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.
 

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When I am faced with a wage suit, whether individual or class action, I always look for a “magic bullet” a quick fix, a tactic that might make the entire suit go away in one fell (and less costly) swoop.

One of these tactics is to use a preemption defense. Where there exists a labor contract, the argument is that the National Labor Relations Act preempts the wage hour suit, meaning the employees have to arbitrate their claims. There are other types of preemption defenses, as illustrated by the defendant’s attempted use of one in a recent case. The tactic failed, but the principle remains an important one.

A federal judge has held that a federal transportation statute did not preempt state wage law claims filed by a class of truck drivers, who claimed they were really employees, not independent contractors. The case is entitled Martins et al v. 3PD Inc., and was filed in federal court in the District of Massachusetts.

The judge rejected the Company’s contention that the wage hour claims and misclassification allegations were preempted by the Federal Aviation Administration Authorization Act of 1994. This statute, in sweeping fashion, preempts state laws that address issues of price, route, or service for any motor carrier regarding hauling of cargo or property. The defendant claimed the broad range of this federal law trumped the state law claims.

The court stated that “3PD argues that plaintiffs’ claims are preempted by the FAAAA for two reasons: (1) they impermissibly seek to 'enlarge or enhance the bargain' that the parties entered into, and (2) they would affect the price of motor carrier services.” The court rejected both arguments, holding that both contentions relied on the premise that the individuals were independent contractors, but that, according to the court, was the quintessential issue in the litigation. The court also certified the class.

Always examine a possible preemption defense. This is easier to do when there exists a labor contract, but the possibility of preemption must always be considered, as it can eliminate a class action in a single motion.
 

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I have posted a number of times on the slew of intern lawsuits recently filed under the Fair Labor Standards Act. This may be a new “wave” or fertile new ground for plaintiff side practitioners so I keep following these cases, particularly, the Hearst Corporation case, with more than a little interest. This particular case is entitled Wang v. The Hearst Corporation and was filed in federal court in the Southern District of New York.

The Company is fighting the bid for class certification lodged by a group of unpaid interns who claim they were really employees and therefore denied minimum wage and overtime protections. The essence to securing/keeping certification is the existence of an overall, companywide policy that establishes, ab initio, a group of workers “similarly situated.” The Company has argued that the circumstances surrounding the internships at the nineteen (19) Hearst magazines that overall conclusions about the work experiences and/or “employee” status cannot be made. In sum, there is no commonality, ergo, no “class.”

This is the famous “individuality” defense that I have commented upon frequently. The defendants contend that for the Court to extrapolate from the few individual accounts by the named and/or deposed plaintiffs to all others in the alleged class, many thousands, possibly, is inappropriate.

The Company wrote in its opposing papers that “the bigger picture obscured by plaintiffs is that these internships are desirable learning opportunities for college students who have not yet entered the job market. These students all knew in advance that their internships would be unpaid, they knew the internships were limited to those who could earn academic credit, they knew the internships were of short duration spanning a semester or summer vacation, and they knew there was no job waiting for them at the end.”

I agree with the individuality defense and observe it is the only way to go, as there is no dispute that the people were paid nothing. The “understanding” that existed prior to the commencement of the internships is also important but, if the plaintiffs can demonstrate that they performed “productive work,” there may be an issue for the Employer. Thus, in any intern situation, be aware of this minefield.

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There are many industries where the agreement between the worker(s) and the employer is that the worker will receive a certain fixed lump sum of money, sometimes wholly or partly in cash, for an agreed-upon number of hours. This situation is rife in the gasoline station industry, as evidenced by the fact that a New Jersey gas station operator has recently settled a case, agreeing to pay $3,000,000 in unpaid wages/overtime and penalties to more than four-hundred employees at more than seventy gas stations in New Jersey for violations of the Fair Labor Standards Act . The case is entitled Harris v. Daniyal Enterprises LLC et al and was filed in federal court in New Jersey.

The employer also had to pay $91,000 in Civil Money Penalties. These are assessed for willful conduct or for repetitions of the same type of offending conduct, which occurred in this instance. The owner was also held personally liable.

The Acting Secretary of Labor noted that “this agreement returns hard-earned wages to workers in one of only two states that still mandates full-service gas pumps. All gas station owners and operators in New Jersey should take note of this precedent by reviewing their payroll practices and legal obligations. Gas station attendants are few in number, earn low wages, work long hours and often lack English proficiency — factors that contribute to their vulnerability as well as the importance of protecting their right to be paid properly."

There were fourteen companies named as defendants, all owned by Mr.Chaudhary; these companies operated BP and Shell gas stations in New Jersey. The Complaint alleged that the employees often worked more than eighty hours per week, with no overtime, with payment off the books to disguise the fact that the employees were working in excess of forty hours per week..

There had been two prior investigations by the DOL, both finding that monies were owed. In both instances, DOL officials met with Mr. Chaudhary and explained his obligations for recordkeeping and proper payment of wages, which he evidently did not heed. Under the terms of the agreement, the employer must implement a monitoring program at each station to ensure FLSA compliance, as well as establishing a confidential hotline for employees to report alleged violations.

First lesson---it only takes a single employee to complain to a DOL (or an attorney). Then, anyone in the same boat, i.e. similarly situated, will be included in the action. Second lesson---informal deals or arrangements, i.e. a salary for a set number of hours (often over forty) is a dangerous idea because overtime must still (and always) be paid, regardless of the “agreed-upon” arrangement.
 

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In a matter of first impression, the Northern District of Illinois determined that maids and house cleaners employed by third parties are protected by the Fair Labor Standards Act (“FLSA”).  In reaching this decision, the court held such workers are not exempt from overtime by the “domestic service” exemption of the FLSA.  The case is entitled Arenas v. Truself Endeavor Corp. d/b/a Garret/Juarez Cleaning and is pending in the Northern District of Illinois.

