On prevailing wage projects, employees are paid for the different trade work they do by the rate for that trade.  Sometimes, employees work in more than one classification (e.g. Carpenter and Laborer).  These lines of demarcations are tricky sometimes, especially in situations where work in one trade might follow closely on the work of another.  The danger is that if the employer does not properly account for these various trades, significant liability will follow.

There are but few general principles that can be stated.  The only “general” rule that stands out is that it remains always incumbent upon the employer who utilizes employees in more than one classification to ensure that those employees are properly paid for the various types of work performed and for the hours such work was performed.

As far as what principles govern various questions, it is clear an employer must inquire into or research the prevailing practices in the particular locale, understanding that even for the same types of work, a county in Florida may have different trade jurisdictions than one in Michigan.  The Administrative Review Board (ARB) (the adjudicative body for Davis-Bacon Act issues and suits) addressed the issue of the applicability of area prevailing practices many years ago.  The Board found that where Wage Schedules reflect union rates as prevailing, then work that may be disputed belongs exclusively to one union over another under the local area practice.  The ARB continues to adhere to this principle to determine proper assignment of disputed DBA work.  In fact, there is an almost obsessive focus on the area practice of the unions that are involved.

Although area practice predominates, the cases do suggest some lines of demarcation, especially where work in one trade “bleeds” into another or overlaps with a different trade.  For example, in one case, the evidence showed that the Employer tried to ensure that Laborers would not be using sheet metal tools, thereby performing sheet metal work, but there were times when the workers would pick up and use tools for the Sheet Metal trade; the foreman did not intervene and either order the men to stop using the tools or ensure that they were paid for the proper trade.  Interestingly, there were occasions when the workers only “sporadically” used the sheet metal tools, but the ARB refused to find any kind of de minimis standard, ruling that the correct rate (i.e. Sheet Metal) had to be paid.

Temporal proximity is also a very important factor.  Where a worker performs work in one trade in the morning, then switches after lunch to another trade, that worker is (obviously) splitting his time, unless the work is integrally related, which is unlikely.  If the “additional” work is performed very soon after the work in the first classification, then an employer who splits the classifications may have a problem, resulting in the higher rate being ordered to be paid.  In other words, if the other (e.g. lower-rated) work is related directly to the trade in chief, the time would be paid at the higher rate, as integral to the primary job.

The Takeaway

These are intensely fact specific issues that are not amenable to the setting of general rules.  However, there are steps that can be taken to enable a Company to proactively gauge when there is a need for a split classification and, of equal import, what that “other” classification should be.  The first is to put some burden on the workers themselves, by developing a self-reporting system for the men themselves to report their hours and, in their belief, the trade and have them certify that time and the trade. It is also possible to seek USDOL guidance on jurisdictional questions, as they exist or arise.

Remember, the DOL is watching…

Every time a plaintiff files a FLSA lawsuit, they seek a third year, one longer than the usual two year statute of limitations, claiming that the violations were “willful.”  It has become a matter of course and defendant attorneys must begin any settlement negotiations knowing that the amount claimed has been artificially inflated with a third year claim.  Maybe things are changing.  The Court of Appeals for the 2nd Circuit has now ruled that plaintiffs seeking to invoke the enhanced three-year statute of limitations) must plead specific facts to show that the employer willfully violated the law.  The case is entitled Whiteside v. Hover-Davis, Inc., Universal Instruments Corp., and issued from the Second Circuit Court of Appeals.

The standard for that third year is a showing of “reckless disregard” by the employer for the dictates of the FLSA.  In this case the plaintiff filed his suit more than two years after the events giving rise to it e.g. alleged claim of failure to pay overtime), but the lower federal court dismissed the allegations as time-barred because the plaintiff had to plausibly allege that there was a willful violation of the statute.  There were no facts alleged to indicate that the Company had acted with with gross negligence or reckless disregard for the law.

The Court opined, from a scrutiny of the legislative history, that willfulness was “an independent element” necessary to sustain a three-year statute of limitations.  Thus, the plaintiff had to plead and prove the facts that support this serious allegation.  This view diverges with presentation of an “ordinary” statute of limitations defense to other claims where the defendant’ must plead/prove this affirmative defense.

The Court first decided that willfulness was an element of the claim and then relied on Supreme Court precedent for the proposition that a plaintiff must allege facts that undergird a plausible inference that a willful violation has been committed.  In other words, boilerplate allegations of willfulness, without details, are insufficient. As the Court explained, “[w]hen a plaintiff relies on a theory of willfulness to save an FLSA claim that otherwise appears untimely on its face, it should similarly be incumbent on the plaintiff to plead facts that make entitlement to the willfulness exception plausible.”

