It seems that plaintiffs (and their lawyers) think that all they have to do to get conditional certification is throw up a flimsy Affidavit from the named plaintiff and the Court will hand them conditional certification, like it is giving out candy.  Fortunately, in the District of New Jersey that is not the case, as evidenced by a very recent case.  The case is entitled Ding v. Baumgart Restaurant Inc. and was filed in the District of New Jersey.  Herein, the plaintiff alleged that the employer did not pay him and other non-exempt workers their proper overtime.

The plaintiff was a deliveryman and claimed he worked between 60-65 hours per week.  He claimed other workers were similarly situated and he, in support of the class certification motion, submitted an Affidavit regarding the hours and pay rates of other employees.  Nothing else was submitted and so the Court relied only on the plaintiff’s affidavit.

Plaintiff asserted in the affidavit that he “know[s] that it is Defendants’ policy not to pay any employee at time and a half rate for all of their overtime hours.”  He claimed he knew this “because [he has] talked with other employees, who has [sic] the same or similar working schedule as [he does], and was told that they were also not paid for the total amount of time they have worked, nor compensated for all of their overtime hours worked.”  Plaintiff had also “heard” other workers mention how much they had been paid.

Plaintiff also claimed knowledge of the hours and rates of other employees because he worked alongside them and allegedly knew their schedules and that they all worked more than 40 hours per week.  However, the plaintiff did not explain how he learned of the fact that the non-deliverymen employees were underpaid.  The Court ruled a sufficient showing to warrant conditional certification had not been made.  There was no showing that Ding’s experience was typical of other class members.  Nor did he show how he knew that other putative class members were not properly paid or were paid less than they were legally owed.

The Takeaway

It takes more than a flimsy Affidavit to get certification in this District.  It should be that way all over the country.  Defense practitioners need to always attack the paucity of such pleadings and, at the minimum, make it tougher for their adversaries to even think of securing conditional, much less final, certification.

Now, this is sanity…

As you know, I am a big believer in and proponent of using USDOL Opinion Letters, both in advising clients, understanding the agency’s view, and, more importantly, urging them on courts as good authority for the premise I may be arguing.  Well, the fact that a federal court has just refused to accept the agency’s view on a particular topic (i.e. whether sleeping time in their sleeper berths is working time) indicates that, perhaps, these Opinion Letters might not be as persuasive as I had thought (and hoped).

The decision shows a skeptical approach to the agency position.  It shows a weakening of the strength of these agency considered opinions; in this regard, the Obama administration had stopped issuing such letters but this Administration has gone back to that practice and I have applauded it as I believe these letters are very instructive and helpful for management-side practitioners like myself in advising clients how to be complaint with the FLSA.

The agency issues the letters in response to questions from employers, employees, unions or any entity or individual who wants guidance on a specific issue, often one that is vague or gray, as the Fair Labor Standards Act often is.  These letters can provide a good faith or safe harbor defense for employers in a lawsuit (and I have done this several times, successfully) but the employer must be able to show it was guided by the letter when it implemented the policy or practice.  But, a court is not bound, legally, to follow the dictates of the letter and will do so (only) if it is persuasive.

As one commentator has noted, “the DOL opinion letters are pretty fact-specific, and the farther an employer or another party gets from the applicable facts, the less reliable it can be.”  In other words, a given Opinion Letter is not a gilt-edged “get out of jail free” card; the employer must stay within the four corners of the letter or else it will be less persuasive to a court on the particular issue.

Naturally, the plaintiff lawyer in a given case will argue that the letter is a “deviation” from precedent and policy and thus is unworthy of deference.  That may give employers pause when they decide to blindly follow the pronouncement in a letter, especially if the letter is reversing a longstanding position held by the agency.

The Takeaway

Given this, I nevertheless remain a “true believer” in the guidance that USDOL Opinion Letters (or the letters or field guidance from state DOLs) offers to employers.  If there is established judicial precedent on an issue and a letter takes a different approach, then employers should be wary and tread with caution.

