There are certain industries or fields where misclassification issues are prevalent because the nature of the duties of the workers “seems” to smack of exempt work but then there is a doubt as to whether they truly meet all of the elements of the exemption(s). A recent example of this tension is the FLSA collective action filed by a number of social services workers who claim that they are non-exempt and due overtime. The case is entitled Ellenberger et al. v. JusticeWorks Youthcare Inc., and was filed in federal court in the Western District of Pennsylvania.

The employees, including classifications such as case managers, family resource specialists and ongoing case specialists, claim that their duties, such as collecting data and coordinating client care were not exempt duties and, therefore, they are owed overtime. They claim that these routine duties involved them following corporate guidelines and procedures and thus, they were not exercising discretion and independent judgment, which is an essential element of the administrative exemption.

The employer has contracts to provide social services to many entities in Pennsylvania counties. The Complaint alleges that the entity falls within the statutory definition of an “employer” as it controls the terms and conditions of employment of these employees. The Complaint alleges that the “defendant is aware or should have been aware that the FLSA required it to pay collective action members overtime.”

There has been a good deal of litigation on the exempt status of these kinds of workers. Ten years ago, the Ninth Circuit Court of Appeals held that social workers with only a BA or BS degree, as opposed to a Masters Degree, did not come within the definition of the professional exemption in the FLSA. In this regard, the website for the Company shows that some of the case management positions only call for an associate or bachelor’s degree.

The Takeaway

The kinds of duties claimed to be performed by these workers would not require the discretion and independent judgment necessary for the administrative exemption. I do believe, however, that possession of a degree in social work or a related discipline gives the employer a good chance of demonstrating that the professional exemption applies. In any event, the employer must argue that the employees fall under either one of, or a combination of, these two exemptions.

After all, whatever works…

One tactic to defeat a class action is to assert that the named plaintiff is not an appropriate or proper representative for the class. These initiatives are not often successful, but defense counsel should always be looking for them. A defendant employer is doing just that by asserting that a lead plaintiff does not share a sufficiently commonality with the rest of the class to allow the case to proceed. The cases are entitled Washington v. GEO Group Inc. and Nwauzor et al. v. GEO Group Inc. and were filed in federal court in the Western District of Washington..

The defendant filed the motion to decertify the class one day before the trial was scheduled to begin, an interesting tactic in its own right. The lead plaintiff had been diagnosed with a mental illness, but he had previously been found by the court to be competent to be the class representative. Now, the defense lawyers are asserting that the man’s condition had “deteriorated significantly” and a referral for him for inpatient treatment indicated he was possibly looking at a “possible long-term civil commitment.”

The defendants claimed that Mr. Nwauzor was not a proper class representative because “his claims are not typical of the class as a whole.” The Company argued that this person only worked in a single job, i.e. a shower cleaner in the time he was confined. Thus, the defendants assert that “his experience is too narrow — both in time and in the scope of his VWP experience. As the sole class representative, Nwauzor represents participants in only one out of more than a dozen VWP positions and only about seven percent of the class period.” Alternatively, the defendant contended that even if the class is not de-certified, it should be limited to only those workers who occupied the same position as the lead plaintiff.

The timing of the motion to de-certify is interesting, as stated above, as jury selection was supposed to start a day later. The employer had fought long and hard for a totally in-person hearing. The employer offered the example of the Derek Chauvin as proof that such an in-person trial could be accomplished safely.

The Takeaway

    This is an interesting tactic and it is one that does not often fall into the hands of a defendant employer. If the motion is successful, the class is eliminated, and the individual is left to vindicate only his own claim. The lesson is if there exists an opportunity to find a magic bullet to get rid of the entire class action, the employer should avail itself of it.

    Keep looking for that magic bullet…

There have been a host of federal cases recently focusing on whether time spent waiting in security lines is compensable. Some have gone for the plaintiffs and others for the employer, as these cases are nuanced and fact-sensitive. A recent example of this genre is a Nike case where the Company will pay $8.25 million in settlement of such a case. The case is entitled Rodriguez v. Nike Retail Services Inc. et al., and was filed in federal court in the Northern District of California.

