I had blogged about this case a short time ago, with my “take” being that this was a bad case for the employer and that it should be settled quickly.  Maybe they were listening.  Now, the employer, a Florida country club and the workers suing have requested that the federal judge dismiss the Fair Labor Standards Act (“FLSA”) suit, asserting that the club has paid almost $96,000 to 35 workers and $34,000 in fees to the lawyers.  The parties assert this will resolve the case.  The case is entitled Werman et al. v. Rotonda Golf Partners LLC and was filed in federal court in the Middle District of Florida.

Golf course
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Under the agreement, the former maintenance workers (Mark Werman and Ronald Segui) agreed to cut their damages calculation to 1.5 times the amounts allegedly due them, rather than doubling the damages, as they initially sought.  The employer (quite correctly) took the view that it was worth paying $130,000 to avoid a long, drawn out judicial process that most certainly would have cost the Company a great deal more in legal fees (for their counsel and the adversary, as the FLSA is a fee shifting statute) and possible damages.

The joint motion stated that “plaintiffs’ probability of success on the merits, and the amount of any potential award, also is uncertain, further suggesting that this settlement is fair and appropriate.”  The plaintiffs assert, and the defendants deny, that the plaintiffs are owed wages due to defendants’ alleged violations of the FLSA.”

The plaintiffs alleged that the employer avoided and evaded the payment of proper overtime by splitting hours between the entities, thereby always paying straight time even though the hours worked at both places aggregated to more than forty in a week.  The settlement discussions began in in June “in an effort to avoid the cost and risk associated with continued litigation.”  Then the parties sent opt-in notices to 36 current/former employees.  By this juncture, the Company had already sent checks to 35 workers, including all opt-ins, which added up to $95,862.40.  The defendants also agreed to pay $34,141.76 in attorney fees.  The parties urged the Court to approve the settlement.

The Takeaway

The parties, especially the defendant, did the right thing here.  I have done this myself many times when faced with a set of facts, as the defendant/employer’s counsel, that signaled to me that something had been done wrong and considerable expense and liability lay down the line.

The best thing to do is get out early and as cheaply as can be done.  Then, of far greater importance, is the need to correct the deficiencies that led to the suit and never do it again.

Kudos to the employer!

It is not that often that a motion for conditional certification is denied, as there is only needed a modicum of evidence, e.g. affidavits, to support the motion.  But sometimes, it does happen.  A federal judge has refused to certify a collective action that sought a class of employees against Stuart Petroleum Testers Inc.  The plaintiffs allege that they were not paid overtime under the Fair Labor Standards Act, but the Judge concluded that the named plaintiff did not introduce sufficient evidence to show he was situated similarly to others in the proposed class.  The case is entitled Mathis v. Stuart Petroleum Testers Inc. et al and was filed in federal court in the Western District of Texas.

Oil pump jack and oil tank silhouette
Copyright: crstrbrt / 123RF Stock Photo

The Court noted that, even under the “fairly lenient standard” of the conditional certification stage, the plaintiff, James Mathis, laid out only “bare assertions” about the nature of the job he performed.  These bare assertions were too vague to allow a determination that other employees in the same positions performed the same basic tasks.

The Judge observed that the plaintiff did not explain what kind of equipment a field supervisor or pump supervisor would regularly use nor did he describe the other classifications of employees they would work with or the specific tasks they would perform.  In lieu of doing that, the plaintiff only gave a broad description of “maintaining and operating the equipment used at the oilfield well sites.”  The Court noted that this could include nearly any worker performing some manual labor at a well site.

The Court stated that “if the court were to evaluate which Stuart Petroleum employees are in a ‘similar position’ to a pump supervisor or field supervisor based on plaintiff’s description of his job duties, the resulting class would inevitably include workers who are not ‘similarly situated’ to plaintiff.”

The Company attacked the motion for conditional certification by contending that it was based on the fundamentally incorrect premise that, although he was a salaried field supervisor, there was a “class” of similarly situated hourly employees.  The Company pointed out that the named plaintiff was a senior operator on a hydraulic choke crew who occasionally supervised other crew members, who were hourly paid and received bonuses.  The Company also argued that he had not presented evidence that any potential opt-in plaintiffs gave any sign that they might want to join the lawsuit.

The Takeaway

Usually, a motion for conditional certification will be accompanied by several affidavits or sworn statements.  Most times, these are canned and boilerplate and then the defense counsel must argue that there is no basis to conclude that any of the affidavits are persuasive and/or that none of the supporters of the motion have “real” knowledge.  In essence, the defendant in that scenario is arguing that the showing was “barebones” as was argued here.

But, here, consisting of only one named plaintiff’s allegations, generalized and vague as they were, the showing was indeed, the essence, of barebones.