The underlying action was brought by ten cleaning and janitorial workers who claim that they worked for Truself Endeavor Corp. (“Truself”), a company that provides cleaning services for private homes, and were not paid minimum wages and overtime.  Truself moved to dismiss the complaint based on several theories including an argument that the employees were exempt from overtime pursuant to the domestic services exemption.

The domestic services exemption excludes from overtime protection any worker “employed on a casual basis in domestic service employment to provide babysitting services or an employee employed in domestic service to provide companionship services.”  The district court rejected this argument and held that the domestic service exemption “applies by its terms only to babysitting and companionship.”

The Arenas case provides a strong indication that the courts are wary to broaden the scope of the domestic service exemption to include additional household functions.  Employers in the janitorial services industry should review their pay policies to ensure that they are compliance with federal and state law.
 

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What happens when an overtime violation is found?  Well, as a management side practitioner, I want my client to come into compliance with whatever parts of the FLSA they are (allegedly) violating.  For overtime violations, I have found that one manner of remedy is to change employee work schedules so that they do not work overtime.  This can be a risky proposition if the DOL (or an employee) alleges that the change was in retaliation for the filing and prosecuting of wage-hour complaints.

The Eighth Circuit has breathed life into this “remedy” and has sanctioned its use.  In a FLSA collective action, a group of employees had sued, claiming that their employer’s decision to change their workweeks in a manner that cut back on their overtime hours violated the Fair Labor Standards Act. T he Court rejected this, concluding that the FLSA allowed such alteration of work schedules to achieve the “goal” of reducing overtime expenditures.  The case is entitled Abshire et al. v. Redland Energy Services.

The Court emphasized that where the change in schedule is intended to be permanent and was implemented in accordance with the FLSA, the motivation of the employer did not mean anything. The drill operators for this gas company used to work on drilling rigs for seven consecutive days; they then were off for seven days, with one weekend off every other week.  The Company then reduced the crew size and changed the work week from Tuesday-Monday to Sunday-Saturday. This reduced overtime because the employee work weeks would now fall into two separate payroll periods.

The employees charged that the FLSA forbade the changing of work week to reduce overtime.  The Company defended by asserting that this change placed all employees on the same workweek, engendered efficiency and (admittedly) reduced overtime outlays.  The Court concluded that the proffered reason was a legitimate business reason for changing its work week for payroll purposes.

This is an important remedial guidepost for employers. There is, as they say, more than one way to skin a cat or to cut overtime costs/exposure
 

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

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

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

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

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

To be continued….
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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In 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.
 

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Under the new FLSA rules (August 2004), exempt employees who work beyond forty hours or whatever their “regular week” is deemed to be may be given compensatory time, although there is no legal requirement to do so.  Non-exempt workers, however, must receive overtime in wage form and cannot be granted compensatory time, except under very strict and narrowly defined circumstances.

This principle has been tested in a recent federal lawsuit involving a major New York City law firm. In a recent settlement, the law firm of Schulte Roth & Zabel LLP has agreed to pay back wages and settle a class action filed by technical support employees who claimed they were not being paid overtime, but rather were given compensatory time.  The case is entitled McKenzie v. Schulte Roth & Zabel LLP, filed in the Southern District of New York.  The putative class encompassed forty-five desktop support technicians and under the draconian New York State statute of limitations, the period of recovery stretched from 2005-2011.

The suit’s theory was that establishment of banks of compensatory time violated the law. The settlement monies would be for those hours that were recorded as comp time.  There was little doubt that the employee (and other class members) was non-exempt as he performed work such as installing and troubleshooting computers and similar technical duties.  There are a host of cases holding such positions are non-exempt, not fitting either the professional or administrative exemptions.

The irony with private-employer compensatory time “banks” is that, often, employees would prefer paid time off to receiving cash overtime, which is (obviously) subject to deductions for taxes, etc.  No one usually complains about such arrangements, but it only takes one, as they say.  If a single employee complains to the DOL or files a lawsuit, then all “similarly situated” employees will be joined.  It will not be a defense to contend that “everybody liked it.”  The other danger is that this violation may expose a company’s other compensation practices (e.g. exemption classifications) to scrutiny and/or attack.
 

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

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

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

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

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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.

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

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

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

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

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In FLSA cases, the plaintiff will often sue not only the Company, but its owners and/or officers as well.  I know from personal experience in defending these cases that clients often are motivated to settle because they fear the specter of possible personal or individual liability.

The recent case involving the owner of Gristede’s Foods Incorporated illustrates this maxim in a graphic manner.  He has appealed to the Second Circuit Court of Appeals, arguing that he is not an “employer” under the Fair Labor Standards Act and thus should not be held liable for any portion of the $3.5 million settlement just arrived at to resolve overtime employees who were pursuing a class action.  The case is entitled Torres et al. v. Gristede's Operating Corporation.

The CEO, John Catsimatidis, argues that he should not be liable to payments to the more than five hundred Department Managers (who were allegedly misclassified as exempt) because the day-to-day operations were handled by his deputies and their deputies and so on.  Thus, he disclaimed any operational control at the level where the working conditions, job duties, and, most importantly, hours, of the employees were regulated and directed from.  A lower federal Court had ruled in September 2011 that he “retained” retained control of the daily operations of the various stores and thus he was an “employer” as defined under the FLSA.

