the Fair Labor Standards Act.  The case is entitled Jenkins v. The TJX Cos. Incorporated and was filed in the Eastern District of New York.

The court ruled that the plaintiffs failed to prove that all of them performed (or did not perform) the kinds of duties that would entitle them to overtime.  This case highlights what happens when the support for the class (e.g. affidavits) is simply too paltry or insufficient to evidence the requisite commonality needed for a class to exist.

The evidence consisted of the lead plaintiff’s own testimony and a single page report submitted by a consultant that supposedly showed the breakdown of duties performed by the Assistant Managers.  The court ruled, quite correctly, this was not enough to sustain a viable class.  The court stated that “although plaintiff's burden at this stage of the proceedings is modest, the court cannot justify certifying a class of plaintiffs, likely numbering in the hundreds, on the basis of such thin factual support.” This is very important because the initial showing for the conditionally certified class is low, but this minimal showing did not even meet that reduced standard.

The submission by the so-called “expert was also criticized by the court.  The report was so vague that no valid or credible conclusion could be drawn from it; any conclusion that could try to be drawn would only be speculative.  The report was skimpy to the point of not providing any context or explanation of the conclusions or findings.

The plaintiff alleged that he (and others) were routinely performing all manner of non-exempt tasks, including cleaning/sweeping, unloading trucks and taking out garbage.  If these tasks comprised a major portion of the work time (judged on a weekly basis) of the employees, their exemption would be undermined.  The failure to buttress these allegations with anything other than the scanty evidence discussed above, however, doomed the case to failure.  As the court found, [the plaintiff] has failed to provide any factual support for the contention that other [Assistant Managers] at Home Goods' stores in New York, let alone nationwide, primarily performed nonexempt tasks.”

The lesson learned here is that defense counsel must scrutinize, tear apart and attack the initial showings made by the plaintiffs.  Herein, plaintiffs’ counsel did the defense a favor by rendering such a flimsy showing of “evidence.”  This scrutiny, coupled with a corollary attack based on the fatal (to the class) need for individual assessment, gives defense counsel the best chance to defeat a motion for conditional certification.

• Print
• Comments
• Trackbacks
• Share Link

In a recent case, a federal judge in New York has allowed a class action to proceed for thousands of employees who allege that they were misclassified as exempt by an accounting firm.  The case is entitled Pippins et al. v. KPMG LLP and was filed in the Southern District of New York.  The judge also ordered that the Company turn over a computer-readable list of the names and contact information for possible opt-in plaintiffs.

The judge found there to be commonality because the accounting field is governed in large part by a number of regulations and standards that would render the plaintiffs as “similarly situated.”  The court noted, however, that “the uniformity does not mean audit associates are entitled to overtime.” The Company has claimed that these employees are exempt under the administrative and/or professional exemptions.  The Company also defended by asserting that, because each employee’s duties may have differed, there would be required an individualized scrutiny as to what each employee did, thus destroying the necessary element of commonality.

What is important is that the “individualized” defense may ultimately prove to be successful, although at the conditional certification step, a court is not focusing on these individual differences but rather looking at what elements of commonality may be present, such as similar educational backgrounds and similar training regimens.

The plaintiffs (naturally) contend that they performed clerical-type work, which was routine and repetitive.  They claimed that “all” they do is do basic reviews of documents and financial records.  I imagine the Company will defend not only on the individual scrutiny basis but will also try to knock out as many plaintiffs as it can but pointing to the higher levels of education they possess, the degrees and certificates, which will evidence that they do more than just “clerical” work and are using their advanced education (college or above) to conduct financial analyses, (which is the essence of an administrative or professional defense) and not just crunching numbers.
 

• Print
• Comments
• Trackbacks
• Share Link

Last week, the Southern District of Texas denied a motion by Power Line Services Inc. (“Power Line”) to dismiss a class action alleging that the company improperly docked employee paychecks.  The claim arises out of a company policy permitting Power Line to make payroll deductions for any charges made on a corporate credit card for which an employee fails to provide an itemized receipt.  The lawsuit is entitled Thurmon, et al. v. Power Line Services Inc., et al., and was brought under the Fair Labor Standards Act.

The complaint alleges that Power Line regularly made improper deductions from the paychecks of exempt employees for failing to comply with its receipt policy.  These deductions range from $3.44 for a lost receipt from a convenience store to $2,500 for repairs to a company issued truck. The named plaintiff in the lawsuit, Jerry Thurman, claims that these payroll deductions evidence that he, as well as other individuals, were improperly classified as exempt employees.  As a result, Thurman is seeking to recover unpaid overtime.

This lawsuit highlights the danger of docking an exempt employee’s pay.  In 2006, United States Department of Labor (“DOL”) issued an opinion letter stating that “any employer policy that requires deductions from the salaries of its exempt employees to pay for the costs of lost or damaged tools or equipment” constitutes an “improper deduction,” thereby invalidating the exempt status of any affected employee.  While the opinion letter only addressed deductions based on lost or damaged equipment, employers can expect the DOL to take a similar stance with respect to any deductions resulting from infractions of company policy.  Put simply, the DOL will likely prohibit any payroll deduction that can be viewed as a penalty.

As discussed in my earlier posting on this subject, employers are best served by maintaining a policy of disciplining, rather than docking, employees who are responsible for lost equipment or a violation of company policy.  Employers should consider that the potential liability for the loss of an employee’s exempt status will likely far outweigh the cost of any lost or damaged property.
 

• Print
• Comments
• Trackbacks
• Share Link

Doug Weiner and Meg Thering, in the Wage Hour Defense Blog, recently commented on the introduction of the Computer Professionals Update Act in the US Senate on October 20, 2011.  They posit that this is a good development for employers, as employers would be more easily able to classify employees as exempt under the computer exemption.

