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

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

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

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

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

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

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

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

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

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

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

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

Not the case.  In this case.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Funny, ain't' it?

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

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

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

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

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

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