The plaintiff here failed to do this.  He only alleged facts to suggest that the Company “forgot” to change his exempt status.  That might show negligence, but not the gross negligence needed to rise to the level of “willfulness.”  He did not allege that any one said anything to indicate management knew it was wrong or, more importantly, that he ever complained about this issue (i.e. exempt status).  He only asserted that his employer failed to reclassify him when his duties changed and that was not enough for willfulness or reckless disregard.

The Takeaway

I know that this case is precedential for the Second Circuit States (e.g. NY, Conn) but I say the rationale of this case should be utilized by defense practitioners early on in the case if at all possible.  There is a split in the Circuits on this discrete issue and the US Supreme Court may ultimately have to harmonize the law.  Until then, this is a tactic that should be aggressively used.

If successful, the entire complexion of the litigation changes…

I read an interesting article in the Morrison & Foerster blog the other day about a case where a class was de-certified because it appeared there was a problem with the lawyers for the class.  As the blog post notes, defense counsel must always be looking for a way to terminate (i.e. dismiss) the case, even after conditional certification is granted and a settlement is expected by the plaintiff’s lawyers.  In this case, the Court became concerned when it became aware that the plaintiff’s lawyer did not appear interested any longer in taking the case to trial. The case is entitled Jin v. Shanghai Original, Inc. et al and issued from the Second Circuit Court of Appeals.

In Jin, the workers sued for overtime, alleging both FLSA and New York State violations.  The district court conditionally certified a class under Rule 23 and designated John Troy of Troy Law, PPLC as class counsel.  Then, a few days before trial, the lower court Judge, on his own initiative, decertified the class, finding that the lawyer was no longer an adequate advocate for the workers.  The Court cited “numerous red flags” that had surfaced, such as the lawyer’s failure to investigate his own assertions that the employer had convinced class members to opt out as well as his persistent failure to submit a joint pretrial order that was not deficient under the Judge’s rules.  The Judge was also concerned that the lawyer only planned to call two class members to testify and deemed this a “significant intervening event” that militated decertification.  The Judge noted that many payroll and other records were missing so that the testimony would be “critical” to the prosecution of the plaintiffs’ case.

The Second Circuit agreed with the Judge.  The Court agreed that the lawyer “was no longer adequately representing the class.”  The court stated that “Rule 23(g) requires courts to consider several criteria, including counsel’s efforts investigating the claims, experience with class actions, knowledge of the area of law, and resources.”  Significantly, the Court also opined that lower courts do not need to see a “significant intervening event” to determine that certification as a class is no longer appropriate.

The Court focused on the concept of adequate or inadequate representation of the class members’ counsel.  The decision highlights the rather “basic” concept that class counsel must from the start, to the end, of the litigation be zealous in his representation of his clients and cannot take the easy way out.  The Second Circuit did not address the issue of what happens if the defendant sought to decertify a class.  The Court observed that “the issue of whether a significant intervening event or a similar type of showing might be appropriate when a defendant moves to decertify is not before us, we do not address this issue.”

The Takeaway

In some ways, this case was a fluke.  I have defended numerous Rule 23 actions and have never (except for maybe once) thought about trying to de-certify a class for inadequacy of counsel (because they have been, honestly, pretty good).  If, however, defense counsel sees an opportunity to de-certify when this kind of a “gift” is handed to him/her, they should seize upon it. Decertify.  As the Morrison authors note, this case demonstrates that, at any time, defense counsel should be looking for signs that the class is no longer appropriate under Rule 23.

Keep looking for a way out…

Another exemption lawsuit has been filed.  What else is new?  This time, a group of nurses and care coordinators determine who analyze requests for coverage from health care providers have claimed they are entitled to overtime because they are non-exempt.  They have filed a collective action under the Fair Labor Standards Act.  The case is entitled Cole v. Highmark Inc. and was filed in federal court in the Western District of Pennsylvania.

The suit seeks to include in the class utilization management nurses, utilization review nurses, care coordinators, nurse reviewers, care management nurses and other similar employees.  The Complaint alleges that the “defendant has been aware, or should have been aware, that plaintiff, the FLSA collective, and Pennsylvania class performed non-exempt work that required payment of overtime compensation.  Defendant also required plaintiff, the FLSA collective, and Pennsylvania class, to work long hours, including overtime hours, to complete all of their job responsibilities and meet defendant’s productivity standards.”