The new legislation would expand the coverage of the exemption to individuals who work in a "computer or information technology occupation, including, but not limited to, work related to computers, information systems, components, networks, software, hardware, databases, security, internet, intranet or websites, as an analyst, programmer, engineer, designer, developer, administrator or other similarly skilled worker."   Also, employees who direct the work of individuals performing these duties would be exempt.

I welcome this development.  I have had numerous cases and matters for clients where the focus has been whether certain computer employees were exempt or not.  There are many fine lines in undertaking this analysis, almost as many as there are titles in this field.  The employer is forever placed in the difficult position of having to make a judgment call ion the exemption question and if it is proven wrong. almost astronomical liability is the result, as these workers are often earning very good compensation (whether at an hourly rate or a salary).  To take the more conservative approach and simply treat the workers as non-exempt is not the answer either because although it spares the employer the specter of a possible lawsuit (usually class action) it escalates the overtime outlays that the employer is subject to.

Now, if the legislation passes, employers will not be forced to make what are now very difficult decisions.  I believe employers are, for the overwhelming most part, intent on doing the right thing and complying with the law.  When the law is not easily amenable to reasonable interpretation and forecasting, that desire to comply is hampered.  With this new law, employers may be able to correctly classify computer workers and not have to be stressed out over whether they will be hit with a FLSA class action.

To be continued...

• Print
• Comments
• Trackbacks
• Share Link

In an interesting case, the Fifth Circuit has addressed the issue of whether an employer may take, as an offset, severance payments that were given to an employee under a severance agreement, against an allegation that the employee is due overtime pay.  The Court rejected the employer’s attempt for offset, holding explicitly that such attempts, or other counterclaims, are not allowable in the context of an FLSA lawsuit.  Therefore, the Court reversed the federal district court, which had held that the employee’s potential overtime claim (even including liquidated damages) was not equal to the aggregate compensation she received in the severance package.  The case is entitled Martin v. Pepsi Americas, Incorporated.

The employee was a Route Settlement Clerk, an hourly job and was entitled to overtime pay.  When she was promoted into a supervisory position, she was changed over to salary and did not then receive overtime.  A layoff ensued two years later and she agreed to accept a severance package.  In exchange, the employee signed a Release in which she agreed to waive her rights to sue under a number of laws as well as agreeing not to file any lawsuits/actions related to her employment.  Notwithstanding the agreement or the compensation that she enjoyed receiving under it, the employee filed an overtime action under the FLSA, as well as state law claims for fraudulent misrepresentation.

The Company moved quickly to dismiss, asserting an offset theory.  The Company showed that the severance benefits aggregated to almost $24,000, while the total theoretical claim for the overtime, plus the liquidated damages, would be approximately $19,000.  On that basis, the district court dismissed the case.  Plaintiff appealed.

The Fifth Circuit found that the offset was illegal under the statute.  The Court stated that “generally speaking, courts have been hesitant to permit an employer to file counterclaims in FLSA suits for money the employer claims the employee owes it, or for damages the employee’s tortuous conduct allegedly caused.”  Although not outcome determinative, the Company had claimed the offset as an affirmative defense, rather than a counterclaim.

In sum, the Court held that the severance monies were not given as wage payments, whether in advance or in any other form, but were for a releases of claims.  The Court found that the issue of whether the employee breached her agreement with the Company to not sue was for another court or forum to determine, but did not affect her FLSA claims.

This is a dangerous precedent for employers, but one which they must be keenly cognizant of. It is not sufficient to “merely” secure a Release which includes the FLSA; such settlements.  Releasing FLSA claims, must be first approved by a court to be legally sustainable.  An ordinary Release will not bar future FLSA claims.
 

• Print
• Comments
• Trackbacks
• Share Link

Last week, a California appeals court ruled that a former law clerk who had graduated from law school but not yet passed the bar, was exempt from overtime pay as a professional employee.  The former law clerk, Matthew Zalesko-Barrett, sued Brayton Purcell LLP alleging that the law firm denied him overtime, waiting time penalties, and rest and meal breaks from August 2007 through June 2009.  Zalesko-Barrett did not contest that he was an exempt employee following his admission the state bar.

California’s Labor Law defines a professional employee as any individual “who is licensed or certified by the State of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting.”  An individual can also qualify as a professional employee if he or she performs work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study.

Zalesko-Barrett admitted that as a law clerk he performed the duties generally required of an attorney such as a drafting pleadings, conducting legal research, and interviewing witnesses. However, Zalesko-Barrett claimed that he was not exempt because the law specifically requires professional employee to be “licensed or certified by the State of California.”  There was no dispute that Zalesko-Barrett did not hold any such license while serving as a law clerk.

The appeals court rejected Zalesko-Barrett’s argument and held that the professional exemption applied to a law school graduate who was not yet licensed to practice law.  The court held that even though Zalesko-Barrett did not hold a license or certification, he performed work requiring a prolonged course of intellectual study.

The decision by the appeals court is interesting in that it disregarded the license/certification requirement under California law, and instead focused on traditional professional employee requirements set forth under federal law.  The decision may also be an indication the law is expanding to recognize/include certain employees as exempt even if they have not met every requirement under a particular regulation.
 

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

Earlier this month, a writer for the legal blog FindLaw, filed a class action lawsuit alleging that Thomson Reuters Corp. and Adecco failed to pay writers for overtime and meal breaks in violation of California state law.  Adecco is a staffing and service agency that hires and assigns workers to Thompson Reuters’ Sunnyvale, California office.

The plaintiff, Jason Beahm, alleges that writers assigned to Thompson Reuters were required to produce a minimum of eight stories a day, and were paid a set amount no matter how many hours were spent to meet this quota.  Counsel for plaintiff has stated that plaintiff’s supervisors “basically told him to put down 40 hours” for each week regardless of the number of hours worked. The case is entitled Beahm v. Adecco, and was filed in the Superior Court of California.