The settlement involves more than 16,000 workers who were employed from 2010-2019. There is White canvas sneakersestablished a fund of more than $5,000,000 and the workers will automatically receive a share. Without needing to fill out claim forms. There is also more than $3,000,000 for attorney fees. Interestingly, the Company amended its policy in November 2019 to deem the waiting time compensable.

The Company had taken the position for years that the time spent waiting for these checks was “de minimis.” In 2017, the Judge agreed with this position. The concept of “de minimis” revolves around the premise that the time being urged as working time was so fleeting or brief that it is not capable of being counted. The Ninth Circuit disagreed finding, significantly, that the de minimis rule, a creature of the FLSA and its regulations, did not apply to claims made under California wage-hour law.

The parties then went to mediation, as looming before them was perhaps many more years of expensive, protracted litigation. Interestingly, the mediation did not result in a settlement but the parties engaged in further discussions following the single day session and those talks produced this agreement.

The Takeaway

    I believe the de minimis rule is an overused and risky strategy for employers. An old case concluded that even five minutes per day, almost a half-hour per week, was not de minimis. If the employer puts all of its eggs in the de minimis basket and that defense loses, then the entire case is lost. This is the type of activity that behooves employers to get out in front of and allow perhaps 5-10 minutes per day compensable time for these checks, to evidence the employer’s awareness that the activity might be working time and to lessen its potential exposure (i.e. class action).

    Spend a nickel to save a dollar…

I have always been interested in the Motor Carrier Act (MCA) exemption of the Fair Labor Standards Act, 29 USC 213(b)(1), especially in the doctrine of “practical continuity” which is one of the ways that interstate commerce is determined and have defended a number of cases where we had to rely on practical continuity for the interstate commerce prong of this tri-partite element exemption. In a quirky case involving this concept, the US Supreme Court declined to take a case involving truck drivers in Wisconsin who claimed that, as short-haul drivers, they were not involved in interstate commerce and were therefore non-exempt and due overtime. The case is entitled Burlaka et al. v. Contract Transport Services LLC, and issued originally from the Seventh Circuit Court of Appeals.

The workers were called “spotters” and they worked for one of the clients of Contract Transport Services. These employees’ duties consisted of transporting loaded/empty truck trailers for short distances at the client’s facilities. There were goods that had been transported interstate in these trucks, but the trucks themselves never travelled across state lines and, in fact, drove, at most, a few miles. The appellate federal court, however, held that these drivers could be “reasonably expected to drive intrastate routes that were part of a continuous interstate journey,” meaning they were in the stream of interstate commerce and therefore came within the Motor Carrier Act exemption.

In order for intrastate drivers to be part of interstate commerce, there must be a persistent intent that the goods they are hauling were destined for interstate shipment and the drivers argued there was no such evidence. They claimed that the Company “failed to prove the plaintiffs’ intrastate movements had any link to the subsequent interstate movement of products, so as to subject the plaintiffs to the jurisdiction of the secretary of transportation.” The Seventh Circuit, however, found that the evidence showed that 20% of the goods going through the Green Bay facility were either coming from or destined for a different state.

As Judge (now Justice) Barrett wrote, “these facts plainly demonstrate that at least some spotters drove trailers carrying finalized goods destined for out-of-state delivery. Such a service, even if purely intrastate and interrupted briefly, would nevertheless constitute ‘driving in interstate commerce’ because it would be part of the goods’ continuous interstate journey.”

The Judge also rejected the plaintiffs’ theory on the lack of interstate movement by observing that “the plaintiffs seem to imagine that a continuous journey must resemble a relay race, in which the next driver immediately picks up exactly where the other left off. But that is neither how interstate shipments work nor what the MCA requires.”

The Takeaway

    Truck drivers often earn pretty good money, a fairly high hourly wage, so an overtime action, especially by a class of these workers, can lead to astronomical damages. Management side practitioners must be aware that merely because drivers do not leave their State does not foreclose a MCA defense. I always look for the connecting links in interstate travel in these cases, looking for evidence of the “practical continuity” of the goods in question, as the interstate commerce prong is often the most difficult to establish.

    Finding that link is, simply, the difference between winning and losing…

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…