These workers performed what is deemed “utilization review work,” according to the Complaint. They charge that all they did was to apply existing criteria and guidelines to the various requests for authorization by doctors and other health care providers who wanted their services covered by insurance and therefore reimbursable.

The Complaint alleges that when the plaintiff complained about long hours/workload, the Supervisor replied that she was working in a “salaried position” and that she had to complete her assignments.  The Complaint also asserts that there are “numerous similarly-situated current and former employees” who are in the same boat and should receive notice of the action and an opportunity to join in.

The Takeaway

I think this is an uphill fight for the plaintiffs.  I have litigated many of these cases involving these kinds of employees and I have found that they do exercise the kind of discretion and independent judgment needed for the administrative exemption.  Many jobs require the use of guidance materials but these employees work off of that general guidance and make evaluations and judgments on these care and insurance issues.  That spells defeat for these plaintiffs.

Too bad…

The employer who is fighting a collective or class action must make the argument that there is too much of a need for individual scrutiny to allow a class to proceed.  There are times that argument works, and times it does not.  An Illinois federal Judge has recently conditionally certified a class of logistics workers where the Judge rejected the employer’s contention there was too much dissimilarity.  The case is entitled Parker et al. v. IAS Logistics DFW LLC, and was filed in federal court in the Northern District of Illinois.

The Judge did, however, rule that only workers at one facility should be in the class as the workers in the trucking division should not be included because they were not similarly situated to the other employees.  The Company had contended that a class was inappropriate because it sought to include workers across many States, without regard for the positions they held, or their service sector, hours worked or compensation structure.  The Judge believed that the plaintiffs could meet the conditional certification tests without having to demonstrate the members of the class worked in the same positions.  As the Judge noted, the “plaintiffs can be similarly situated for purposes of the FLSA even though there are distinctions in their job titles, functions, or pay.”

The Judge also rejected the contention that conditional certification was inappropriate for those employees who were working under arbitration agreements. The Seventh Circuit recently held that employees with arbitration agreements and potentially join a collective action (i.e. receive the opt-in notice) unless the “defendant fighting notice proves that a valid arbitration agreement exists for each worker it seeks to exclude from receiving notice.”  In this case, the Judge observed that “not only do [Parker and Rhodes] allege that the arbitration agreements and waiver provisions were entered into with another entity, not Pinnacle, but Pinnacle also does not seek discovery on the agreements to establish their validity.”

The workers rely on a well-established “basis” or “theory” for their claims.  They contend that the Company violated the FLSA (and Illinois and Maryland law) by automatically deducting a half-hour to an hour from each shift for lunches, even if they allegedly worked during their meal periods.  The suit also claims the Company did not include shift differentials (e.g. nights, weekends) when computing the regular rate for overtime calculations.

The Takeaway

Well, at least they managed to exclude one facility from the calculus and that is a victory.  I always first look for a legal out, a magic bullet, such as to content the workers are all “exempt” or the case is preempted by a union contract, something that makes it all go away in one fell swoop.  If that option is not in the picture, then we (always) argue the individual scrutiny “angle.”

Sometimes the magic works, sometimes it doesn’t…

 

I have been asked many times by clients if they need to give employees paid time off in order to get the vaccine.  I tell them (in New Jersey) that they are not compelled to do so, but it is a good idea.  Some States have gone farther than just suggesting it is a “good idea” and have issued laws or Orders mandating such paid time off.  For example, on March 12, 2021, the Governor of New York signed a law requiring all New York employers, without regard for the size, business or industry, to give employees paid vaccination leave, to a maximum of four hours per injection, effective immediately.

The law requires that private employers provide a “sufficient period of time,” which could be as much as four hours, for the employee to be injected.  The payment must be at the worker’s regular rate of pay.  Significantly, employers are not permitted to charge this paid time to any other type of leave that the employee may otherwise be entitled to, such as paid sick leave or vacation time.  Naturally, the law does not allow an employer to discriminate or retaliate against any employee who takes or wants to take this vaccination leave.

The law sunsets on December 31, 2022.  It does not mention whether it is retroactive, i.e. whether employees can seek payment for their vaccination time before the law’s effective date.  The law is also unclear on whether employers can demand proof of vaccination or what documentation, e.g., vaccination card, is acceptable.