This lawsuit will likely hinge on whether Beahm constitutes a “creative professional” under California’s wage and hour law.  Similar to the Fair Labor Standards Act, California exempts from overtime individuals whose primary duty is the performance of work requiring imagination, originality, or talent in a recognized field of art or creativity.  An employee will not qualify for this exemption if his or her work depends on intelligence, diligence and accuracy rather than creativity.

Typically, writers for newspapers, magazines, and other media are not exempt as “creative professionals” if they only collect, organize and record information that is already public.  For this reason, the Ninth Circuit has held reporters to be non-exempt employees.

In contrast, writers may qualify as “creative professionals” if they analyze or interpret public events, write editorials or opinion columns, or contribute a unique interpretation to a newsworthy event.

Based on the very subjective nature of the “creative professional” exemption, employers should consider taking the advice provided in the federal regulations, and designate writers as exempt or non exempt on a “case by case basis.”  Employers should be aware, however, that there are no points for “style” in these matters.
 

• Print
• Comments
• Trackbacks
• Share Link

It is often difficult to claim that security officers are exempt from overtime under the Fair Labor Standards Act.  However, in a recent federal lawsuit, four officers who were employed by a private, so-called, paramilitary force that provided security services at the atomic research laboratory at Los Alamos were ruled to be executive employees and thus were exempt from overtime.  The judge held that the primary duties of these men were managerial and they were not acting as first responders the majority of their working time.  The case is entitled Maestas v Day & Zimmerman, LLC and was filed in the District of New Mexico.

The plaintiffs were two lieutenants, a captain, and a major.  They tried to have a class certified; the judge refused to conditionally certify the class but instead focused on the employer’s simultaneously filed motion for summary judgment/dismissal.  That motion sought to eliminate the possibility not only of the “class,” but of any individual plaintiff gaining a recovery by arguing that any/all potential class members, starting with the named plaintiffs, were not entitled to overtime as exempt employees.

The officers claimed that only functioned as first responders, whose mission was to safeguard and protect the atomic facility, all forty-three square miles of it, as well as the inhabitants of the facility and the atomic secrets stored there.  Thus, the case, interestingly, presented the tension between two FLSA regulations, one stating that first responder classifications are non-exempt, while the executive exemption regulations addressed the issue of the circumstances under which someone’s primary duty was deemed to be supervision/management.

The employer countered by asserting that the officers retained management as their primary duty, even when performing their first responder tasks.  The employer also relied upon (as I have often done) a Department of Labor Opinion Letter that held that employees would still qualify for the executive exemption, notwithstanding that they performed first responder duties provided that they continued to meet all of the tests/elements for the exemption.  Couched in these terms, the judge determined that the officers did indeed retain management as their primary duty.

The evidence showed that the plaintiffs trained employees, assigned work, based on their assessments of employees’ fitness for the jobs at issue, resolved complaints from workers and managed the manner in which security matters and emergencies were responded to.  The judge rejected that the plaintiffs’ contention that, as first responders, they were entrusted with keeping the facility at full readiness, finding that the global mission of the security force—protection of Los Alamos---was separate and apart from the issue of what their primary duty truly was.

The defense of exemption was the magic bullet that wiped out the entire class action.  Nice result if the facts support the theory.

• Print
• Comments
• Trackbacks
• Share Link

On March 17, 2011, a Michigan jury returned a verdict in favor of loan company, Quicken Loans Inc., in a class action lawsuit alleging that Quicken had failed to pay them overtime under the Fair Labor Standards Act (“FLSA”).  The jury found that the loan officers had been properly classified as exempt employees under the FLSA’s administrative exemption.  The case is entitled Henry v. Quicken Loans Inc. and is in the Eastern District of Michigan.

This verdict is significant as it is the first ruling by the courts on the applicability of the administrative exemption to loan officers. Even more noteworthy is that the jury disregarded the recent “administrative interpretation” issued by the United States Department of Labor (“DOL”) that provided, going forward, that loan officers would be treated as non-exempt employees.  In spite of this guidance, the jury decided that the administrative exemption applied.

The DOL’s March 20, 2010 “administrative interpretation” reasoned that contrary to the requirements of the administrative exemption, the typical mortgage loan officer’s primary duty is not “the performance of office or non-manual work related to the management or general business operations of the employer or employer’s customers.”  Rather, mortgage loan officers are responsible for selling loan products produced by the company, but their duties do not relate to servicing the business itself.

In contrast to the reasoning of the DOL, the jury in Henry v. Quicken Loans Inc., ruled that the individuals constituted administrative employees in that they were engaged in “sophisticated financial analysis” and exercised discretion and independent judgment regarding business related matters.

As I stated in an earlier entry, there have been numerous overtime suits filed by mortgage loan officers and underwriters within the past year.  Henry v. Quicken Loans Inc. may provide loan companies with a defense to such lawsuits. This is great news for the financial services industry.

To be continued…
 

• Print
• Comments
• Trackbacks
• Share Link

In early January, I posted an entry regarding the exempt status of pharmaceutical sales representatives. In the past several months, there have been several significant developments with respect to this issue.

On February 14, 2011, the Ninth Circuit affirmed the District of Arizona’s ruling in Christopher, et al. v. SmithKline Beecham Corp., that a proposed class of pharmaceutical sales representatives (“Sales Reps”) were exempt from overtime pay pursuant to the “outside sales exemption.”

In affirming the District of Arizona's decision, the Ninth Circuit acknowledged that the duties of Sales Reps are the “functional equivalent” of making an outside sale in that they “makes sales by obtaining commitments to prescribe…drugs from physicians. They are credited with those sales and compensated accordingly by means of incentive payments.” The plaintiffs have filed a petition for rehearing to overturn the decision.