The CEO’s appeal focuses its attack on the legal standard used by the District Court.  He urges that the district court had applied the wrong legal standard and should have used the so-called “economic reality” test, which is the test used to determine independent contractor status under the FLSA.  The CEO argues that this test would zero in on an owner’s “actual relationship” with employees.  The appeal papers urged that “the district court did not apply the 'economic reality' test or focus on Catsimatidis’ relationship with the store employees in question. Instead, it looked at Catsimatidis’ overall corporate control and supervision.”  The evidence showed that for over a decade, the CEO has not played a role in hiring or firing decisions, did not make payroll decisions and did not negotiate with the labor unions representing the employees.

An affirmance would pose a danger for employers because it would expose controlling shareholders to liability in scenarios in which they may exercise general oversight of Company operations but are not “on the ground” in a particular store or facility (where decisions about exempt status and work hours may be made).  The Company claims that the “FLSA does not contemplate such disdain for the corporate form.”  On the other hand, the buck (all three million of them) may stop at the top.

To be continued.
 

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I have written many times about class actions for claimed working time and the great danger of these “subtle” kinds of violations that then explode on the employer.  Call centers gave been especially hard hit with this new wave of collective actions.  Another example.  A class of customer service representatives has been conditionally certified in Virginia.  Their theory is that their employer refused to pay for extra hours worked “off-the-clock.”  The case is entitled Hargrove v. Ryla Teleservices Inc., and was filed in the Eastern District of Virginia.

The employees claim that they were required to report early, before their shifts and engage in necessary work-related activities, which were not paid for.  They claimed that had to boot up the computers, plan schedules and review and respond to work-related e-mails.  If these preparatory tasks are "integrally related” to performance of the employee’s principal job duty, the tasks may be compensable, especially if the employees are “ordered” to perform these preliminary (or postliminary) duties.

Evidence of the widespread nature of this problem is that this is the seventh class action against this company, with conditional certification already granted in four cases.  The magistrate had originally recommended conditional certification be ordered; the Company appealed to the District Judge, who found the ruling was not clearly erroneous and allowed it to stand.

The Complaint has alleged that “supervisors explained to the employees that performing unpaid work activities was required because it was expected and was part of the job.”  The Complaint also estimates the amount of extra work performed as 10-20 minutes each day.  However, the workers allege that the overtime hours were not recorded or paid for.  The Complaint also maintains that the employees faced poor performance evaluation if they were not ready to take calls when their shifts started, meaning that they had to perform the preliminary work.

The key (again) is the amount of employer compulsion.  It is concerning to me, as a management side advocate, that the employees would allegedly suffer poor performance evaluations if not at their desks, ready to take calls, at their assigned start times.  This would enhance their argument that they were required to perform preliminary tasks that were tied to their main job and were mandated by their employer.  That combination equals (in all likelihood) significant liability.
 

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Nowadays, an intern is a good thing to be.  The young person gets some experience for a resume and the “employer” gains some productive work accomplished as part of furthering the person’s education.  When the line is crossed and the issue becomes money, not getting “experience,” the putative employer must be able to defend its decision not to compensate these people when judged against a series of defined regulatory criteria that define what an intern is under the law.  A recent example of this is the suit filed by a former unpaid intern at The Hearst Corporation suing on behalf of herself and hundreds of other similarly situated people.  The case is entitled Wang v. Hearst Corporation and was filed in the U.S. District Court for the Southern District of New York.

The lead plaintiff had interned for Harper's Bazaar.  She claimed that she worked on a full-time basis, i.e. fifty-five hours and claims she was never paid, notwithstanding that she performed job duties that regular employees should have been doing.  The Complaint labels this class of interns as a “crucial labor force” for Hearst, which publishes dozens of magazines, here and abroad.

The plaintiffs’ counsel asserted that “unpaid interns are becoming the modern-day equivalent of entry-level employees, except that employers are not paying them for the many hours they work.”  In this regard, the lead plaintiff, Ms. Wang, who was the head accessories intern, claims that she assisted at photo shoots and managed samples given to Hearst by fashion houses.

There are a number of criteria, under federal law, that are utilized when determining if so-called interns are actually statutory employees who must be paid at least the minimum wage (and overtime).  What they default down to, on a more global level, is that the internship is designed to enhance the education of the person without a substantial benefit inuring to the employer, in the form of productive work, which could and should be done by regular employees.  The Company is defending on this “educational” basis, asserting that it requires the interns to be enrolled in a university program and receive credit for their time spent at the company.

Be aware that Departments of Labor also focus on the presence of interns and scrutinize whether these people are employees or not.  There are other consequences for misclassification, beyond the minimum wage and overtime that would have to be paid back, such as unemployment and workers compensation issues.  Conducting an internal audit of any such intern positions, judged against the regulatory criteria, will provide necessary guidance.
 

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I have written several times about Assistant Manager class actions being quite difficult to defend because these employees often perform a great deal of “subordinate” type work, making the issue of “primary duty” a tricky one.  In a recent class action involving these employees, a federal judge has denied a motion for conditional certification (which does not often happen) on the basis that the lead plaintiff Assistant Manager was not similarly situated to the people he tried to represent. The case is entitled Guillen v. Marshalls of MA Inc and was filed in the Southern District of New York.

The plaintiff had claimed that the violations were willful, thereby entitling him (and the other opt-ins) to a third year of recovery.  Then, going after the primary duty requirement, the plaintiff alleged that he devoted the bulk of his time to non-exempt tasks such as janitorial work and unloading trucks.

The deficiency in the plaintiff’s motion, however, was that he failed to show that Assistant Managers throughout the country were performing their jobs in precisely the same manner.  Put differently, there was not a strong showing that Assistant Managers elsewhere were discharging non-exempt duties.  The court stated that “Guillen’s latest motion adds virtually no evidence suggesting that Guillen is similarly situated to ASMs in Marshalls stores nationwide with respect to the main contention in this case: that he was required to perform tasks that rendered him nonexempt from the FLSA’s overtime requirements.”

