The area of prevailing wage law, construction wage-hour law, is a niche within a niche and a very complicated area of wage hour law.  I am proud to say I have defended more than one hundred employers in these cases, both the federal Davis Bacon Act and a number of state prevailing wage, but there are many vagaries in this law and unique pleading issues that lay in wait for unwary plaintiffs.  An example of this is a recent New Jersey decision where the Court granted a motion to dismiss on the pleadings because the plaintiffs did not allege that they were performing “public work.”  The case is entitled Chambers v Precision Pipeline Solutions and was filed in federal court in the District of New Jersey.

The plaintiffs claimed they were owed prevailing wages for work they allegedly performed for the Company on the Rockford Eclipse Valve Replacement project.  However, to make out a case under the New Jersey Prevailing Wage Act, they had to allege facts that supporting a possible conclusion that they performed “public work” which were “on property or premises owned by a public body.” The Court noted that neither of these conditions were alleged in the Complaint.

The Complaint vaguely alleged that the Plaintiffs’ job duties “included but were not limited to, regulator changes installs, high pressure gas valves [sic] changes, and pipeline mechanic work.”  However, and significantly, the Complaint did not set forth the specific work that the Plaintiffs did while working at the Rockford Eclipse Valve Replacement project.  Thus, the Court was unable to conclude that the project was of a type that the Prevailing Wage Act would encompass.

Moreover, the contention that the Rockford Eclipse Valve Replacement work was “state-funded and/or state-incentivized” could not establish the source of the funds that paid for the work, i.e. whether it was paid for through public financing, making it “public work” as the statute defines such work.  Therefore, the Court ruled that the Plaintiffs had failed to allege sufficient facts to allow their NJPWA claims to survive and dismissed the Complaint.

The Takeaway

Defense lawyers must look for any option to make a case go away early.  Now, the plaintiff here may file an Amended Complaint but given the posture of the case, might not.  Even if he did, this tactic shows the plaintiffs (and their lawyers) that the employer is going to fight aggressively against the case, which may engender an early (and reasonable) settlement.

I applaud my colleague and friend, Eric Stuart, on this victory.

Well done!

The State of New Jersey has passed several laws in the wage-hour area that are definitely pro-employee, to say the least.  The latest effort on this front is something quite special, or onerous, depending on which side you are on.  The brand new, effective immediately, New Jersey State Wage Theft Act (WTA) geometrically adds to the existing penalty structure for employers by adding a liquidated damages provision and gives extra protections for employee retaliation claims.  The joint employer provisions have also been expanded; indeed, the new law states that any waiver of its “joint and several liability” section is void and against the law.”

There is now a rebuttable presumption against employers who do not maintain records mandated by law or who take disciplinary actions (e.g. firing) against workers who voice internal or external complaints.  The law also increases the ceiling on wage claims that can be filed with the NJDOL Wage Collection Section (“Section”).  The ceiling was $30,000—now it is $50,000.  The Section can now also take jurisdiction over retaliation claims.

Importantly, the law also now, for the first time ever, imposes liquidated damages on employers who do not properly pay wages.  These penalties, amazingly, can be to Two-hundred (200) percent of the wages owed.  Just as amazingly, the statute of limitations has been extended from the current two years to six years (equal to that of New York).

The rebuttable presumption of retaliation kicks in should an employer fire/discipline a worker within ninety (90) days of his engaging in any conduct or actions protected under the new law.  The employer must establish the bona fides of the adverse action under a stringent “clear and convincing evidence” standard and prove that the action was for a legitimate, business-based reason.

The penalties have also been stepped up.  Now, it is $1,000 for a first violation (or imprisonment of 10 to 90 days); $1000-2000 for a second or subsequent violation (or imprisonment of 10 to 100 days).  These penalties can be assessed, in theory, for every employee and for every week.

Significantly, a first-time offender can escape liquidated damages if that business can show that the violation was “an inadvertent error made in good faith and that the employer had reasonable grounds for believing that the act or omission was not a violation.”  In order to maybe get that safe harbor, the Company must admit it violated the law and pay the entire amount owed in thirty (30) days.

Each employee must be give a WTA notice, whether incumbent or new hire.  Interestingly, the notice must advise how a claim for wages can be filed.

