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

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

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

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

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

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

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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.
 

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This past week, a former film editor for the “Girls Gone Wild” franchise filed a class action in the Superior Court of the State of California alleging that Manta Films Inc. and GGW Direct LLC improperly classified him as an independent contractor, and consequently, denied him overtime pay.  The former film editor, Philip Anagnos, has also brought this action against Joe Francis, the founder of “Girls Gone Wild.”

Anagnos claims as a film editor, he “worked very, very long” hours viewing footage and picking the best pornographic clips to use in the “Girls Gone Wild” films.  Anagnos alleges that he was paid a flat rate of $170 per day regardless of the hours he worked.  Anagnos further claims that he did not exercise sufficient control over his time and duties that would qualify him as an independent contractor.

Joe Francis has responded to these allegations with a threat to make the plaintiffs’ counsel “run for the hills.”  According to Francis, the lawsuit is “nonsense” because Anagnos, as well as other editors, signed an arbitration agreement and release stating that the companies had paid him all wages owed.  While Francis may believe that this release will carry the day, California wage and hour law appears to provide otherwise.

Similar to the federal Fair Labor Standards Act, California’s Labor Code provides that an employee’s right to unpaid wages or overtime can only be released by the Department of Labor. Thus, any private agreement, such as the release signed by Anagnos, would likely not result in the waiver of an employee’s right to recover unpaid wages.

The lawsuit is entitled Anagnos v. Magna Production Inc, et al. and has been brought on behalf of a proposed class of 400 current or former employees of Manta Films Inc. and GGW Direct LLC who were allegedly misclassified as either independent contractors or exempt employees.
 

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On May 9, 2011, a group of Yankee Stadium food service workers filed a complaint in the Southern District of New York alleging that the stadium’s concession providers withheld tips in violation of the New York Labor Law (“NY Labor Law”). The workers allege that the concession providers at the new and old Yankee stadiums kept the 20% service charge added to the cost of food and drinks served to certain field level fans. The workers claim that the menu for the field level seats states, “A 20% service charge will be added to the listed prices. Additional gratuity is at your discretion.” The case is entitled Ryan et al. v. Legends Hospitality, LLC, and the proposed class allegedly consists of one hundred members.

The case is notable in that it highlights an increasingly rare phenomena - - a divergence between state and federal wage and hour law. Under the federal law, the Fair Labor Standards Act, a compulsory service charge does not constitute a tip, but rather is counted toward the employer’s gross receipts. In contrast, the NY Labor Law, provides that an employer cannot “retain any part of a gratuity or any charge purported to be a gratuity for an employee.”

The New York Court of Appeals has previously interpreted this language to require that an employer is prohibited from withholding a mandatory service charge or fee if a “reasonable patron” would have believed the service charge to be gratuity. Accordingly, the employers in Ryan et al. v. Legends Hospitality, LLC appear to have a difficult road ahead of them since the menu states, as alleged by plaintiffs, that “additional gratuity is at your discretion.”

The lesson here is that employers need to be mindful of state, as well as federal, wage and hour law. While state and federal law is typically consistent, a difference such as discussed in Ryan et al. v. Legends Hospitality, LLC, can lead to significant problems.
 

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

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

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

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

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

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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.
 

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