But don’t be trapped into paralysis by (over) analysis…

I love it when the employer wins an exemption case because the deck is so often stacked against the employer on these kinds of cases. This is especially so when the action is a collective one under the FLSA. In this instance, a RN who was employed as a health insurance claims consultant was found to be exempt as a professional employee because she utilized her specialized knowledge when she performed her duties, even though they were not hands-on patient care. The case is entitled Isett et al. v. Aetna Life Insurance Company and issued from the US Court of Appeals for the Second Circuit.

The appellate panel affirmed the decision below, where the employer had won summary judgment. This employee did not work with patients or perform clinical duties. Her function was to analyze claims submitted to determine if the procedures performed were medically necessary. If they were, she approved the coverage, but if she thought they should be denied, she denied them. The Second Circuit acknowledged that this analysis was different because the worker was not functioning in the typical nursing environment.

The Court stated the issue: “We address the applicability of the FLSA’s professional exemption to an employee who acts in a manner consistent with the central characteristics of the profession at issue but does so outside of that profession’s traditional employment setting.” The Court then concluded that the professional exemption applied.

The employee conducted what were known as “utilization reviews,” where she scrutinized patient appeals of their insurance claims which had already been denied within the Company. She worked without hardly any supervision. There were more than twenty (20) other Nurse Consultants who had opted into the suit and their claims were dismissed as well.

The appellate Court concluded that the professional exemption, which requires “specialized intellectual instruction” in a field of “science or learning” applied because the named plaintiff used that specialized knowledge as a RN in conducting these reviews. The Court noted her limited supervision as well. The Court stated that her primary duty “as a nurse consultant requires the discretion and judgment characteristic of registered nursing — the ability to act independently, or under limited supervision, on the basis of collected clinical data. Accordingly, we conclude that Isett’s job required the use of advanced knowledge, thereby satisfying the first prong of the primary duty test.” The panel also concluded that the employee’s advanced knowledge that allowed her to make these determinations was at “the core of the specialized training that registered nurses receive before entering their profession.”

The Takeaway

This is the best kind of victory for an employer because the exemption is a magic bullet that eliminates every potential plaintiff in one fell swoop. There is, in this regard, no need for the employer to start mounting the “too much individual scrutiny needed” defense. It is also an object lesson for employers to be aware of a potential exemption defense.

And, know this, they may not always be readily apparent…

The USDOL has finalized its new rule concerning when two entities can be deemed a joint employer and therefore liable for each other’s wage violations.  Under the Obama administration, the DOL sought to expand the reach of this doctrine and issued a “white paper” asserting that indicated that businesses had to be completely “disassociated” to not perhaps be joint employers.

The Trump DOL rescinded this position in 2017 and engaged in rulemaking.  Now, there will be a new test, reliant on examination of four prongs: whether the alleged joint employer can hire or fire employees, control their schedules or their job conditions, set their pay and payment methods, and if it maintains their employment records.

Joint employer relationships arise in two scenarios:

  • Where an employer suffers, permits or otherwise employs an employee to work but another individual or entity simultaneously benefits from that work


  • Where two or more employers employ a worker for separate sets of hours in the same workweek

The new rule (effective March 16, 2020) changes only the “complete disassociation” analysis under the first scenario.  The new rule introduces a balancing test that focuses on the actual exercise of control over an employee by considering whether a potential joint employer:

  • Hires or fires the employee
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree
  • Determines the employee’s rate and method of payment
  • Maintains the employee’s employment records

Importantly, the rule makes clear that maintenance of employment records, without more, will not suffice to find a joint employer relationship.  There will be other indicia to scrutinize, but these other areas must be indicators of the exercise of significant control over the terms and conditions of the employee’s work by the putative joint employer.

The rule also specifies factors that are not relevant to determining joint employer status.  These include:

  • An employee’s “economic dependence” on a potential joint employer, including factors traditionally used to establish whether a worker is an independent contractor
  • Whether a potential joint employer operates as a franchisor or operates using a similar business model
  • The potential joint employer’s contractual agreements requiring the employer to comply with its legal obligations or to meet certain health and safety standards
  • The potential joint employer’s contractual agreements requiring quality control standards to ensure the consistent quality of work product, brand, or business reputation
  • The potential joint employer’s practice of providing the employer with a sample employee handbook or other forms, allowing the employer to operate a business on its premises (including “store within a store” arrangements), offering an association health or retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practices

The Takeaway

The DOL’s new rule will provide clarity for employers attempting to determine whether they are joint employers.  Courts do not have to defer to this new regulation, but it has been my experience that courts often do give such deference.  I hope they do because the old rule was far too vague to allow employers to really know how to structure their relationships with other entities.