The Ninth Circuit’s decision in Christopher is in direct contradiction to the Second Circuit’s stance on the applicability of the “outside sales exemption” to Sales Reps. Indeed, in cases against Novartis and Schering Corp., the Second Circuit determined that Sales Reps do not fall within the “outside sales exemption” because they do not “sell” or make any “sales.” Rather, the Second Circuit held that the Sales Reps are responsible for promoting and marketing drugs rather than actually selling them. On February 28, 2011, the United States Supreme Court denied the petition by Novartis and Schering Corp. to review the decision.

This issue will likely have to decided by the United States Supreme Court due to the split in authority among circuit courts. Moreover, the exempt status of Sales Reps will likely become further muddled as there are cases pending in the Seventh Circuit, Connecticut, Florida, and Ohio.

In the meantime, drug companies should be wary about classifying Sales Reps as exempt if they do not “sell” or make any “sales.”
 

• Print
• Comments
• Trackbacks
• Share Link

In a recent lawsuit, a group of truck drivers filed a FLSA collective action against their employer, which was a leasing company and the trucking company to which they were leased.  The drivers did not have assigned routes, but their routes changed on a daily basis, depending on a number of factors, such as customer requirements and the driver’s need to stay with DOT driving hours guidelines. The drivers claimed overtime and the Company defended on the grounds that the workers were exempt under the FLSA motor carrier exemption.  The case is entitled Songer v Dillon Resources, Inc. and was decided in the Fifth Circuit Court of Appeals.

The federal district court had ruled that because the men could be asked to drive interstate on any given day, all of the drivers were in interstate commerce and therefore the motor carrier exemption applied.  For that exemption to apply, the company must be recognized as a motor carrier under DOT law, the employees involved must affect safety (as drivers do) and the employees must be involved in interstate commerce.   Under the motor carrier regulations, if the drivers are in a “pool” by which on any day, any one of them can be required to drive out of state, all of the workers are deemed to be in interstate commerce.

The wrinkle here was that the men worked for the staffing company, which sent them to the actual trucking company so their claim was that they were one step removed from the company that actually conducted the interstate work.  The Fifth Circuit rejected that contention and found that the staffing company was a “joint employer” with the trucking company because it hired and trained the drivers and was responsible for their payroll, while the trucking company (the co-employer) controlled the day-to-day activities of the drivers.  Thus, the staffing company reaped the benefit enjoyed by the interstate trucking company and was found to be within the scope and protection of the motor carrier exemption.

This case is fascinating because in these unique circumstances, it benefited the leasing company to be found to be a joint employer with the other entity.  That relationship gave it the protection of the exemption.  It just goes to show that one size does not fit all when defending a FLSA collective action and the advocate must always be on the lookout for a strategy/defense that will find a safe harbor (e.g. exemption) defense.  The other lesson here is to be cognizant that state law may differ from federal law, as it does in New Jersey on the motor carrier exemption, so that contingency must be provided for as well.
 

• Print
• Comments
• Trackbacks
• Share Link

I have often preached that the administrative exemption is the toughest one to prove.  It is even more difficult when that exemption defense is not raised either in the Answer or early on in a case, because it might be deemed lost or waived.  That is precisely what has happened to the employer in a case entitled Diaz v. Jaguar Restaurant Group LLC.  In that case, the Court of Appeals for the Eleventh Circuit reversed the trial court which had allowed the raising of the defense very late in the case.

The Court of Appeals held that the employer could not use this affirmative defense because it was not included in the Answer and, significantly, the employer never sought to amend the Answer to include the defense before the trial commenced.  The lower court had found that since the plaintiff had injected the issue into the case through her testimony, the defense was permissible and the court granted the defendant company’s motion to amend its Answer to conform to the evidence.

The plaintiff had worked as a bookkeeper, which would normally be a non-exempt position which would not meet the administrative exemption test because the employee did not exercise discretion and independent judgment.  She also performed other job duties, such as opening bank accounts and working the cash register and more, also non-exempt duties.

She filed an overtime action, to which the Company raised five affirmative defenses, but not the exemption defense.  The only instances in which Jaguar raised the defense was in a joint pretrial stipulation and joint jury instructions; the plaintiff’s counsel, however, objected both times to the potential inclusion of this defense.  The Circuit Court stated that “if there ever there were a classic case of waiver, this is it.”  The Opinion emphasized that the company “repeatedly waived the administrative exemption defense by failing to plead the defense in its Answer and by failing to move to amend its answer before trial.”

This is dangerous for employers, but could have been easily prevented.  In any case involving an “office” worker suing for overtime, all that the employer-defendant need do in the Answer is assert that the employee “is exempt under 29 USC 213(a) of the Fair Labor Standards Act” and the corresponding state statute if another Count of the Complaint references state law.  With that done, the defense is raised and the interest at stake protected.

Sounds simple?  It is.
 

• Print
• Comments
• Trackbacks
• Share Link

An employee who was paid a salary, deemed exempt by her employer, filed a lawsuit claiming she was in fact non-exempt and won.  The calculation of her damages, however, was not to her liking as the court computed the overtime using the half-time method allowed by the Fair Labor Standards Act (“FLSA”) fluctuating work week (FWW) regulations for salaried non-exempt employees.  The employee has now filed a petition with the United States Supreme Court asking for a determination that this methodology was incorrect.  The case is entitled Urnikis-Negro v. American Family Property Services Incorporated and comes out of the Court of Appeals for the Seventh Circuit.

The employee earned a salary of $52,000 a year and claimed she usually worked in excess of forty hours per week, but was never paid overtime.  The defendant claimed that she was exempt as an administrative employee, but the district court rejected that position.  The court then applied the fluctuating workweek computation method, which had the effect of significantly reducing the damages to approximately $25,000.