Similarly, the Illinois Department of Labor has just issued guidance on this as well.  The DOL stated that an employer who requires employees to get vaccinated would likely have to pay for this time, even if it occurs outside normal working hours.  If employees get vaccinated voluntarily, the guidance suggests employers allow them to take paid leave that they may have available.  The guidance also states that employees may be able to use paid sick leave (under the Illinois law) to take their relatives to get the shots.

There is another looming issue.  It is likely that, in time, employers will be allowed to provide vaccinations on their premises, during working hours.  Naturally, the time employees spend waiting on line and getting the shot would most likely be deemed working time, especially (and obviously) if the employer mandates vaccinations.

The Takeaway

This is the flip side of whether employers have to pay employees for time waiting to get their temperatures checked before entering the workplace.  Besides New York or Illinois, it is a decent bet that if employers are compelling the vaccinations before a return to work, the time is compensable or employers should/must provide paid time off.

It’s money well spent…

This Sunday was Daylight Savings Time and we pushed the clocks ahead by one hour. This is, on a human level, a welcome event, as it signals winter’s end.   Now, I can fling away any vestiges of Seasonal Affective Disorder and turn my attention to outdoor activities.   Employers, however, must be vigilant on the particular day that this event takes place, as there is a FLSA implication to it.

The US Department of Labor has issued an Opinion Letter in 1967, but it remains the USDOL position, addressing the issue of whether overtime is due when employees work the shift during which the clock changes from 2AM to 3AM. Ostensibly, this adds on an extra hour to the shift, making an eight hour shift a nine hour shift, but the employee is actually working only seven hours not eight.  There also is the issue of whether the payment for the extra hour must be included when computing the regular rate for purposes of overtime calculation.

The DOL opined that the payment of the additional hour’s pay to the employee who works the seven-hour shift at the beginning of the change to daylight saving time need not be included in the regular rate of pay in accordance with Section 7(e)(2) of the FLSA.   Since this extra compensation is not being given for actual work performed, the payment was not made as compensation for the employee’s hours worked in the workweek and thus it need not be included when the rate for overtime is computed.   Conversely, no part of such payment could be credited toward overtime compensation due, if the aggregate hours worked during the week equal or exceed forty hours.  The key point is that the worker is only working seven hours in the spring-forward scenario.

However, the Opinion Letter also warns that, at the end of the daylight saving period, the employee working the nine hour shift must receive pay for the nine hours and all such time must be counted in determining the hours worked in that workweek.

The Takeaway

This is the kind of hidden landmine that employers may stumble on and not pay people correctly, either overpaying them or underpaying them.  It is indicative of the many nuances in FLSA law that employers need to look to counsel for guidance.

Enjoy the additional sunshine!

It is amazing to me that employers still do not understand that there exists an inviolate obligation on their parts to pay proper overtime.  It is not proper for an employer to believe that if it treats its employees “well,” or if its business is “green” and it tries to do the right thing by the environment, this means that it cannot pay overtime.  A recent example of this trend is a Georgia slaughterhouse that has now settled a case (for $100,000 in wages) to resolve allegations from workers who claimed they were shorted on overtime pay.  The case is entitled Travis Taylor, Terry Barrows, and Layton Ferrell Duke v. White Oak Pastures, Inc. and was filed in federal court in the Middle District of Georgia.

A class of thirty-four (34) workers will receive payments, which will range between $191-16,000.  Their payouts depend on how long they worked at the employer, which is typical for class action settlements, which often come down to the parties agreeing on a formula for payouts, rather than an individualized study of each employee’s situation.  The lawyers for the class will receive $127,500 in fees, more than their clients will receive in wages.  As is typical in these cases (and crucial for the employer), the Company does not have to admit it violated any law.

One collective action was filed in September 2015 and another in 2020.  The settlement includes workers in both lawsuits.  The workers were assigned to the red meat abattoir, on the kill floor.  The allegation was that they were supposed to work from 7AM-6PM, with one hour for lunch, but they were nevertheless compelled to work until all of the cows were slaughtered.

The Judge had rejected an earlier settlement.  He found that the employees were being asked to release claims other than those dealing with overtime and the lawsuit, such as age discrimination claims, etc.  The parties then revisited the Releases and drafted one focused more sharply on just the overtime allegations.  The Judge found that more to his liking, stating that the “scope of this proposed release provision is reasonable.”

The Takeaway.

The Company characterized its business as a “fair, sustainable and humane” farm.  The Company also was proud that it was a so-called zero-waste operation where even the bones of the cows were used to make bone-meal fertilizers for organic fields.  Both of these are commendable, but what would be even more commendable is if the Company paid proper overtime.