After an employer make settlements with employees, especially if done through a DOL investigation, and those employees are still employed, there exists perhaps a natural “urge” to take some of that money back or perhaps, to get some pay back.  That’s a No-No.  To prove the point, the US Department of Labor has now sued an employer who cut the wages of two workers when they refused to return back wages paid to them as part of a settlement in a prior DOL investigation.  The case is entitled Perez v. Makin’ Choices Inc. and was filed in federal court in North Carolina.

Dollar signs
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The company agreed in August 2014 to pay sums exceeding $100,000 to resolve a DOL investigation centering on allegations of unpaid overtime/minimum wage.  Then, allegedly, the company began repeatedly asking two of the employees to return what they were paid out under the DOL audit.  Their refusal triggered (allegedly) the wage cuts.  The government’s complaint charges the company the owner, personally, with violating the anti-retaliation protections of the FLSA.  As the Complaint aptly states, “shorting workers once is bad enough, but we simply will not tolerate attempts to retaliate after we’ve stepped in to recover the wages they’ve worked so hard to earn.”

The audit started in July 2012 and culminated in an August 2014 settlement.  The simple fact is that the workers worked between 77-112 hours per week, making about $12 per hour, so these people were working a huge amount of overtime hours.  Then, after many times being asked to give back the “hard-earned” settlement dollars, the company decided to try an alternative method to recoup the money.

While DOL investigators were looking into the alleged retaliation, they also uncovered other violations by the company of FLSA overtime laws.  The agency is seeking back pay and damages for the alleged retaliatory action and, adding insult to injury, seeking overtime wages for the two employees at issue as well as two other technicians.

The Takeaway

Sometimes it is better to leave well enough alone.  The most important thing for me, when I am advising and representing a client in a DOL audit, is to come out of the audit or inspection, fix what was broken and then move on.  The company here seemingly did not do that.

So the company will perhaps learn another, harder, more expensive lesson.

Quiz
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The TSheets Time Tracking Blog recently posted a quiz testing readers’ knowledge of the Fair Labor Standards Act (FLSA). It was a pleasure to assist in preparing the 9-question quiz, asking participants to correctly apply the FLSA to several hypothetical situations. Can you get a perfect score?

As I live and breathe!

The USDOL, the agency charged with enforcing the Fair Labor Standards Act has, evidently, not been paying its own employees proper overtime.  The agency has just agreed to pay $7 million to settle claims that it did not pay proper overtime to thousands of its own employees.  The matter was brought as a grievance by the American Federation of Government Employees, Local 12 (“AFGE”) and had been percolating through “the process” for almost ten years.

U.S. Department of Labor headquarters
By AgnosticPreachersKid (Own work) [CC BY-SA 3.0], via Wikimedia Commons
The Union lawyer aptly noted that “this is the agency that goes around fining all the private employers for doing the same thing that it just ended up paying $7 million to make go away.”  The “collective action” grievance charged that the DOL failed to pay employees when the agency “suffered or permitted” overtime to be worked.  Interestingly, during the pendency of this grievance, many workers who had been classified as exempt were re-classified to non-exempt, i.e. overtime-eligible.

It is estimated that thousands of employees will receive payments under the settlement.  The theory of the grievance was that employees were performing work beyond their assigned shifts, work that the agency knew or should have known about, but nonetheless did not pay the employees for this work.

The Union sought to place the blame directly on the former Secretaries of Labor, Elaine Chao and Hilda Solis.  The Union President stated that “it is deeply disappointing that both Secretary Chao and Secretary Solis were unwilling to abide by their own regulations when it came to paying their employees.  It is sad that a decent and hard-working public servant like Secretary Perez has to clean up their mess.”

The Takeaway

The Union lawyer stated that “this settlement will help ensure that the agency follows the same laws it enforces.  I guess this should be taken as a cautionary tale by all employers, small or titanic.”

But, most especially, for the agency.

This is an interesting case and a (possible) double victory for the employer.  A rarity.  An employer-defendant, Dynamex, Inc. has filed a motion to eliminate more than 30 opt-ins from a conditionally certified collective action under the FLSA seeking back due wages for overtime violations.  On that very day, the employer won the right to access some of the opt-in members’ tax records.  The case is entitled Juan Saravia v. Dynamex Inc. and was filed in federal court in the Northern District of California.

Tax returns
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The Company wanted some opt-ins eliminated because they failed to show up for their depositions and others because they withdrew their consent to participate in the suit.  The Company also challenged opt-ins because they were not part of the originally proposed class definition or they did not opt-in on time or they were contracted to work outside of California or were deceased.  The Company urged to the Court that “absent the requested dismissal, this court will be allowing the inclusion of eighteen (18) additional opt-ins at trial in a case where individualized determinations are a necessity and the interest and diligence of the opt-ins is at question.”