The “fluctuating workweek” regulations govern the payment of overtime to non-exempt salaried employees.  When such employees work different numbers of hours on a weekly basis, the regular hourly wage, on which overtime is then computed, is calculated by dividing the weekly salary by the total number of hours worked, getting a regular rate for that particular week, dividing that by two to get the half time component and multiplying that half-time number by the number of overtime hours.

The employee wanted the calculation done by dividing her weekly salary by forty, getting a fixed hourly rate and then doing a time-and-one-half calculation on that hourly rate.  That second methodology would produce a much higher overtime/damages number.  The Seventh Circuit did agree that the pertinent regulations (29 CFR 778.114) did not apply to her position, but decreed that this method could be used for her damages computation based on an earlier Supreme Court decision.  The petition asserted that leaving the Seventh Circuit decision stand will give employers an undue advantage as they can classify employees as exempt, pay them a salary and if they are wrong, they will not be required to pay time-and-one-half overtime.

I believe the Seventh Circuit is correct here.  If a misclassification occurs, the FWW method should apply to the calculation of damages because there is no regulatory or statutory basis for converting the salary into an hourly rate, which would then generate the "usual" overtime calculation, such as would be paid a non-exempt hourly worker.  Assuming there was no nefarious intent by the employer to “intentionally” misclassify workers so as to get the “benefit” of a FWW calculation, the half-time calculation is proper.  My reading of the tea leaves is that the Supreme Court will not accept the case for its decision.

To be continued…
 

• Print
• Comments
• Trackbacks
• Share Link

Although Blackwater, the “infamous” company that has played a role in the occupation of Iraq, has changed its name to Xe Services LLC, that cannot change the seemingly continuing stream of Fair Labor Standards Act collective actions raining down on the company.  In the latest such action, a group of employees are asserting that they were misclassified as exempt and therefore improperly denied overtime pay.  These employees are firearms and tactics instructors and the case is entitled Falla et al. v. Xe Services LLC, filed in the U.S. District Court for the Eastern District of North Carolina.

The employees also assert that Blackwater misled them into believing that they were not entitled to any overtime pay.  The workers nevertheless complained about not receiving overtime, but that did not matter.  The Complaint alleges that the Company employed 30 instructors and they were directed to report “8 hours” worked, regardless of the number of hours actually worked.  If that were proven to be true, that could be problematic for the Company.

The Complaint sets forth that “WPPS and Navy program instructors, including plaintiffs, were nonexempt employees, eligible for overtime compensation, under the FLSA.”  Complicating matters is the fact that Blackwater failed to keep proper records of hours worked, including any additional hours claimed.  The Complaint focuses on this alleged deficiency. “ As a result, the instructors' time records, to the extent they exist, fail to document all of the instructors' compensable time.”

The instructors provided military training for police and armed forces at a number of camps throughout the United States.

If the Company paid these men on a salaried basis, there is a chance that the administrative exemption might apply to them.  There are US Department of Labor Opinion Letters standing for that proposition; I think the professional exemption would be a reach.  If the men were paid hourly, then they were non-exempt because they were not paid on a salaried basis, no matter how unique or important their job duties.
 

• Print
• Comments
• Trackbacks
• Share Link

In a recent post in the Wage and Hour Defense Blog, Richard Tuschman discussed the Eleventh Circuit decision in Abel v. Southern Shuttle Services, Incorporated, which analyzed the applicability of the FLSA motor carrier exemption to drivers who transport passengers from airports to locations within the same State.  This exemption from overtime typically applies to truck and bus drivers who drive in interstate commerce.  When drivers do not drive interstate, they may nevertheless be found to be in interstate commerce if their part of the transportation is part of the “practical continuity” of the interstate trip.  This posting can be found at  www.wagehourblog.com/2010/10/articles/motor-carrier-exemption/intrastate-passenger-trips-can-trigger-flsas-motor-carrier-exemption-rules-eleventh-circuit/index.html

I handled a case where bus drivers never left New Jersey but because a passenger could buy a ticket and use the ticket for local and then interstate transportation, so-called “through-ticketing,” the drivers were deemed in interstate commerce.  That single-ticket arrangement evidenced the practical continuity required to show interstate commerce was involved.  Similarly, in this case, the Court held that the shuttle drivers were continuing the interstate journeys of the passengers who were disembarking at three South Florida airports and then were being taken by the drivers (Mr. Abel included) to their hotels, offices and other locations.  These connecting arrangements were made via the Internet; Southern Shuttle had contractual arrangements with these Internet travel companies to provide this transportation.

This contractual arrangement provided the practical continuity for the interstate trip.  Where a purely intra-state trip is the start or end of an otherwise interstate trip, the continuity exists.  To be sure, as Richard points out, someone simply hailing a roving taxi at the airport and being taken to a hotel does not place that taxi driver in interstate commerce as there was an absence of a prior contractual arrangement.

This development as well as the entire doctrine of practical continuity is of special interest to trucking and bus companies.  Many drivers who work for such companies work long hours, making possible overtime claims, whether individual or collective/class, of considerable danger. Establishing that an intrastate trip is part of an interstate trip is a magic bullet out of such a dilemma.
 

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

The Eleventh Circuit Court of Appeals court has concluded that a lower court’s dismissal of a collective action filed by accountants was legally proper on the basis that the Company did not misclassify these accountants as exempt.  In an area of wage-hour law that is rife with all manner of shades of gray, this is a great victory for this employer and employers in general.
The case is entitled Bell v. Callaway Partners LLC, in the U.S. Court of appeals for the Eleventh Circuit; the case had been filed in the North District of Georgia.

