I blogged about this a short time ago. More than fifty (50) business groups requested that a US District Court Judge render a fast decision in the case involving the constitutionality of the USDOL’s new overtime regulations, i.e. the doubling of the salary threshold.  The case is entitled Plano Chamber of Commerce et al. v. Perez and was filed in federal court in the Eastern District of Texas.

Courthouse pillars
Copyright: bbourdages / 123RF Stock Photo

The theory is that the DOL exceeded its powers.  Also, they argue that the cost of compliance will be massive, forcing many small business owners to cut jobs or close.  The groups also want the date pushed back beyond December 1, 2016 so plaintiffs want oral arguments to be held as soon as possible and the rule vacated.  The plaintiffs argued that “this conclusion is compelled by the plain text of the statute and is further confirmed by over 70 years of administrative practice and judicial decisions left untouched by Congress.”

The suit was filed in late September, as were other similar cases by two dozen States.  These plaintiffs have this week filed a motion for preliminary injunction in their case.  The business groups have stated that they want their case adjudicated on the same timeline as the motion by the States.

The business groups have contended that the proposed changes are not merely limited to raising the salary level, but they, really, change the basis for determining whether or not employees are exempt.  The groups argue that the new DOL rule does not abide by the requirement that the duties of positions govern the exemption tests.

The motion papers, in this regard, state that “rather, they fundamentally alter the focus of the exemption analysis, shifting the test from one focused primarily on the functions identified by Congress in the FLSA to one that turns almost entirely on a salary threshold that is not a plausible proxy for those statutorily defined job functions.  And by automatically adjusting the salary threshold every three years in perpetuity, the rule ensures that this disconnect will only grow greater over time.”

The Takeaway

I am fascinated by these initiatives and I cannot wait to see how it plays out.  I think the motions are going to fail, because I think the DOL did have the regulatory power to make these changes.

I hope I’m wrong…

I read an interesting post the other day by Michael Thompson in the Wage & Hour Defense Blog, in which he discussed the discoverability of plaintiff ATM and cell phone records in a FLSA collective action case.  He discussed the case of Gonzalez v. Allied Concrete Industries, Inc., where the plaintiffs claimed they were not paid overtime in violation of the Fair Labor Standards Act and New York law.  The case was filed in federal court in the Eastern District of New York.  To help them ascertain whether the plaintiffs were working when they claimed they were, the defendants sought an order compelling discovery of their ATM and cell phone records.

Woman using her mobile phone, city skyline night light background
Copyright: ldprod / 123RF Stock Photo

The defendants asserted the records of the plaintiffs’ ATM transactions were likely to lead to the discovery of admissible evidence because they could reveal each plaintiff’s “whereabouts and activities during hours they claim to have been working.”  The defendants relied on other precedent where access to ATM records was granted.  The Court denied the motion, although it acknowledged the existing precedent.

The Court found that in the other case an evidentiary showing had been made to the effect that the plaintiff attended prolonged lunches during the workweek and withdrew cash from ATMs for that purpose.  In the instant case, however, the defendants had not shown any “evidentiary nexus between the en masse discovery sought and a good faith basis to believe that such discovery material is both relevant and proportional to the needs of the case.”

The defendants also sought the release of the plaintiffs’ cell phone records in order to determine whether the plaintiffs “engaged in personal activities such as non-work related telephone calls, extended telephone calls, [and] frequent text messaging” during times they claimed to have been working.  There was also precedent for this production but the Court ruled that the defendants had not made a showing that the plaintiffs made personal calls when they were supposed to be working.  Thus, the Court ruled that this was mere speculation and did not warrant a “wholesale intrusion into the private affairs” of the plaintiffs.

The Takeaway

I have blogged recently about employers obtaining tax records of plaintiffs in FLSA cases.  I think this possibility, i.e. obtaining, or requesting, electronic evidence of an employee’s activities through discovery, may be another good tactic.  Obviously, some evidential foundation is needed but there may be a possibility that plaintiffs do not want their ATM or cell phone records thrust into the middle of a litigation.

Therefore, they may be more inclined to settle.  Something to ponder, isn’t it?  Or to try…

  • Corporate travel spend is at great risk for non-compliance if business travelers make independent decisions about airlines, hotels and rental cars. In fact, companies that have a very loose travel policy, or no formal policy often end up with endlessly escalating travel expenses. Yet, preparing, approving and gaining travel policy support can be a daunting task, often creating more questions than answers. Learn how to build a travel policy that reflects company philosophy, avoids common mistakes under FLSA and DOL, and other best practices. Join me October 18 for my C4CM-hosted webinar “Writing & Enforcing a Corporate Travel Policy that Cuts Costs & Keeps Your Company FLSA/DOL Compliant.
  • The explosion of smartphones and tablets has eased the way for employees to have continuous remote connectivity to the workplace, presenting yet another liability threat for employers already battling an increase in overtime pay claims. An employer can be held liable for overtime pay for work it never requested from an employee upon a showing by the employee that the employer had actual or constructive knowledge of the work. Learn about the latest DOL developments impacting employees use of electronic devices after hours, how continuous connectivity of employees affect the definition of working time and compensable time, defenses to electronic overtime pay claims, and best practices to avoid such claims. Join me October 27 for my Stafford Live CLE-hosted webinar “Overtime Pay Claims for After-Hours Use of Electronic Devices: Navigating the Latest DOL and Case Law Developments.