Clarity is a good thing…

The USDOL is busy again issuing Opinion Letters and has again turned its focus to the issue of inclusion/exclusion of bonuses into the regular rate for purposes of overtime computation.  These Letters are not binding on courts but they operate to evidence the agency’s position on whatever issue is being addressed so they are extremely valuable to employers and practitioners alike.

In the Opinion Letter on bonuses, the agency addressed how employers should calculate employee overtime in a scenario when the employee receives a nondiscretionary bonus that is earned over a period of time and is not connected to a specific pay period.  The Opinion Letter posited a hypothetical where employees will be eligible for a $3,000 bonus upon completion of a ten-week training program, as well as signing up for an extra eight weeks of training.  The hypothetical sets out that the employees worked varying amounts of overtime over that initial ten week period of training.

The Opinion Letter starts by acknowledging that the lump-sum bonus needs to be included in the regular rate of pay, when overtime is computed, over that.  The Opinion Letter indicates that the employer must divide the bonus up in equal components for the ten weeks.  Thus, for each week, the sum of $300 would be “thrown into” the earnings for that week, when the regular rate is determined as each week.  According to the Opinion Letter, each of those allocations “counts equally in fulfilling the criteria for receiving the lump sum bonus.”

The agency (in a footnote) noted that it will be revising its Field Operations Handbook, which is the bible for all field investigators, to “reflect that allocating bonuses equally to each week of the bonus period is the appropriate method for computing overtime pay on bonus earnings that cannot be identified with particular workweeks.”

The Takeaway

One commentator has stated that these Opinion Letters are “a reminder of how these guidance documents normally function and have functioned throughout most of the Wage and Hour Division’s history.  They provide “discrete, largely uncontroversial technical assistance in a way that delivers clarity to both employers and employees.”  He added that “each letter can be very informative, and therefore helpful, for a business or a worker facing the specific situation the letter addresses.”


There have been a host of wage hour cases in the energy industry and I have often commented upon these.  Many concern misclassification issues and another example of this phenomenon has arisen where a class of pipeline inspectors has requested that a federal court approve a settlement amounting to more than $2,000,000 where the theory of the plaintiffs was that the employer misclassified the workers as exempt under the Fair Labor Standards Act.  The case is entitled Ganci v. MBF Inspection Services Inc. and was filed in federal court in the Southern District of Ohio.

The Company supplied inspection services for energy companies, e.g. gas and oil.  There were 120 employees covered in the settlement, which was urged by both sides as a proper resolution of the case.  The employees claimed they worked, on average, sixty (60) hours per week.  The parties, in their brief, stated that “wage and hour trials are complex, expensive, and unpredictable.  Absent this settlement, payment would be uncertain, and would take dramatically longer. Such expense, uncertainty, and complexity strongly favor approval of the settlement.”  The lawyers will walk away with almost $750,000 in fees.

The matter had been conditionally certified under the FLSA in 2016 and as a Rule 23 class in 2017.  The US Magistrate Judge granted preliminary approval to the settlement a few months ago.  The parties believed final approval was warranted.  The parties have exchanged and reviewed thousands of pages of documents and the case itself has been going on for more than four years.

The Takeaway

The simple reality is that inspection work is never going to be exempt work.  It does not matter how skilled or knowledgeable the inspectors are, as this work will never meet the “discretion and independent judgment” element of the administrative exemption, which is (in all likelihood) the only exemption applicable.  Given what would have likely happened at trial, the $2,000,000 was a good settlement.

If that can be believed…

Employers always have difficulty knowing what sums should be included in calculation of the regular rate and many employers unwittingly walk themselves into trouble by not knowing the intricacies of FLSA computation. Well, the USDOL is finally doing something about that. The agency just finalized a rule that allows employers to not include the cash value of many traditional “perks,” such as tuition benefits, cash-outs of accrued leave and certain bonuses.