The Takeaway

This law is a quantum leap in terms of enforcement efforts.  It also places (as did the NJ Equal Pay Act before it) a heavy burden on employers to prove they were right, e.g. motivated by legitimate business reasons.  The threat of liquidated damages and the vast increase in penalty assessments that are possible really puts pressure on employers to settle cases/audits quickly, even if they believe they did nothing wrong.

What’s next?

The New Jersey DOL is very aggressive on the issue of independent contractor status, i.e. the issue of misclassification.  The latest, perhaps best (or worst) illustration of this view is the agency’s determination that court reporters are employees for purposes of the Unemployment Law.  This errant decision, which cuts against traditional modes of thinking on the status of these individuals, is but a sign of the enforcement efforts that have emanated from Trenton.

This determination, which is being fought by Jersey Shore Reporting LLC, brings into the focus the heightened enforcement efforts of the DOL; the end point of all this is alarming for businesses and the lawyers who advise them.  This is because not only would these reporters need to pay back due contributions, they would, going forward, have to file the necessary quarterly forms and pay UI, which will significantly reduce their incomes.

The State is clearly becoming very aggressive on this issue.  The Commissioner of Labor has asserted that misclassification “robs” the State of revenue streaming into the unemployment compensation fund.  To add to this stance, Governor Murphy has stated he will foster a bill to allow the NJDOL to halt work at construction sites when allegedly “sufficient violations” are found relating to worker misclassification.

Jersey Shore argued that it satisfied the so-called A-B-C test for the determination of independent contractor status.  The Company also argued that a 2009 amendment to the UI law that made court reporter-type employees ineligible for unemployment compensation and therefore exempt from contributing to the UI coffers was dispositive.  The DOL did not answer that contention but mechanically asserted in a brief that the reporters did not meet the statutory A-B-C test.

There is a definite preference for the NJDOL to classify people as employees observed Ian Meklinsky, co-chair of Fox Rothschild’s labor and employment department and the administrative hearing process makes it tough for an employer to prevail.  This is because the findings of the Administrative Law Judge are “nonbinding recommendations that state agencies can choose to accept or reject,” Meklinsky said.  “That means an agency essentially has the final say on its own determination.”  He added that “I personally don’t think it is, or should be, appropriate for the head of an administrative agency to overturn the decision of an Office of Administrative Law judge.”

The Takeaway

The problem is that, in reality, people who are classified as independent contractors truly want to be and in fact consider themselves as such.  The State is taking, as this court reporter decision (and a host of others) demonstrates, a draconian position, painting with the broadest brush possible on who is and who is not an independent contractor.

An individual’s preference should count for something…

 

It seems that with the resignation of Secretary Acosta there is going to be a decidedly more pro-business posture for the agency.  This is because Patrick Pizzella, who will take over, has let it be known that he will be “hitting the gas” according to Paul DeCamp.

The business community sought (and expected) a great deal of deregulation emanating from the agency in the wake of the 2016 election.  That did not materialize so quickly.  The first nominee, Andy Puzder, withdrew his nomination and then a more moderate selection, Acosta, was made.  He started off quickly, reversing the trend of expansion of the joint employer doctrine, but then he slowed down, a little too much for business.

It seemed that, under Acosta, the enforcement attitude did not change that much from what it had been under President Obama.  The DOL during that administration hit employers with large damage assessments and heavy penalties.  Under Acosta, it has been pretty much the same, it appears.  His approach to reducing the amount of regulation has also been criticized as deliberate, if not slow.

The new DOL chief is said to be an enthusiastic champion of deregulation, a specialty of this Administration.  Indeed, another commentator has noted that “the corporate community has made no secret for quite some time that they were hoping that Acosta would somehow be removed or step aside so that Pat Pizzella, the deputy secretary, could take over.  That’s what’s happening now.”

The new Secretary comes in at an important juncture for the agency.  There is still the new overtime rule that needs to be finalized and a “new” clarification of when two entities constitute a joint employer.  They need to get done by the 2020 election.

The Takeaway

If Acosta was seen to be as moving too slow, I don’t think the same criticism will be leveled at the new Secretary.  For employers, for business, this should be a good thing as these regulations need overhauling.  In an employer friendly way.