The opinion recited that “the class of plaintiffs in this lawsuit are highly educated accountants and certified public accountants who, during their employment with Callaway, often made more than $100,000 a year and thus they fall under the overtime exemption.”  The plaintiffs had evidently tried to contend that they were not “salaried” as the federal regulations demand, so it did not matter whether or not they performed “professional duties.”  This would be the only tactic open to them, especially if they were more than “staff accountants” or “junior accountants.”

As a component of their attack on the salary issue, the plaintiffs asserted that the Company paid out bonuses and paid them for work performed on weekends in a manner that transgressed against the salary basis test.  If they succeeded in showing they were not salaried, it would not matter whether they performed professional duties 100% of the time because, by definition, they would be non-exempt.

The plaintiffs charged that they were not paid by a salary basis, as the bonuses they received were reduced if they worked less than eight hours in a single weekday.  However, if they were paid a minimum fixed amount of at least $455 per week, the federal minimum, they are still considered salaried.  The Eleventh Circuit noted this, finding that “because there was a nondeductible minimum weekly salary, Callaway was free to structure any bonus program as it saw fit.”

This is the danger of an attack based on lack of a salary basis---if the employer is wrong, there is no defense and the plaintiff(s) win because it is of no avail or legal relevance that the work performed was “exempt” or “professional.”  The FLSA makes a few minor exceptions to this otherwise inviolate requirement to pay “white collar” employees a salary in order to seek to claim the exemption (i.e. doctors, lawyers), but if employers pay in any method other than a salary, the exemption is automatically lost for the employee or class of employees and then significant liability may result.
 

• Print
• Comments
• Trackbacks
• Share Link

In Florida, an Assistant Manager has filed a class action against RadioShack Corporation, alleging that the company has misclassified these managers as exempt executives and has not paid them overtime.  The case is Truax v. RadioShack Corp. and was filed in the U.S. District Court for the Southern District of Florida.

The plaintiff is also claiming that Radio Shack “knowingly and willfully” violated the Fair Labor Standards Act; this is an attempt to extend the otherwise two-year statute to three years and to recover liquidated (i.e. double) damages.  The plaintiff is claiming that the company failed to pay time and one-half for the overtime hours.  The named plaintiff claimed he regularly worked 55 hours every week but was only paid straight pay for the hours, rather than time-and-a-half that is mandated by the FLSA.

In another case, RadioShack is alleged not to have paid workers for attending store meetings. In that case, Kamar et al. v. RadioShack Corp., the U.S. Court of Appeals for the Ninth Circuit has affirmed a lower federal court ruling that granted class certification to the plaintiffs.  That case involved mandatory meetings (on Saturday) that non-exempt employees attended and were not paid for.

On the Assistant Manager issue, the best defense is that these workers are truly exempt. The second best defense is that the class certification motion must fail because individualized assessment of each Assistant Manager is needed because some might have exercised more managerial duties than others.  The need for individual scrutiny is the antithesis of a class action .

As far as the mandatory meetings, this is basic FLSA law.  Non-exempt employees compelled to attend meetings or trainings are on the clock. 
 

• Print
• Comments
• Trackbacks
• Share Link

Statistics were just published showing a rise in litigation under the Fair Labor Standards Act.  This highlights the fact (something we have seen for some years, now) that there is a semi-organized network of plaintiff side lawyers specializing in FLSA cases who are actively seeking out these cases and also highlights the fact that, under a Democratic administration, there is a more employee-friendly federal Department of Labor.

FLSA cases filed in federal courts rose almost 23% in the second quarter of 2010 and represents a leap of 25% from the first quarter of 2009. From January 1-June 30, 2010, there has been a total of 3,230 FLSA cases filed.  That is 6% more than for the same time frame in 2009.

Why are we seeing this?  As a management side practitioner, as someone who defends such cases, I wonder about it and then the answer dawns on me, clear as day.  The FLSA (and all state wage-hour laws) are fee-shifting statutes, so there is an incentive for a plaintiff attorney to engage in this work, because there is a decent chance of a payday.  Second, these laws contain a lot of gray in them and employers who are striving their utmost to comply in good faith will often unintentionally run afoul of the myriad rules and regulations.

Lastly, but not of least importance, the ability for plaintiffs to gain conditional certification in a FLSA case is fairly common.  Not that much “proof” is needed and then the burden dramatically shifts to the employer to try to de-certify the class (not often done) or, as often happens, settle the case, to avoid more plaintiff attorney fees accumulating.  The last option, often times, is go to trial, especially in a classification case, especially where the administrative exemption is at issue.

For example, the DOL issued a position statement, an Interpretation, holding that, in many instances, mortgage loan officers do not qualify for the administrative exemption.  The Interpretation rescinded two prior DOL Opinion Letters, both of which gave employers a cubbyhole to classify employees as administratively exempt.

In sum, it is more important than ever to be proactive and “self-reflective” for employers. Self-audits or internal audits of compensation practices, classification decisions and analyses and working time issues must be conducted by HR or labor counsel.  If something is wrong, it should be fixed immediately, as to stop a running liability and the maintenance of an “eternal” two (or three) year statute of limitations.  With the stakes in these cases very high, with the burdens of proof (at least initially) for plaintiffs distinctly modest and the fess shifting component, it is far better to be safe than very sorry.
 

• Print
• Comments
• Trackbacks
• Share Link

I have written a number of times about the difficulty of proving that the administrative exemption applies to dispatchers in the transportation industry.  I have noted that most transportation employers consider these employees exempt because their job functions are critical to business operations.  Under the Fair Labor Standards Act, however, that is not the test. Rather, the employee must be paid a salary and perform certain kinds of duties.  In Rock v. Ray Anthony Int’l LLC, the Eleventh Circuit held that a crane dispatcher was not entitled to overtime compensation because he was an administrative employee.  This is a rare victory for employers on a difficult employee classification matter.