The court noted that there was nothing in the job description for this classification that required the performance of non-exempt work that the plaintiff alleged was done.  There was no evidence of any nationwide requirement(s) in this area as well.  The plaintiffs could not find a companywide policy that would apply to all of these employees.  As I have often noted, that is the anathema for an employer defending such a case. In this case, there could have been thousands of employees employed in these jobs across the country and without a showing of commonality (i.e. a policy), there would be a need for individual scrutiny of what each employee actually did.

What this case again reinforces for me is that the knee jerk reaction of any company defending a FLSA collective action should be to look for and solidify all evidence of the dissimilarity of the lead plaintiff and the “others.”  Company compensation policies should also be examined and, if need be, appropriately revised.
 

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I am always counseling clients to have very good and strict time reporting systems so that employees cannot claim they performed work and want to be compensated for it.  I also caution clients that if they “see” employees working or “hear” about it, they have an obligation to make them stop or to pay them.

A recent Seventh Circuit case proves this premise admirably.  The Court (in upholding a trial court's ruling) held that an employer did not have to pay overtime to an employee who had been “working” prior to the normal start of her shift but who had neglected to inform her employer that she was doing this work  The case is entitled Kellar v. Summit Seating Incorporated.

The appellate Court affirmed the ruling that no compensation was due to the factory manager, who claimed that she, virtually on a daily basis, arrived for work prior to the start time but was never paid for the extra work.  The Court held, however, that as the plaintiff never informed her supervisor that she was working this extra time.  The Court found no obligation to pay because the Fair Labor Standards Act “stops short of requiring the employer to pay for work it did not know about and had no reason to know about.”

The Court held that the Company “had little reason to know, or even suspect, Kellar was acting in direct contradiction of a company policy and practice that she herself was partially responsible for enforcing.”  Therefore, no jury could reasonably conclude that the Company knew or had a reasonable basis to know that the employee was performing work prior to her shift commencing. The employee had asserted that she often arrived before 5AM to prepare for her day’s work.  She claimed that the pre-shift job duties, i.e. turning on the lights, unlocking doors, taking deliveries, setting up work stations for rank-and-file employees, etc took between 15-45 minutes.

The lower court held that the work was “preliminary” in that it was not integral to the performance of the plaintiff’s duties, but it was for her own convenience.  This, however, is a different basis for denying the claim for compensation.  The trial court also relied on the de minimis doctrine as an alternative basis for dismissing her claim.  Significantly, the Seventh Circuit held, in contrast to the lower court, that the activities engaged in were not preliminary.  Thus, if the employer had known of the work and allowed it to still be performed, it would have been compensable.

The lesson for employers is to have explicitly drawn policies that disallow any preliminary or postliminary work to be performed without express permission of the employer.  The best crafted policy, however, is to no avail because if a supervisor (whether first level or higher up) has knowledge that work is being done, that work will likely be compensable.  To then argue that it is for the convenience of the employee, not the employer, will be quite difficult and if unsuccessful, quite costly to the employer.
 

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

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

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

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

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

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Last week, the U.S. Department of Labor (“DOL”) announced that United States Beef Corp., doing business as Arby’s, has agreed to pay back wages in the amount of $55,838 based on their failure to properly calculate overtime.  This agreement came following an investigation by the DOL, which found that 255 Arby’s restaurants had failed to include bonuses paid to managers when computing the “regular rate” of pay for overtime compensation. The settlement affects 759 current and former hourly paid managers in Arkansas, Illinois, Kansas, Missouri, and Oklahoma.

Pursuant to the Fair Labor Standards Act (“FLSA”), overtime for hourly workers “must be compensated at a rate not less than one and one half times the regular rate at which the employee is actually employed.”  The “regular rate” is computed by dividing the total compensation paid to an employee (including all commissions, bonuses and incentive pay) by the hours worked in a given week.  Contrary to an hourly rate, the “regular rate” of pay will vary from week to week depending on the number of hours worked and the monetary amount of any bonus or commission paid to the employee.

The DOL found that Arby’s had computed overtime for the hourly managers using their hourly rate of pay rather than their “regular rate.”  The DOL stated in a press release that “Fast food restaurants are frequently found by the Wage and Hour Division to be in violation of the FLSA’s minimum wage and overtime wage provisions.  Because historical data indicate that the majority of violations are committed by franchisees rather than by corporate-owned establishments, the division is focusing its enforcement efforts accordingly.”

All employers, not just fast food franchisees, need to make sure that they are calculating overtime correctly.  This is especially true for businesses that pay employees lump sum amounts, such as bonuses, pursuant to company policy or practice.  As seen above, even a relatively small deviation from the required computation can lead to significant liability.
 

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In June, I wrote about a lawsuit filed by a former film editor for “Girls Gone Wild,” who alleged that he was entitled to overtime pay because Manta Films Inc. and GGW Direct LLC improperly classified him as an independent contractor.  In response to the allegations, Joe Francis, the founder of “Girls Gone Wild,” stated that the lawsuit was “nonsense” because the plaintiff signed an arbitration agreement and release stating that the companies had paid him for all wages owed. The lawsuit is entitled Anagnos v. Magna Production Inc, et al. and was brought on behalf of a proposed class of 400 current and former workers.

As expected, Francis’ reliance on the arbitration agreement was misplaced.  Not only was he unable to dismiss the lawsuit based on the signed agreement, but on October 3, 2011, a California judge refused to enforce the arbitration agreement in its entirety. Specifically, the court denied the request to have an arbitrator, rather than a judge or a jury, decide the class action.  This decision should not come as a surprise to anyone, except maybe Francis, since the California courts have consistently refused to uphold mandatory arbitration clauses for class actions under the Fair Labor Standards Act.