The new rule makes it easier for employers to “more easily offer perks and benefits to their employees.” The rule will be final in approximately one month. The rule revises the sections of the regulations that deal with statutory exclusions from the regular rate. Currently, there are seven recognized exceptions to the inclusion rule but the revision greatly expands those exclusions to encompass things like payments for unused paid leave, cellphone and travel reimbursement, parking reimbursement, wellness plans and gym use.

Importantly, the rule also excludes signing and longevity bonuses and some “discretionary bonuses” as well. For example, some of the bonuses now excluded are those given for employee of the month or a bonus for “overcoming challenging or stressful situations.” The new rule is also expected to cut down on litigation.

The agency stated that it could not quantify the value of the new/additional benefits/perks that employers could now provide after the rule goes into effect. One commentator, Tammy McCutchen, stated that the new rule allows businesses to extend perks to their workers and not be afraid that a lawsuit will ensue. She stated that “because the regulations are so old, it really has opened up the door for plaintiffs’ attorneys to file lawsuits alleging that employees earned overtime on a lot of these great modern benefits.” Another commentator decried the fact that the new rule only mandates inclusion in the regular rate if the benefits are “anticipated” or “prearranged,” which places the onus on the employees, said this pro-worker commentator.

The Takeaway

The key is whether the employer is undertaking providing the benefit or perk to circumvent or evade the overtime obligations of the FLSA. In this regard, employer-furnished gym memberships do not seem to be related to work, while tuition benefits could be, depending on the circumstances. The important point is that the agency is adapting an eighty year old law to the realities of the modern workplace and providing more certainty for employers!

As the New Year dawns…

I have long been a fan of the fluctuating work week (FWW) method of paying overtime to non-exempt salaried employees.  This computation yields a half-time calculation, i.e. a lower calculation than dividing the salary by forty and then calculating time and one half of that number.  The Pennsylvania Supreme Court has recently held that this computational method does not apply in Pennsylvania.  Thus, employers in that jurisdiction paying non-exempt employees a salary must use the more generous method of overtime calculation for these workers.  The case is entitled Chevalier v. Gen. Nutrition Ctr., Inc., and issued from the Supreme Court of Pennsylvania.

The FWW method of paying non-exempt employees, codified at 29 CFR 778.114, allows an employer to pay this half-time overtime when employee hours fluctuate from week to week.  There must be an agreement in advance of the work being done that provides that the fixed salary will be straight time pay, without regard for the hours worked and then the overtime is computed at half the regular rate for that particular week, depending on the hours worked in that week.  In that regard, many courts have used this method of calculating overtime in misclassification cases and I know, from considerable experience representing employers in DOL audits (more than 300 of them) that the agencies, state and federal, will undertake this calculation as well.

The class here was a group of non-exempt store managers paid a fixed weekly salary (and commissions).  When they worked overtime, the employer used the FWW method.  The employer computed the “regular rate” by dividing the manager’s fixed weekly salary by the actual number of hours worked, and then paid half-time overtime, after doing the math.  Plaintiff contended this was incorrect under state law.  The Court agreed.

The Court held that the employer could not avail itself of the FWW method, but had to pay these salaried non-exempt employees time and one half of their regular rate for overtime hours.  The Court relied on Pennsylvania state law and regulations that state that each “employee shall be paid for overtime not less than 1-1/2 times the employee’s regular rate of pay for all hours in excess of 40 hours in a workweek.” The Court also concluded that since the state DOL did not adopt the FWW method of overtime payment.  That fact, combined with the import of the state regulations, showed that the FWW method was not allowable under Pennsylvania state law.

The Takeaway

This decision shows the dichotomy or tension between federal and state law.  Under the FLSA, this method of paying overtime is legal (assuming the agreement with the employees has been implemented).  The danger for employers is that they must always examine both federal and state law on any wage-hour issue, especially such an important one as proper overtime payment, when implementing compensation issues.  Compliance with one set of laws does not mean the particular policy is legal under another body of law.