The appellate court agreed with the lower court that the employee “effectively managed” an entire department and did in fact exercise discretion and independent judgment, which is often the greatest obstacle to successful application of the exemption.  This is because the line between using “skill and experience” and discretion is often blurry and the regulations offer some guidance but not too much..

For example, the employee interfaced with customers in significant manners.  He was responsible for helping them select employees.  He also maintained crane rental records and helped facilitate projects by selecting materials, tools, and machinery to meet the needs and demands of certain projects.

The employee tried to denigrate his job responsibilities.  He portrayed himself as simply doing retail sales work or being a cog in an assembly line-type operation.  The Company countered that he was working in a capacity crucial to vital business operations.   The Court agreed with the company, concluding that what the employee performed work that was at the “heart of Sunbelt business.”

As stated above, the Court also agreed that the employee exercised discretion.  The employee possessed and exercised the ability to resolve a wide range of customer and technical issues. The court also found that the employee was “responsible for directing and overseeing all operators and truck drivers.  The Eleventh Circuit did caution, however, that ordinary dispatchers, such as many of those working in the trucking and bus industries, did not utilize discretion but were rather only following prescribed techniques and standards.
 

• Print
• Comments
• Trackbacks
• Share Link

Recently, the United States Department of Labor (“DOL”) issued a white paper or a formal position statement on exemption issues in the financial services industry. I wrote about that in March, when it issued.  This was the first in a series of white papers that will replace the longstanding practice of the DOL responding to inquiries from employers and workers and issuing/publishing these responses, so-called Opinion Letters.  I bemoan the decision of the DOL to stop this informative and educational process.

The agency believes the opinion letter process utilized too many agency resources.  The agency is evidently working on a new initiative that will focus on employee misclassification.  There is a new push and urgency from not only the federal DOL but many state agencies to focus on the infamous independent contractor issue.

Nancy Leppink, Deputy Administrator of the Labor Wage and Hour Division, stated that “the cost-benefit was not there and, moreover, the department has a ‘robust regulatory agenda.’  Another factor was that most requests for opinions emanated from the employer community, rather than workers or labor unions.  This evidently troubled the DOL but it makes a great deal of sense that most requests come from employers as it is the employer who must make initial (and continuing) decisions on classification (exempt vs. non-exempt) as well as working time policies (e.g. on-call, travel).

Employers seek the guidance so that they may comply with the myriad laws and regulations that apply to the numerous compensation issues in the workplace.  Also, the many opinion letters that have been published, on a far reaching and wide array of subjects, give invaluable guidance to employers on such subjects as whether or not the employer must pay exempt employees for snow days to whether the solicitation and sales of mortgages by mortgage brokers qualify as “sales” for purposes of the outside sales exemption.  Now that the agency has adopted this white paper approach, it will only address certain “major” issues as it itself defines those issues.

I regret this agency decision. I believe the public, especially the employer constituency, will be adversely impacted by it as employers will be left again to, oftentimes, make reasoned “guesses” on what is legal for them to do. If they are wrong, they pay in overtime and other damages.  The inquiry-response channel that had formerly been provided by the opinion letter process took much of the guesswork out of some employer decisions.

Now, it’s back again.
 

• Print
• Comments
• Trackbacks
• Share Link

A federal judge has granted conditional class certification to a class of workers at a subsidiary of ATT, who are alleging a failure to pay overtime.  The case is entitled Wlotkowski et al. v. Michigan Bell Telephone Company, filed in the Eastern District of Michigan.

These outside plant engineers made a sufficient showing to the judge for her to order conditional certification and the sending of the opt-in notices to similarly situated people.  The company must provide names and addresses within ten days so that opt-in notices may be sent. These employees draft plans which are then used by other employees use to install telephone lines in their proper locations.

The issue arose when the Company reclassified the workers from exempt to non-exempt under the Fair Labor Standards Act (“FLSA”).  This is a red flag for employees and Department of Labor alike, because the employees questioned (as anyone would) if their duties were identical pre and post re-classification, why were they not getting overtime pay prior to the re-classification. Instant lawsuit!  Moreover, the Company does not dispute that the employees worked in excess of forty (40) hours per week during the relevant time period (i.e. three years prior to date of complaint filing).

The thrust of the workers claim is that they are not “engineers,” as they hold no professional degrees which would qualify them for the professional exemption.  They claim their duties are more clerical in nature and they do not exercise any managerial or supervisory responsibilities. Interestingly enough, they all hold the title of “Manager, Outside Plant Planning Engineering and Design.”

This case highlights two significant problems.  First, titles mean nothing.  Calling someone a “Manager” does not qualify them for any exemption.  The analysis, whether by a DOL, or a court, will always be on what the actual duties are.

Second, more importantly, employers who set about to re-classify workers must be aware of what their possible back pay exposure will be (because all it takes is one person to complain, or sue) and either proactively deal with that, i.e. pay it, or develop a sufficiently polished spin when employees are informed of the reclassification to (hopefully) avoid any one complaining or suing. Not an easy task!  Either way.
 

• Print
• Comments
• Trackbacks
• Share Link

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

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

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

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

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

I think it does!
 

• Print
• Comments
• Trackbacks
• Share Link

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

• Print
• Comments
• Trackbacks
• Share Link

The Second Circuit Court of Appeals has reversed a lower court and held that a regional director of advertising sales for the Elite Traveler magazine was non-exempt under the Fair Labor Standards Act. The Court rejected the contention that the employee fell within the administrative exemption. The case is entitled Reiseck v. Universal Communications of Miami Inc.

In the 1990s, there was a rash of cases involving inside sales people and whether they fit within the administrative exemption. Courts have held that such employees are “white collar production employees” in that they are really only “producing” the goods of the employer and not engaging in the ancillary, back-office kinds of duties that are deemed administrative under the FLSA. In this case, the Second Circuit continued that line of reasoning.