Now, that is something that is fair and sustainable…

I have often said that the USDOL is a politically charged industry and its view on legal issues (much like the National Labor Relations Board) shifts with the Administration that is in power.  For example, under the prior administration, the agency took a pro-business stance and issued pro-business Opinion Letters on independent contractor and working time issues.  Well, a new day has dawned at the agency with a retreat by the USDOL on these and other matters.

It is as simple as withdrawing the Opinion Letters.  On February 19, 2021, the USDOL rescinded these letters, showing that the pendulum is swinging back towards employee interests.  The first Opinion Letter (FLSA 2019-6), dealt with independent contractors for a virtual marketplace company; that letter favored independent contractor status for these workers within the parameters of the Opinion Letter.  This letter followed the agency’s February 5, 2021 announcement of a delay in the issuance of a final rule on this very important topic.

The second Opinion Letter related to working time issues, in particular whether sleeping time for truckers was compensable.  That pronouncement (FLSA2019-10) had opined that the sleeping time was presumptively non-compensable, if there was a sufficient showing that the worker was relieved if all productive duties and there were adequate facilities.  The agency believed, now, that the Opinion Letter was inconsistent with the USDOL decades old view that employees could go as much as eight hours in a sleep mode, without needing to be paid for the time.  Other letters on this topic, which FLSA 2019-10 had “overturned,” were now reinstated.

The Takeaway

The withdrawal of these letters is an indication of how the USDOL swings in the winds of political change.  Although these letters might provide a safe harbor for alleged offenses occurring while they were in force (which was not that long) now they are “history.”  The more salient point is that employers need to expect (and prepare for) a wholesale expansion of FLSA rules and rulings in favor of employees, starting with a tightening up of the definition of independent contractor.

Stay tuned and be aware…

I have settled numerous FLSA cases and note that there are many elements that management-side lawyers always want to see in such a document.  One is a confidentiality provision as we do not want the employee “shooting his mouth off” over what he received in settlement.  We also want as broad a Release as possible so we never run the risk of being confronted by this worker again in a court.  Well, these goals, laudable as they are, are proving more difficult to achieve given the stance of federal courts on such provisions.  A recent New Jersey case illustrates this point.  The case is entitled Hudson v. Express Transfer & Trucking and was filed in federal court in the District of New Jersey.

In this case, the parties settled on August 10, 2020 and requested that the Court approve the settlement as required.  Included in the Release were a limited confidentiality provision, non-disparagement and neutral reference provisions.  The limited confidentiality provision provided that the parties, if asked about the lawsuit, would respond that “the matter has been resolved” and that the employer could seek equitable relief in court for a violation.  The general release provided that the plaintiff gives up his claims under the Family and Medical Leave Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1991 and the New Jersey Law Against Discrimination.

The Court noted that many courts had found such provisions unenforceable, especially in the District of New Jersey.  The Court observed that such provisions undermine fundamental purposes of the FLSA.  In one case, the confidentiality provision prevented employees from speaking to anyone about the contents of the settlement and compelled them to tell anyone who asked that “the matter has been resolved and I cannot talk about it.”  In another case, the Judge noted that this kind of “compelled silence” allowed employers to “thwart the informational objective of the notice requirement by silencing an employee who has vindicated a disputed FLSA right.”  The court in that case concluded that this provision potentially allowed employers to retaliate against employees for the vindication of their FLSA claims by allowing employers to sue the employee if they spoke about the agreement.

The Court also rejected the broad release provision as possible including future employer FLSA violations that could occur after the signing of the Release and observed that the FLSA was enacted in part to address “inequalities in bargaining power between employers and employees” and that this salutary purpose was endangered by such broad waivers of FLSA rights.  The Court noted that another court had rejected a release provision in a single plaintiff FLSA action because it purported to release any and all claims the plaintiff may have against defendant, and the court had no information regarding the potential value of such released claims so as to evaluate fairness.

Conversely, the Court pointed to another case where a court approved a Release because it was limited to future claims related to the specific litigation at issue and did not incorporate any FLSA claims) and another case where a court approved a release provision in a FLSA collective action because it was limited only to the claims in the subject litigation, and noting that the parties intentionally narrowed the scope of the release because they knew that general releases are disfavored in FLSA settlement agreements.

The Takeaway

The Court believed that the confidentiality provision and the release provisions were overbroad and contravened the “public-private character” of employee rights under the FLSA and served to “nullify the purposes of the Act.”

Attorneys need to be aware…