Employers should be guided accordingly…

I love Assistant Manager class actions because it gives a defense lawyer a “golden” opportunity to defeat class certification by asserting that too much individual scrutiny is required to allow a class action to proceed.  A beautiful example of this is a recent Walmart case where a group of Assistant Managers dropped their misclassification lawsuits, after they were unable to secure class certification.  They did, however, arrive at settlements for themselves.  The case is entitled Swank et al. v. Walmart Stores Inc., and was filed in federal court in the Western District of Pennsylvania.

The plaintiffs alleged they were misclassified as exempt.  On the surface, it seemed that there was some superficial appeal to their claims as they were three levels down on the hierarchy of Walmart management personnel, after Store Managers and Co-Managers.  They claimed (as the plaintiffs in these cases usually do) that they spent the overwhelming majority of their time performing non-exempt work, i.e. the same work as their subordinates, worked sixty (60) hours per week and did not receive overtime.  Thus, as a result, they claimed they were making less than the hourly employees.

These employees also claimed that they could not hire or fire and were given no authority to make (or have input into) decisions regarding the operation of the stores.  The cases of these different plaintiffs were consolidated in 2015.  The Judge indicated the Complaints could survive motions to dismiss, but was dubious whether a class could survive as the classes of Assistant Managers had too varied experiences that would allow a class action to proceed.  The plaintiffs asked for reconsideration which was denied and which also brought a rebuke from the Judge for trying a legal argument the plaintiffs had opposed when Walmart sought to do that same thing earlier on in the case.

A Walmart spokesperson observed that “we believe our roles are properly classified under the FLSA and applicable state law, and the court denied class treatment to these plaintiffs earlier this year.  While we deny the plaintiffs’ allegations, we elected to resolve many of the cases with the individual plaintiffs in the best interest of the company. We are glad we could resolve these matters.”

The Takeaway

This case highlights the efficacy of using the individualized defense to defeat class actions.  With any group of these types of employees, who perform subordinate-type work but who also perform and discharge management functions, one size certainly does not fit all.  It is the advocate’s job to highlight this need to look at every single Assistant Manager to see if they fit within the exemption, which is the anathema to a bona fide class action.

Works (almost) every time…

I have blogged numerous times about the strictness of the New Jersey A-B-C test as applied to possible independent contractors.  The prime example of this is the very recent assessment of Uber for $650,000,000 in back-due unemployment contributions.  This incredibly large assessment, certain to be litigated about for years, is a sign to employers, large, small or otherwise, that the State of New Jersey has declared war against any designation of an individual as an “independent contractor.”

Uber will certainly fight this to the hilt, as such an unbelievable assessment is a direct, systemic threat to its business model.  The Company stated that it is “challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere.”

Uber can (and will likely) seek an informal meeting with NJDOL officials, with someone titled the Redetermination Auditor to see if it can cut a deal.  The reality is that the DOL will never agree that all (or any) of these individuals are independent contractors and Uber will likely never concede that any of them are employees because that would have nationwide consequences.  Even if the NJDOI agreed to cut the assessments down to nominal, nuisance value amounts, Uber would be compelled to treat all of its New Jersey drivers as statutory employees going forward.  The Company will never voluntarily do that.

A further cruel irony awaits Uber (or any putative employer).  If the Company cannot cut an acceptable deal with the Redetermination Auditor, the case will proceed to trial in the Office of Administrative Law (OAL), before a neutral Administrative Law Judge (ALJ), who is not a DOL employee. Even if the Company completely prevails before the ALJ, the Commissioner of Labor, the head of the agency that the Company has just beaten, then has forty-five days to sustain, modify, or reverse the ALJ decision.  Any bets as to which option the Commissioner would choose?

Uber could then go through the New Jersey courts, starting with the Appellate Division but courts greatly defer to the position (and decision) of a State agency.  Thus, it is very dangerous to take a case to OAL because even if you win, you may well, in the end, lose.

The Takeaway

The end result, potentially, is that Uber has to change its business model or create some indicia of true employment.  As one commentator has put it, there may be born a cadre of individuals known as “dependent contractors where there is some melding of the attributes of employee and independent contractor.

But, for sure, some revenue will flow to the State…