The Court found that as the primary duty of the employee was selling advertisements to individual customers and not promoting sales generally, the employee was only a producer, not an administrative employee.

The magazine was free and thus advertising sales made up the predominant component of its revenue. There were salespeople who sold advertising space and, significantly, a marketing staff that was charged with the primary function of creating promotional material to increase advertising sales. The Court determined that the employee was not involved with the market creation work, as she was selling specific advertising space and advertising sales were a critical source of revenue, the Court therefore concluded that advertising space was the Company’s “product.”

As the employee’s primary duty was the sale of that product, she was a sales employee, not an administrative employee. This was the Court’s conclusion notwithstanding that there was evidence that Ms. Reiseck developed new clients with the goal of increasing advertising sales generally. Her primary duty remained selling specific advertising space to clients.

I have often commented on the grayness of the administrative exemption. There is a continuing, if you will, eternal, tension between whether an employee is merely producing goods (whatever those good may be) or is performing the more esoteric duties that support and comprise the business. Those duties are administrative, but precise definitions are difficult to come by. Fair warning to the employer----if you choose the administrative exemption, be prepared to defend it (probably in court).
 

• Print
• Comments
• Trackbacks
• Share Link

In a January 21, 2010 posting in the New York Labor and Employment Law Report, Joseph Dole reported on a case entitled Young v Cooper Cameron Corporation, recently issued by the Second Circuit.  The case concerned the applicability of the professional exemption to an individual performing engineering design work on sophisticated equipment.  While he had twenty years of experience, he only had a high-school degree.  The court ruled that the employer incorrectly classified him as exempt.

 The issue rose and fell on the absence of a college or higher degree in a specialized field of training.  To me, this is the completely wrong result.  The proposed new professional regulations had sought to allow a claim of professional exemption even without the "degree," if experience and education were deemed to fit the exemption.

The final regulations stepped back from this and hearkened back to the old tests.  They do leave a crack open, attesting that there is the "possibility" that an individual may fit the professional exemption as an attorney, for example, even if he did not go to law school, like, for example, Supreme Court Justice William O. Douglas.  The regulations, however, envision this as a one in a million occurrence and I think, especially in the computer and technology fields,. experience of a professional nature is often supplanting the straight, "pure" education.

In fact, I understand that Bill Gates did not finish college.  Under the rationale of this case and the current FLSA regulations, this billionaire would be found to be non-exempt and entitled to overtime. 

Funny, ain't' it?

• Print
• Comments
• Trackbacks
• Share Link

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.
 

• Print
• Comments
• Trackbacks
• Share Link

In a recent posting in the Connecticut Employment Law blog,  http://www.ctemploymentlawblog.com/2009/12/articles/wage-and-hour/a-dollar-here-35-mi Steve Lavelle wrote about a recent case in involving the exemption status of Store Managers for Family Dollar Stores.  The evidence showed that the employees rarely, if ever, discharged managerial duties and spent the vast amount of their time in performing duties identical to subordinates and thus their classification as exempt from overtime was erroneous.  He warns that the employer must always be be vigilant about properly classifying employees as exempt or non-exempt.  

I have often advised clients that, sometimes, it is safer to treat titles such as Assistant Manager as non-exempt, from the outset.  Pay them hourly and time and one-half OT, but compute, or "back into" the proper hourly rate by determining the number of hours that will be routinely worked (e.g. 45, 50) in given weeks.  In such a manner, the exempt/non-exempt issue never becomes an issue.

The other option for employers is to enhance the actual job duties of these and similarly titled employees so that they do, insofar as possible, exercise managerial functions (e.g. hiring, firing, input into raise/promotions).  This is harder to do, takes significant managerial oversight and must be monitored.  It can be done, however, and then the person or persons will truly be exempt, whether under the Fair Labor Standards Act or any state wage-hour law.

• Print
• Comments
• Trackbacks
• Share Link

Law firms are usually defending clients in wage-hour suits where the allegation is that the employee claims he/she has been misclassified as exempt when they are really not and are due overtime. But, law firms themselves must be diligent about properly classifying their own employees, especially when they categorize employees exempt under the administrative exemption. This is the lesson being learned by the so-called boutique intellectual property law firm of Turocy & Watson LLP, where a legal secretary has filed a class action, charging that the firm did not properly pay the “class” of secretaries overtime.

The case is docketed as Osolin v. Turocy & Watson, LLP et al filed in federal court in the Northern District of Ohio and charges a violation of the Fair Labor Standards Act.. The plaintiff believes there are approximately 30 legal secretaries in the class. All of these secretaries were paid a salary and were allegedly misclassified as exempt.

The complaint alleges that none of the plaintiffs did any managerial work or directed the work of employees, or had authority to hire and fire. Under that factual predicate, the plaintiffs would not fit within the executive exemption, but the firm will likely defend on the basis that they are administrative employees. As I have often warned, this is the most difficult exemption to prove and if the facts show that the secretaries performed secretarial, clerical work the majority of the time, this exemption will not be available as it will founder on the “discretion and independent judgment” element.

It is highly doubtful that the firm could show they were professional employees, even if the employees were given the moniker “paralegal,” as paralegals are explicitly deemed non-exempt under the federal regulations.

The burden of proof is always on the employer in an exemption case. This behooves employers, law firms or otherwise, to make reasoned, defensible exemption determinations and classifications at the time of hire, because it only takes a single plaintiff to start a world of trouble. In sum, these lawyers need a lawyer.
 

• Print
• Comments
• Trackbacks
• Share Link

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

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

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

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

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

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

• Print
• Comments
• Trackbacks
• Share Link

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

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

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

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

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

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

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

• Print
• Comments
• Trackbacks
• Share Link