The Court’s recent ruling in Anagnos v. Magna Production Inc. et al. highlights the fact that employers cannot hide behind such agreements in defending wage and hour lawsuits.  As seen in connection with independent contractor agreements, the courts will disregard any agreement that it deems to be contrary to the state and/or federal wage laws.
 

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Four U.S. Open umpires have filed a lawsuit claiming that the U.S. Tennis Association (“USTA”) failed to pay them overtime during the three week tournament in violation of federal and state law.   The Umpires allege that they regularly work more than 40 hours in a week during the tournament, but do not receive overtime pay because the USTA misclassified them as independent contractors.  The Umpires claim that the USTA pays them a daily rate based upon each umpire’s certification level and the type of match worked. The lawsuit further alleges that approximately 300 umpires work the U.S. Open each year.  The case is entitled Meyer et al. v. United States Tennis Association and was filed in the Southern District of New York.

The Umpires argue that they are employees, not independent contractors, because they do not make their own schedules, the USTA sets their pay without any negotiation, they have no chance to make or lose money in connection with their duties, and they are not allowed to work for another company while working at the tournament. As discussed in previous blog entries, the courts review the totality of the circumstances in determining employee status.  In particular, the courts consider the following : (1) degree of control; (2) investment in facilities; (3) opportunity for profit and loss; (4) permanency of the relationship; and (5) required skill.  Degree of control is generally considered to be the key factor in making this determination.

This case is unique because the above-mentioned factors do not appear appropriate in analyzing whether an employment relationship exists here.  While in certain instances the courts have held seasonal or short term workers to be employees, an agreement to only work three weeks in a year seems to suggest an independent contractor relationship.  For instance, even if the USTA sets the hours for the Umpires during the three week tournament, for the other 49 weeks of the year, the USTA does not maintain any control over the Umpires.  Additionally, its questionable whether the USTA truly sets the hours for the Umpires as they allege.  It would seem more likely that the Umpires’ schedules are dictated by the scheduling of the matches.

This may be one of the rare instances where an employer can establish that workers are independent contractors rather than employees.  Based on the allegations in the complaint, this case could very well hinge on whether the court focuses on the degree of permanency of the work relationship, rather than the degree of control.
 

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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.
 

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

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

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

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

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

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Just when the New York Mets thought that things couldn’t get any worse for them this season, they get “hit” with a class action lawsuit for allegedly failing to pay Citi Field security guards overtime. The plaintiffs, Errol K. Roberts and David N. Vernod, allege that Citi Field security guards regularly work 40 hours a week, plus 6 hours of overtime for each Mets’ home game, but do not receive time and a half when they work more than 40 hours in a week.

Specifically, the plaintiffs claim that the Mets pay security guards $17.00 per hour and provide them with a flat rate of $102.00 for each home game they work.  However, this flat rate only covers their regular hourly rate and does not factor in premium overtime pay.  The security guards are seeking an injunction, unpaid wages, liquidated damages, and attorneys fees.  The case is entitled Errol K. Roberts, et al. v. Sterling Mets LP and was filed in United States District Court for the Eastern District of New York.

Much like their infield this year, the Mets’ defense appears weak.  Notably, security guards are generally not exempt employees, and the Mets certainly do not appear to treat the Citi Field security guards as exempt.  In particular, the security guards are paid by the hour, not a salary, and they receive a set lump sum when they work extra hours.  The Mets could argue that the lump sum payment for home games represents overtime pay.  However, under the federal regulations, this arrangement is only valid where there is a signed writing between the employee and the employer to this effect. It is not clear whether such a written agreement exists.

Based on the allegations in the Complaint, it is unlikely that the Mets will be able to put up much of a fight in this case.  My advice to the franchise on how to comply with the law under their current pay structure for security guards --- hope for rain.
 

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

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

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

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

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

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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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I have often discussed the issue of lawsuits (usually collective actions) for off-the-clock claims and preliminary and postliminary work claimed to be compensable.  These are usually mundane activities and usually done for only a few minutes, but when the minutes occur every day, every week and there is a large group of employees engaging in the activities, the aggregate exposure can be substantial.  Technician-type employees or field service personnel are a prime breeding ground for such lawsuits. Another example of this phenomenon has now surfaced in the federal courts.

A field representative has launched a class action in federal court in Florida, alleging that he and a large group of similarly situated employees were compelled to work overtime hours, without being properly paid.  The case is entitled Salamanca et al. v. TNC (US) Holdings Inc.

These field representatives performed technical job duties.  They visited customer homes, in their geographic territories, to perform a number of customer-relation as well as technical functions.  For example, they would stay with the customer to show him how to handle and work with the equipment.  They allege they also received nightly error reports, relating to malfunctions in the equipment and they were compelled to remain on call for issues arising for customers in their designated areas.

An interesting twist is that the plaintiffs contend that the company’s GPS records and the Company-issued phones will provide the best evidence of the hours they worked.  This might then be a case where the accuracy of the employer’s records is the “worst” evidence against it for not only would these devices show the actual minutes/hours worked, they would also evidence that there was a fair amount of this “work” and it was necessary for the performance of the plaintiffs’ jobs.

The lesson here is that employers who provide any kind of PDAs or cell phones or any kind of equipment must scrutinize the employees’ usage of those devices and whether any such usage is occurring before or after the “usual” work day ends.  If employees must plan their routes for the next day while at home the evening before, the company may be liable for compensation.  Similarly, any job-related activities that employees are engaging in (e.g. showing customer how to use the equipment after installation) must also be looked at to determine whether the activity is sufficiently related to the primary job to warrant compensation.