The theory of the case is that although the Company labeled the workers as independent contractors, the Company controlled the routes, schedules, customers and other details for thousands of U.S. drivers, which would show too much control, meaning that they were actually statutory employees.  At this time, 155 drivers have opted in.

On that same day, as luck would have it, the Judge ordered 36 collective action members to turn over their federal tax records relevant to their claims from 2008-present when they were contractors for the Company.  The class members had objected on invasion of privacy grounds and that the demand was a pretext for harassment.  The court disagreed, concluding that the plaintiffs’ privacy interests did not supersede the Company’s interest in preparing and advancing a fully formed defense on the merits of the case.

The Court aptly and cogently found that “the tax records that Dynamex seeks will provide probative information indicating the structure of each plaintiff’s businesses, the nature of their income and expenses, and the extent of their gross income, which will be useful in demonstrating whether each of the opt-ins was properly classified as an ‘independent contractor’ or not.”

The Takeaway

This is a great victory, securing the tax returns.  Moreover, and more importantly perhaps, it tilts the momentum of the case in favor of the employer.  Regretfully, most times, the employer is placed in the unenviable position of being reactive and always warding off the next attack by plaintiffs.  Maybe the plaintiffs do not want to open up their tax returns for scrutiny.  Maybe this will cause the plaintiffs to want to settle or be more reasonable in any settlement demands.

I applaud the tactic.  Let it be a signal to other defendant counsel out there.

One thing about FLSA collective actions—right or wrong, win or lose, the legal fees for both sides mount up quickly and almost relentlessly.  I often counsel clients to try to get out early of such a case (especially if I perceive there to be a problem, where there usually is).  Well, the parties in a recently filed collective action have asked a federal judge to stay the proceedings in their case so they could pursue mediation.  The case is entitled Barnett v. EQT Production Co., and was filed in federal court in Western District of Pennsylvania.  This is the correct tactic for the employer.

Oil pump jack and oil tank silhouette
Copyright: crstrbrt / 123RF Stock Photo

The workers claim that they were misclassified as exempt, thereby denying them overtime.  In a joint motion, the parties requested that discovery be stayed and that the action be conditionally certified so that notice could be sent to potential class members.  That notice would allow workers to opt in.  The conditionally certified class would be comprised of any person who performed completions work for the Company but who were treated as independent contractors; such people are not “employees” under the FLSA.  (The mediation is scheduled for October 17).

The named plaintiff alleged that he and other employees on rigs routinely performed non-exempt work in excess of forty per week and were never paid overtime.  To evade this obligation, the plaintiff charges that the Company classified the workers as independent contractors.

The plaintiff charges also that the Company exercised sufficient control to label the workers as “employees” and therefore subject to the FLSA.  They allegedly took direction from the company as well as being managed and supervised by Company supervisors.  They provided regular reports to supervisors; they wore EQT uniforms, attended EQT training/orientation and lived in company-provided housing.  Those are several indicia of control, undermining the defense that the people are true independent contractors.

The Takeaway

This could be bad for the Employer.  By putting all your eggs in the basket of independent contractor status, the battle will be totally lost if the workers are not found to be independent contractors.  This is because if a worker is covered by the FLSA and is non-exempt and if they work beyond forty hours, they must get paid overtime.  End of story.  Then, all there is to quibble about is the number of hours worked and computation issues.

I applaud the action here, especially by the employer.  Get out of it early and save the escalating legal fees (on both sides, as this is a fee-shifting statute).  If there is something to be fixed or ameliorated, then do it.

And move on…

A putative class of delivery truck drivers has filed a collective action FLSA lawsuit against Bimbo Bakeries, alleging a failure to pay overtime.  The case is entitled Oddo et al. v. Bimbo Bakeries U.S.A. Inc. and was filed in federal court in the District of New Jersey.  The plaintiffs will seek conditional certification and try to get the ability to send opt-in notices to affected employees.

Bakery
Copyright: maxsheb / 123RF Stock Photo

The plaintiffs claim that by paying drivers a flat rate of $110 per week plus 12% commission on sales, the Company violated both federal and state law.

The Complaint alleges that the “plaintiffs assert that defendants failed to pay named plaintiffs and those similarly situated proper overtime compensation and failed to implement a system to track the number of hours worked each work week.” The Complaint contends that the drivers, titled “route sales representatives,” could not improve their commissions since they had no sales training and “the amount of sales that named plaintiffs made to a retailer along their delivery routes was mainly determined by the volume of the retailer’s sales to its customers since named plaintiffs’ last delivery.”

There have been many other FLSA lawsuits against this Company, which is a multinational bakery company based in Mexico; the Company owns several brands, including Sara Lee, Entenmann’s and Thomas’. The Company has also settled several cases with fairly large dollar payouts over the last six years.  By contrast, the class here is no more than forty employees (if they all opt in).