Naturally…

When employers classify individuals as independent contractors, they are not obligated to provide them with certain benefits, as they would statutory employees.  Sometimes, if those individuals are found to not be independent contractors, those “failures” come back oftentimes to haunt the employers.  Another example of this phenomenon has happened in that a New Jersey appellate court has reversed a lower court that found that an employer properly deducted monies from truck driver compensation to pay for workers compensation insurance (as well as other things).  The case is entitled Morales et. al. v. V.M. Trucking LLC and issued from the New Jersey Appellate Division.

The Court found that the “defendants do not cite to any legal authority allowing an employer to shift its legal obligation to provide workers’ compensation insurance to its employees through the guise of requiring the employees to pay the costs of the insurance, and we find nothing in the [Wage and Payment Law] authorizing a wage deduction for that purpose.”  Thus, the Court concluded that the deductions were illegal because the drivers were really employees under the NJ Wage Payment Act because the drivers did not meet the (stringent) ABC test under the NJ Unemployment Law.

The lower court found the deductions were allowable under certain provisions of the agreements that the men signed.  The appellate Court disagreed, finding that the “record here is devoid of any evidence establishing that the insurance for which deductions were made from plaintiffs’ wages was part of an employee insurance plan.”  The Court remanded the case back to the trial court to make additional findings regarding the deductions and whether a class of such workers should be certified.

The Takeaway

Calling people independent contractors allows employers to do things that they might not be able to do vis-à-vis their own employees.  From many cases that I have handled, I know that the New Jersey Wage Payment Act is enforced in a very strict manner, in favor of employees.  The lesson here is that simply having an “agreement” that denominates people as independent contractors is not the end of the game, by any means.

There still remains the ABC test to be overcome…

The issue of whether athletic referees are independent contractors has surfaced a few times in the last few years. Here, in Pennsylvania, the Pennsylvania Interscholastic Athletic Association (the PIAA) that engages these referees has agreed to settle with a group of these individuals for $260,000 to close out a FLSA action, based on misclassification. The case is entitled Ruslavage et al. v. PIAA, and was filed in federal court in the Western District of Pennsylvania.

The Judge signed off on the settlement. The referees were used to participate in high school football, basketball, baseball and lacrosse matches. The case would have been long and expensive to try and the recent issuance of a DC Circuit decision holding that lacrosse referees were independent contractors under the National Labor Relations Act (NLRA)(and therefore could not unionize) also played a role in the decision to settle, no doubt.

More than four-hundred referees opted in to the suit and they will share most of a $262,500 fund. In an unusual provision, the settling workers will also receive a free registration for one Association annual convention over the next four years. The lawyers will receive fees equal to 35% of the settlement fund as augmented by the value of the conference attendance.

Each share will hinge on how many sports an individual refereed from 2015-2018.  The refs worked at more than 1,500 schools statewide. The lawsuit alleged numerous violations, e.g. working off-the-clock, not being paid for required training or meetings and pre and post-game work. All of these alleged violations flowed from the referees’ alleged misclassification as independent contractors.

The employer had two arguments. The refs were independent contractors or even if they were employees, they were nevertheless exempt from FLSA rules under the seasonal and recreational employee exemptions. If either argument prevailed, the plaintiff’s case would all but collapse. There was also an employer contention that there was a uniform industry practice that governed referee status across the nation.

The Takeaway

A lot of moving parts generated this settlement and the plaintiffs were wise to get out and at least get “something.” I find it interesting that there was mention of using “industry practice” as a defense on the independent contractor issue. I’ve tried that tact a few times and it has not gotten me far when the agency measures that up against the (usually tough) statute or standard.

Given this case, however, that defense might bear revisiting…

New USDOL Wage Hour Administrator Issues Opinion Letter Finding Paralegals Can Be Exempt: A New Day Dawning!

Under the Trump Administration, there has been a return to the issuance of Opinion Letters which I have highly applauded.  I also applaud the rather pro-employer stance that many of these Letters have reflected.  Another example of both of these scenarios has just been announced.  The USDOL issued an Opinion Letter finding that highly paid paralegals for a “global trade organization” perform sufficient management-type work to qualify as exempt under the white-collar exemptions.  As paralegals have, for years and years, been designated as non-exempt, this letter signals a change in the agency’s attitude towards such employees..