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There had been an initiative to change the regulations regarding the fluctuating work week ("FWW") computation of overtime found in 29 CFR 778.114 by allowing the payment of non-overtime bonuses and incentives without invalidating the guaranteed salary criterion required to allow an employer to pay half-time overtime under the formula set forth in the regulation.  

There was opposition to this.  The opposition took the view that this change would allow employers to reduce employee fixed weekly salaries and shift the bulk of the employee compensation to bonus and premium pay.  These commenters believed that the change would lead to significant variations in weekly wages based on hours worked and that such variations were inconsistent with the concepts behind the fluctuating work week method of compensation.

The US Department of Labor accepted the view of these opponents, or perhaps, was afraid to make the changes that the new times in which we live might have commanded.  The agency concluded that such incentive and bonus payments were incompatible with the FWW procedure.  The agency feared that the change could have induced employers, intentionally or not, to shift a large portion of employee compensation to such bonus payments, potentially resulting in wide disparities in employees' weekly pay depending upon the number of hours that they worked in a given week.  Thus, other than changing the example in the current regulations to comport with the new minimum wage, the regulation has been left unchanged.

I believe the DOL missed an opportunity to bring this longstanding regulation into the 21st Century.  It is a widespread truism that non-exempt employees are receiving bonuses and other premium-type payments in addition to their salaries and these incentive elements are becoming more and more accepted by employees as components of their compensation.  In my view, it would have been logical and consistent to permit such payments under the FWW compensation method. 

I guess the DOL was afraid that the employer community would seize upon such a change as a "new"  way to hurt their employees.  In my practice, I deal with employers all of the time and I have more faith in the employer community, i.e., there is by no stretch of the imagination the malevolent intent  to use a DOL regulation to hurt people.  Simple as that.   

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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.

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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…
 

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I have believed that it is not illegal form an employer to reduce the wage rate of an employee, even if the objective is to save overtime costs or where as DOL audit has turned up liability and the employer wishes to respond by effecting a reduction in wage rates so the employer’s labor costs do not increase. Not, it seems, that my theory may get a grand “test” in the US Supreme Court.

In a case arising in the Ninth Circuit (California), a plaintiff has petitioned the Supreme Court to hear her case and reverse the decision that the hospital-employer did not violate the Fair Labor Standards Act when it reduced the hourly rates of Nurses so that these reductions would “balance out” or offset anticipated overtime costs for those employees who were scheduled to work twelve-hour shifts. The case is entitled Parth v. Pomona Valley Hospital.

The plaintiff claims that this ruling essentially negates or nullifies the application of the FLSA. The plaintiff alleges that the Ninth Circuit has undermined the “intent” of the statute by providing employers with a loophole to evade the so-called proper payment of overtime. If the employer can lower the rate and then pay time and one-half on that reduced rate, argues the plaintiff, the true intent of the FLSA and its “spirit” is not being complied with.

The dispute had its genesis in requests made by nurses more than twenty years ago that they be allowed to work twelve hour shifts, rather than eight hour days, to cut down on their commuting time and to allow more leisure time for the nurses. The hospital agreed to this, but under California law, any hours worked in excess of eight in a day are deemed overtime hours. In response, the hospital cut the hourly rate so that, with the computation of the four overtime hours, the hospital’s labor costs had not increased.

In the Petition, the plaintiff claims that this policy of the hospital “immunized the hospital from the additional labor costs associated with overtime.” In contrast, the Ninth Circuit had ruled that “there is no justification in the law and no public policy rationale” for declaring the hospital’s policy (which was later embodied in a labor contract between hospital and the nurse union).

I believe this is legal. Certainly, in my view, it is legal if the employees voluntarily agree to the procedure, as they did herein. I also believe the employer, upon adequate notice to the affected employees, may do this unilaterally.

The Supreme Court will tell us, if it accepts the Petition. If not, then the Ninth Circuit decision will stand, a decision that approved of the procedure.

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

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

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

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

Happy New Year! (I think).

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A group of satellite television dish technicians suing for overtime under the Fair Labor Standards Act ("FLSA") have been denied class certification based on the court’s finding that there was not sufficient commonality among the class members, or, put differently, there was too much of a need for individual scrutiny.   The case is entitled Shim v. Echosphere, LLC and was filed in the Southern District of Florida.

This is an important decision because, although the judge agreed that the putative class members had similar job descriptions and they were covered by the same corporate policies as the lead plaintiff, there existed enough “significant individual considerations” such as to negate the identity of the proposed class.

The lead plaintiff was a technician and, as such, he was clearly non-exempt and entitled to overtime. In addition to overtime monies, the lead plaintiff alleged that the company made routine/automatic deductions for lunch periods, whether or not the lunch periods were taken.

The judge also found, as another basis for denying the certification motion that the technicians at issue were employed at a number of locations throughout the country and thus the court would be compelled to analyze varied employment standards in the different jurisdictions.  The court stated that, in order to grant the conditional class certification it “would have to analyze the work experience and employment policies of each individual at each location across the nation.”

The judge also determined that since so many time periods were involved, the damage claims would be all over the board.  The differences between the different workers would also mean that some would be entitled to liquidated damages and others would not, another lack of the required commonality. The Court also stated that it was “wholly unclear whether the opt-in plaintiffs were subjected to the same lunch-break policies and practices, whether these policies and practices were established in the same manner by the same decision maker, and whether the FLSA violations allegedly experienced by the opt-in plaintiffs were sufficiently similar.”

This is the key to an employer’s successfully defending a class action.  Dig into the facts and find as many distinguishing factors amongst the putative class members and bang away at those in the opposition to the motion for conditional certification.  The greater need for individual scrutiny the better the chances of defeating the class motion.

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

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

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

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

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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.
 

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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.
 