The Takeaway

Overtime cannot be waived nor can it be paid through compensation arrangements which, although fair or even generous, do not comply with the law.  The employer here must either keep employees to forty hours or less or pay them overtime.

There are legal ways to pay overtime and yet not experience an increase in labor costs.  This Company must examine any number of procedures for effecting compliance and still being efficient and profitable.  They do exist!

I believe the Company can do it…

I blogged about this case a few weeks ago and opined that the employer would have an uphill fight.  Maybe they heard me.  The case has now been put in abeyance as the parties seek to work out a settlement.  This initiative follows my thinking in many of these cases—try to get out early and as cheap as you can (especially if, as the employer, you perceive you have exposure).  The case is entitled Werman et al. v. Rotonda Golf Partners LLC and was filed in federal court in the Middle District of Florida.

Golf course
Copyright: happyalex / 123RF Stock Photo

The proposed collective action was based on the theory that employees were forced to work off the clock and were therefore not paid proper overtime.  The lawyers filed a joint motion last week asking for a stay so they could discuss settlement.  The case is now in abeyance until October 7.

The joint motion noted that “the parties respectfully submit that it would be most efficient for the parties to spend their time and limited resources working toward a mutually agreeable settlement rather than responding to the amended complaint, filing a case management report, engaging in discovery and engaging in motion practice relating to, among other things, the overtime exemption asserted by defendants.”

The protocol agreed on will include letters being sent to the employees so they can opt in if they choose.  The defendants then have to provide the payroll records to the plaintiffs’ lawyers so they can “reasonably necessary to determine whether, as plaintiffs allege but which defendants deny, compensation is owed to the opt-in.”

The suit alleges that employees were directed not to punch in when they got to work and to keep working after they punched out.  The employees allege that they received two paychecks that showed only a portion of their hours worked.  They also received part of their monies as “employees” and then received the rest of their pay through a 1099, i.e. as independent contractors.  The workers contend that they were intentionally misclassified so the employers could avoid paying overtime.

The Takeaway

This is a big step forward in resolving this litigation and it will dramatically cut down the litigation fees which the employer would have to spend and avoid inflating the adversary’s fee petition/demand.

It appears to me, as a management side practitioner, that this is the right strategy.  The most crucial thing is to fix what was broken—treating people as W2 employees and 1099 independent contractors in the same work week(s) smacks of deception and an intent to avoid payment of overtime.  Off-the-clock cases are very bothersome, especially when the evidence suggests that there was a focused, management effort to order people to work off-the-clock.

A sand trap, but there is a way out…

A group of hourly employees working for the pawnshop chain Gem Financial Services Inc. have been granted conditional certification in a Fair Labor Standards Act action; their allegation is (as usual) unpaid overtime.  The federal Judge ruled that the workers had presented sufficient evidence at this early juncture to show that a common compensation policy applied to them and it was arguably illegal.  The case is entitled Dalton et al. v. Gem Financial Services Inc. et al., and was filed in federal court in the Eastern District of New York.

Pawn Shop
Copyright: schubphoto / 123RF Stock Photo

The Judge concluded that “courts in this circuit have routinely allowed for conditional certification where plaintiffs proffer precise and detailed information outlining the alleged mistreatment suffered by other similarly situated employees as a result of defendants’ compensation policies.”

The employer has twenty-eight retail locations throughout the New York area and in excess of 130 workers.  The employees allege that they were routinely shorted on overtime pay for weeks when they worked in excess of the statutory threshold of forty hours.  Added to the pure wage hour claims is the allegation by one of the three original plaintiffs, Diori Johnson, an accountant, who states that she was asked to falsify time records, make improper deductions from exempt employees’ salaries and continually not pay employees the proper amount.

An HR administrator, who visited company pawn shops, always heard complaints from employees that they were not paid overtime and saw (allegedly) rounding practices that always resulted in clocked hours being rounded down.  The Judge noted these employees’ experiences and observations as the basis for deciding to grant conditional certification.  The Court stated that “this type of consistent involvement in the day-to-day compensation realities of other Gem employees enabled plaintiffs to directly observe defendants’ alleged wage-denial scheme.”

Interestingly, the Court also concluded that the workers did not meet the Second Circuit standard for demonstrating sufficient similarities between non-exempt workers and other employees who were allegedly misclassified as exempt from overtime to be able to conditionally certify a collective action class including both groups.

The Takeaway

This case shows the best and the worst of results for the employer.  The Court (rather easily) granted certification on the one class of workers, where the Court believed that a common policy and practice applied to all of them.  Then, the Court refused to grant certification to a second requested class, where the allegation was that the workers were non-exempt.  On that component, the Court believed that not enough similarity or commonality had been shown.  That is the essence of a successful defense to a collective action.

On that first group, it seems an uphill climb…