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…

As a general rule, employee expense reimbursements are not includible in the regular rate for purposes of overtime computation.  When the reimbursements, however, are unreasonable or out of whack (i.e. too high) as regards the particular expense, then the USDOL takes the position that the reimbursements are really a backdoor way of paying the employee a higher wage and not having to pay overtime on that higher wage.  In a recent case testing this concept, the Ninth Circuit has determined that per diem sums paid given to employees for meals, incidentals and housing while they were assigned out of town can be deemed “wages” and therefore includible in the regular rate.  The case is entitled Clark v. AMN Services, LLC, and issued from the Ninth Circuit Court of Appeals.

The per diem payments were given to workers who worked more than fifty miles from their home base.  The policy provided that the workers were given the per diem allowances if they worked only the week’s shifts required under their contract.  If the employees worked more shifts than anticipated, they were allowed to “bank” those additional hours for the next week when they did not work a full week; if they worked fewer shifts, the per diem allowances would be reduced proportionately given the missed shifts/hours.

The Court looked at the issue of whether the employees were receiving the per diem as reimbursement for expenses or whether it was compensation for working hours.  The Court concluded that the monies were for hours worked.  There were three reasons.  The first was that the Company was paying a per diem for seven days’ worth of expenses, whether or not the employee actually had “expenses” e.g. hotel, on those days.

The Court also noted that the workers could “bank” hours and therefore receive the per diem payments for days they did not work and were (obviously) not paying any expenses.  Lastly, and significantly, the Company paid the traveling employees and those that did not travel, the identical per diem allowances.  The Company treated the payments to the workers who did not travel as wages, which indicated that the per diem payments were, really, additional wage payments, rather than valid expense reimbursement.

The Takeaway

The per diem payments here were not connected to expenses actually incurred by the employees and thus were deemed extra compensation, which had to be included in the regular rate for purposes of overtime compensation.  Any expense reimbursements must have some direct and reasonable connection to the expenses actually incurred by the workers in order to pass muster under the FLSA.  Otherwise, these “reimbursements” will be deemed wages and the employer will face unexpected liability and if this policy applies to many workers, the employer will face a class or collective action.

That will involve a lot of “expenses” for the employer…

I do a great deal of prevailing wage defense on behalf of employers, both on a federal level (i.e. Davis-Bacon Act) and the State of New Jersey prevailing wage statute.  It sometimes seems that trade unions are able to aggressively lobby the NJDOL to take administrative actions that militate against non-union employers or make it harder for such employers to conduct their construction businesses.  One prime example of this is the law that mandates construction contractors (e.g. those doing public work) to be affiliated with an apprenticeship program.  Well, a trade association, the New Jersey Electronic Life Supply Association (“Association”), represented by my Partner, Beth Hampton, has now challenged that requirement in federal court.  The case is entitled Centcom Corporation et al. v. New Jersey Department of Labor and Workforce Development and was filed in federal court in the District of New Jersey.

The suit alleges that this requirement precludes Association members, particularly smaller entities, from meeting existing contracts and was really a boondoggle to the trade unions, which are very powerful in New Jersey.  The Complaint notes that “this preference was enacted … to reward political favor and to ensure that every public contractor in the state of New Jersey was part of and contributed to a union, and for no other legitimate purpose.”

The Association maintains that the apprenticeship requirement impermissibly favors union contractors, because one manner to secure compliance with this mandate is to be in a collective bargaining relationship with a Union, as the unions have access to various government-approved apprenticeship programs.  Members of this Association, made up of companies that install safety systems (e.g. fire detection), have the additional obstacle that the US Department of Labor has not sanctioned an apprenticeship program for entities that install safety systems.

Thus, these companies cannot renew their registration certificate with the NJDOL, which allows them to perform public work.   As a result, the entities cannot service the systems that they themselves installed.  The Association alleges that because these systems are unique, the State would be compelled to install new safety systems in many public buildings.

The Association charges that this apprentice requirement violates the contracts clause of the U.S. Constitution, a clause that precludes the States from enacting laws that impede the performance of contracts.  The Association also charges that the statute violates the due process clause by, de facto, stopping these companies from conducting their businesses as well as the First Amendment by discriminating against contractors based on their association (or lack of such association) with a union.  The plaintiffs seek declaratory and injunctive relief, i.e., an order declaring the law unconstitutional.

As Ms. Hampton aptly put it, “hardworking small business owners who have invested their life’s work in building a business from the ground up and who have for decades established and worked under contracts with municipalities, boroughs and cities in our state are being deprived by state law from continuing existing contracts unless they establish an apprenticeship program.”

The Takeaway

The prevailing wage laws are, in a sense, the great equalizer.  Employers, whether union or non-union, must pay the same wages and benefits on a public project.  So far so good.  But, the NJDOL has not only expanded the definition of “public work” but has also enacted measures that seem to facilitate union organizing.  Like this apprenticeship rule.

We’ll see where the lawsuit goes…