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 When can the Department of Labor or plaintiff lawyers go after the officers and owners of a company for unpaid wages due employees?  That is an extraordinarily important question because all individuals who go into business, especially those who incorporate, are doing so to gain legal protections and to avoid, if things go “south,” being found liable for debts of the corporation.

In a recent case, a federal court has held that the CEO and COO of a trucking company in dire financial straits did not exercise operational control over the terms and conditions of employment of the plaintiffs as to be deemed “employers” under the Fair Labor Standards Act and thus personally liable for FLSA violations.  The case is entitled Solis v. Velocity Express, Inc. and was filed in the Western District of Oregon.  The Secretary of Labor claimed that since each of the officers possessed a significant financial interest in the company, as well as exercising financial control and supervisory authority over the individuals who actually handled the daily operations, these individuals should be “employers.”

The US DOL had taken the position that the Portland-based delivery drivers were improperly denied overtime wages tried to impose personal liability, in a broad-stroke action.  The federal judge disagreed with this approach, finding that, under the government’s theory, almost any corporate officer could be considered an “employer” under the FLSA.  This would transgress against the Congressional intent, which was that supervisory/management employees would not be held personally liable for unpaid employee wages.

The court focused on the “economic realities” test, which mandates control be directly exercised over the working conditions of the employees, such as keeping their time records and directing compensation decisions.  Under that rationale, there was no personal liability Here, the facts showed that the CEO really had a very minor financial interest, i.e. 0.85 percent of the stock; the COO owned only 0.18 percent.

The court noted that there must be a direct relationship between the officer’s decision and the FLSA violation. Herein, major operational decisions were made at a number of hierarchical levels of the company.  There was, tellingly, no evidence that either of these officers were involved in those decisions.  Therefore, the court concluded that the “supervisory relationship between these corporate officers and the delivery workers is too attenuated to support personal liability under the FLSA.”

The lesson for employers—if you a corporate officer or owner does exercise this kind of supervisory/operational control, that officer/owner should make absolutely sure that FLSA (and state wage hour law) obligations are being totally met, or they will face personal liability.

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

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

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

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

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

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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.
 

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Under the proposed Workforce Empowerment Act (S. 3696), introduced in the Senate on August 3,  2010, in-home direct care workers who work more than twenty hours per week will be covered by the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).  The bill would amend the FLSA, which currently exempts from its minimum wage/overtime protections individuals who work on a “casual basis in domestic service. 29 USC 213(a)(15).  A companion bill has also been introduced in the House of Representatives.  These workers typically provide assistance to their clients with such activities as bathing and eating.

The proposed bill’s Findings state that in the direct industry “working conditions are often difficult and turnover is high because of low pay, access to health insurance and other benefits, strenuous conditions…”  The Findings also report that 13,000,000 Americans are currently receiving such services and that “two-thirds of older adults will need some form of long-term care at some point in their lives.”

The proposed amendment defines “casual employment” as employment which is irregular or intermittent and which is not performed by an individual whose vocation is the provision of babysitting or companionship services.  Employment will not be considered “casual” if the hours worked in a week, for whatever number of employers, exceeds twenty (20).

Is this an initiative of the Obama Administration?  Any proposed expansion of the coverage of the FLSA is more likely to come from a Democratic Administration in any event.  I know this---there will certainly be record keeping, timekeeping issues if this law goes into effect because many of these workers have significant “down time” during the day, when they are able (?) to have free time to follow their own pursuits.

Are they engaged to be waiting or waiting to be engaged when these “chunks” of down time pop up?  Who knows?  Working time issues are amongst the grayest under the FLSA.  I guess we will see.
 

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A few months ago, I posted about a law firm sued for overtime by a paralegal.  In this latest case lodged against another law firm, a securities and antitrust plaintiff’s law firm named Labaton Sucharow LLP, a former attorney has filed a class/collective action seeking overtime.  The suit was filed under New York law and the Fair Labor Standards Act.  The case is entitled Koplowitz v. Labaton Sucharow LLP and is in the U.S. District Court for the Southern District of New York.

The suit’s primary contention is that because the attorney was paid hourly and worked more than forty hours, he was entitled to overtime compensation and not paid it . I find this a challenging theory because it is my understanding that lawyers (and doctors) can be paid hourly, under the Fair Labor Standards Act and still qualify for the professional exemption.  See 29 CFR 541.304. Perhaps the twist here is that the plaintiff is alleging that New York State does not recognize this exception to the salary requirement, but then why would the suit also be filed under the FLSA?.

Notwithstanding the FLSA carve-out for lawyers and doctors on the salary issue, the plaintiff’s attorney has boldly asserted that “the law is simple.  Employees paid on an hourly basis cannot be exempt under the FLSA’s `white-collar` exemptions.  It is disturbing that a prestigious law firm would pay employees in clear violation of the law.”

The plaintiff's attorney must have a countervailing argument to escape the dispositive force of the FLSA regulation because he filed the case as a collective action, ostensibly on behalf of all attorneys employed by the firm within the last six years who worked in excess of forty (40) hours per week and were paid hourly.

The other problem for the plaintiffs, as I see it, is that New York generally follows the FLSA regulations and guidance on exemption issues, meaning that New York will likely adopt the same rule that lawyers are exempt, even if paid hourly . One argument might be to contend that the duties assigned to the plaintiff were not lawyer duties and thus did not constitute exempt work.
 

I will follow this with interest and report back. 

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A case has recently issued that provides instructive guidance for employers who may want to insulate themselves from potential liability in a class action lawsuit.  A federal judge has ruled that an entity, a sub-contractor that provided janitorial personnel and crews to Target Corp. was contractually obliged to indemnify Target in a Fair Labor Standards Act lawsuit where the janitorial employees sued Target and the contractor for unpaid overtime compensation.  The case is entitled Itzep et al. v. Target Corp. et. al and was filed in the Western District of Texas..