For the last several months, I have been talking to and advising clients on strategies to deal with the advent of the new FLSA salary regulations, i.e. the $913 per week commencing December 1, 2016.  Maybe all that was for naught?  This is because more than fifty business groups and twenty-one (21) States have filed lawsuits challenging these rule changes.  The theory is that the agency unconstitutionally exceeded its authority to establish a federal minimum salary level for exempt, white collar workers.  The cases are entitled Nevada et al. v. U.S. Department of Labor et al. and Plano Chamber of Commerce et al. v. Perez, both filed in federal court in the Eastern District of Texas

Courthouse pillars
Copyright: bbourdages / 123RF Stock Photo

The States contend that the large increases in required salary levels would force many state and local governments (and private businesses) to dramatically increase their employment costs.  This could compel employers to cut services or lay off employees.  The States seek a declaratory judgment to the effect that the new rules unlawfully violate the Tenth Amendment by requiring a certain mode of payment for state employees.  On that same day, many business groups (e.g. US Chamber of Commerce, National Association of Manufacturers, National Retail Federation) also filed legal actions, claiming that the reasons proffered by the USDOL for the new salary threshold are not a proper construction of the FLSA.

The states also take issue with the policy behind the rule change, saying a worker’s salary level doesn’t reflect the kind of work an employee actually performs. The states argue the DOL regulation disregards the text of the Fair Labor Standards Act by imposing a salary threshold without regard to whether an employee is actually performing bona fide executive, administrative or professional duties.

The States also assert that the rule’s automatic indexing mechanism, which kicks up the minimum salary threshold every three years would not be illustrative of the nation’s economic conditions or the potential impact on public and private resources.  The plaintiffs contend that by compelling States to spend more from state funds on exempt employee salaries or overtime, the federal government is unilaterally depleting state resources and that violates the Constitution.

The business groups also allege that losing the overtime exemption for “frontline executives, administrators and professionals” would rob businesses of being able to flexibly manage their workforces.  Ostensibly, millions of employees nationwide would have to be reclassified to non-exempt hourly workers, which would result in their hours being cut back to avoid overtime and thereby “deny them opportunities for advancement and hinder performance of their jobs — to the detriment of their employers, their customers and their own careers.”

The Takeaway

The agency has raised the minimum salary level several times, the last time in 2004, without legal challenge, or, at least, a successful legal challenge.  I think the same result will obtain this time.  In any event, every employer should be going through the process of determining, under current salary levels, if all of their exempt people are truly exempt??

Get ready for December 1!

I recently blogged about the defendants in a FLSA case being able to secure plaintiff tax returns in discovery.  Maybe that was the start of a trend.  In a New Jersey case, a federal judge has ordered all of the named plaintiffs to produce tax returns for the tax years for which they claim damages in this action.  The case is entitled Kim v. Dongbu Tour & Travel, Inc and was filed in federal court in the District of New Jersey.

17542382 - u s income tax return forms 1040,1065,1120
Copyright: lobzik / 123RF Stock Photo

Plaintiffs worked as tour guides and were classified as independent contractors, which the Court ruled they were not; the Court granted the conditional certification motion. Defendants then sought the Plaintiffs’ income tax returns, asserting that “the income earned by each Plaintiff is relevant to their retaliation claim[s] and “is evidence of Plaintiffs’ damages (or lack thereof) and their mitigation of such alleged damages.”  The employer also argued that the tax returns would provide further evidence of whether Plaintiffs were employees or independent contractors, which would impact the key issue of liability.

The Court noted that public policy “favors the nondisclosure of income tax returns,” but it looked at the relevance of the tax returns to the litigation.  If the returns were relevant, a court had to then determine whether there was a compelling need for the tax returns due to the sought after information being otherwise unavailable.”  The Court noted that it was the burden of the party objecting to producing the information to prove that that the information is otherwise available.

Applying this test, the Court here ruled that the plaintiffs’ tax returns were relevant, because if the workers received additional income by tips or commissions counts, that information bore directly on assessing whether the employees received proper wages.  The information was also relevant to the workers’ allegations relating to their claimed damages, including the existence of offsets or mitigation.

The Court also concluded that there was a compelling need for the tax returns and the information was otherwise unavailable.  The Court observed that although Plaintiffs submitted their log guide books, many were incomplete or were simply unavailable and the Court concluded that information pertaining to the amounts received at various stops was also unavailable.  The Court also refused to approximate damages because it opined that the tax returns could provide accurate information and eliminate the need for speculative, burdensome, or costly attempts to approximate.  In sum, the employees could not show that the information was otherwise available from a less invasive reliable source.

The Takeaway

This is a great tactic for defendant employers to use in these cases.  This decision provides an instructive roadmap for the arguments that must be made in order to secure plaintiff-employee tax returns.  Usually, people don’t want their tax returns to be seen by others, especially in a federal litigation, where it could conceivably become “public.”

Maybe it turns out to be a way of impelling quick, early, cheaper settlements.

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
Copyright: happyalex / 123RF Stock Photo

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
Copyright: sergo / 123RF Stock Photo

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.

Copyright: netsay / 123RF Stock Photo

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.