Significantly, the defendants did not contest the fact that the workers did in fact work more than forty hours, but were not properly paid overtime.  The dispute was really about which defendant would have to pay the damages.  The subcontractor, Jim’s Maintenance, contended that the indemnification provision was facially illegal as it was void under the public policy of the State of Minnesota (the state that the parties agreed contractually controlled the claim).

The federal judge rejected that contention.  The judge agreed that the public policy of Minnesota was not offended by this contract, which was between two commercial entities.  It was a business transaction.  The judge also held, however, that Target was precluded from seeking indemnification for defense costs, as it did not tender the defense to the subcontractor as required by the contract, but the court held that the company could seek indemnification for its other expenses.

The bottom line was that the subcontractor was obliged to pay its employees, not Target.  When it did not pay, the workers sued both entities and won the judgment, but then target could, on the “back end” go after the subcontractor as it was and remained that entity’s legal obligation to pay the workers. That is unless the entities were found to be joint employers (which they were not).  This scenario posed an entirely different set of perils for an employer who subcontracts out certain work (most commonly cleaning and janitorial) but whose supervisors may exercise nominal or putative authority over the subcontractor’s employees when they work at the customer, i.e. Target.

The lesson for employers engaged in such subcontracts is to apportion the liability for unpaid wages, overtime and discrimination and other claims to the subcontractor for its employees.  This can be done via provisions in the contract that spell out the obligations of each party and what will happen, i.e. indemnification, if a particular party does not live up to those obligations.
 

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

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

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

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

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

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

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

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

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

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

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

Smart clocks may be silly policy!
 

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

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

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

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

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

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

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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.
 

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

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

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

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

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

I think it does!
 

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

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

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

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

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

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

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

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

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

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

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

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

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The US Department of Labor has resolved a legal action against a Texas company, Flour Enterprises Inc. for its failure to pay relief workers who participated in the Katrina clean up and rehabilitation efforts. The company will pay one million dollars to 154 workers. The case is entitled Solis v. Universal Project Mgmt., Inc., and was filed in the Southern District of Texas.

The DOL had also secured a default judgment against another Houston, Texas company for wages due workers which arose from the same investigation. That case is entitled Solis v. Universal Project Mgmt., Inc., and was filed in the same federal court..

Fluor, an engineering and construction firm, functioned as the General Contractor when it contracted with the Federal Emergency Management Agency after the devastation caused by Hurricane Katrina.  In turn, Fluor Enterprises subcontracted the work of inspecting trailers for the displaced people who were left homeless by the disaster to Universal Project Management.

The field investigation conducted by the DOL revealed that the companies did not pay time and one-half overtime, but rather (and against the law) paid only straight time for overtime hours.  A DOL official explained that “some employees involved in the inspection of trailers during the hurricane recovery worked up to 84 hours in a week without the required overtime compensation for hours worked over 40 in a workweek.”.

The Secretary of Labor observed that “workers who help rebuild our communities and secure the safety of local residents following natural disasters should be fairly and legally compensated for the work they perform.”

It is shameful that these employers should disregard such a basic tenet of wage-hour law, i.e. paying proper overtime, especially to workers who were likely not earning that high of an hourly wage to begin with. The mind boggles. I often take issue with Departments of Labor when defending/representing clients, but I applaud this use of the agency’s investigative and enforcement powers.
 

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

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

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

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

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

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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.

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Under the Fair Labor Standards Act, ("FLSA") compensatory time is statutorily prescribed for governmental-entity employees.  29 U.S.C. 207(k). Generally, compensatory time is impermissible in the private sector.  The US Department of Labor (“DOL”), however, does allow the use of so-called “time-off plans.”  Time-off is very similar to compensatory time but involves leave taken during the same pay period.  Time-off plans are only allowed under the following conditions:

1) The employee must get time off at time and one-half (1 ½) for all hours over forty (40) worked in a week; and

2) The employee must take the compensatory time off during the same pay period in which it was accrued.

Dunlop v. New Jersey, 522 F.2d 504 (3d Cir. 1975), vacated on other grounds, 427 U.S. 909 (1976); Wage Hour Opinion No. 913 (December 27, 1968) (employer may not credit an employee with compensatory time even at time and one-half rate if taken subsequent to the pay period in which the overtime is earned).

For example, an employee who works fifty (50) hours the first week of a biweekly pay period can take off fifteen (15) hours in the second week and, accordingly, only work twenty-five (25) hours during the second week without the cash payment of any overtime.  If the fifty (50) hour week occurs in the second week of the pay period, then the overtime premium must be paid in cash.

It appears that an employer can require that an employee accept compensatory time in lieu of being paid cash overtime provided the boundaries of the individual pay period are not exceeded. The US DOL has approved, by Opinion Letter, a procedure by which an employer could lay off an employee for a fixed number of hours in the second week of the pay period in order to offset the compensatory time earned in the first week of the pay period. 

In another Opinion Letter, the DOL held that the FLSA does not prohibit an employer from maintaining employee salaries at a constant level by controlling the number of hours worked; approving “layoff” concept in second week of a bi-weekly pay period.  By analogy, an employer could “order” an employee to take compensatory time in the second week of the pay period, as opposed to being required to pay cash overtime, even if the employee preferred to be paid in cash.

The kicker for employers is that if they allow private sector employees to bank overtime and the DOL comes in, albeit for an unrelated reason, and discovers that, the agency will deem it a violation and order the employer to pay the employees their “overtime.”  The DOL may also (and probably will) impose penalties for late payment of wages and/or improper payment of overtime.
 

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

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

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

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

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

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

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