The new Wage and Hour Administrator, Cheryl Stanton, concluded that the paralegals fit within the rubric of the so-called Highly Compensated Exemption (HCE) as they earned more than $100,000 and they “regularly” discharged duties that qualified as administrative under the FLSA regulations.

The letter cited to the “litany of the paralegals’ job duties and responsibilities — including keeping and maintaining corporate and official records, assisting the finance department with bank account matters, and budgeting — that are ‘directly related to management or general business operations.  Thus, the Administrator found that “as such, the paralegals perform at least one of the duties of an exempt administrative employee.”

The Letter also was instructive in that the Administrator concluded that an employee can fit within the HCE if they perform exempt work “more than occasionally.”  For such work to be deemed more than sporadic, it must be “performed normally and recurrently every workweek, but not if it is an isolated or one-time task.”  However, and most significantly, the work need not be the primary duty of the worker.  She also concluded (and I wholeheartedly agree with this) that an employer does not have to conduct a minute examination of employee duties because a “high level of compensation is a strong indicator of an employee’s exempt status.”

Therefore, these paralegals were exempt from overtime-exempt.  These workers were also different from the typical paralegals who are always found to be non-exempt because those other paralegals discharged “a wide variety of administrative tasks … that are clearly directly related to the management or general business operations of the employer.”

The Takeaway

These USDOL Opinion Letters do not bind courts, but they are instructive, if not very influential on the thinking of a court.  This Opinion Letter displays a common sense perspective on the issue because people who earn in excess of $100,000 are (most likely) performing important work that qualifies for an exemption.  This new view on paralegals is literally a breath of fresh air.

My compliments to Ms. Stanton!

The whole trick for a plaintiff (and his lawyers) in a FLSA collective action case is to try to get conditional certification. Once that happens, the stakes automatically escalate for the defendant-employer, often leaving settlement as the most viable and cheapest manner of resolving the case. This process becomes more complicated when there is, as in this case, a possible joint employer scenario. With that said, a federal Judge indicated that she was likely going to conditionally certify a class of truck drivers who claim overtime monies. The case is entitled Johnston et al. v. Titan Logistics & Resources LLC and was filed in federal court in the Western District of Pennsylvania.

The allegation was that the Company paid a day rate (as well as money for expenses) but did not properly (or at all) compute overtime pay when it was due. The Judge noted the low standard for granting conditional certification. She observed that “this is a very liberal standard [for conditional certification], because our government wants to make sure people get paid properly.”

The workers drove light trucks; they transported equipment and employees to and from gas well sites in Pennsylvania, Texas and the Dakotas.

Approximately seventy (70) plaintiffs have opted in to the lawsuit; the issue at a hearing the other day focused on whether the drivers were employed by Titan or another entity, UVL. The plaintiff’s attorney noted that the drivers “were making runs or driving in excess of 300 miles, 500 miles. They were working long, long hours and they were doing so at the direction of UVL. It was really UVL that was dictating the relationship.” The lawyer maintained that the drivers received UVL training materials, adhered to that Company’s policies, utilized UVL apps, received benefits from UVL and were subject to that Company’s disciplinary rules.

The plaintiff wanted employees from both companies included in the class. The Company argued that the entities were not a joint employer. The lawyer contended that there was sufficiently independence between the two entities as to render them truly separate employers. Importantly, he claimed, Titan, not UVL, established the compensation rates of the drivers. The Judge, however, found there was a sufficient connection to warrant sending out notice to drivers from both companies, so the stakes just multiplied, for the employer.

The Takeaway

It is the co-determination of terms and conditions of employment and/or the sharing of a particular group of employees that marks a relationship as one of “joint employer.” That moniker opens up a whole can of worms for the employer(s) as then many more workers can become members of the class.

Think settlement…

I blogged last week about the back and forth on the new USDOL proposed salary threshold for exempt status, at approximately $35,000 per year.  Well, the Democrats have now spoken on the issue and they propose raising the threshold to approximately $51,000 per year.  Another great divide.

The proposed law is entitled the Restoring Overtime Pay Act.  It would codify the Obama proposal to establish the salary level at the 40th percentile of wages in the South; this region is (currently) the lowest paying area in the country.  The Democratic plan also sets out that there will be periodic automatic updates.

One Democratic lawmaker stated that “overtime standards are long overdue for a meaningful update that will protect more workers and put money back in the pockets of millions of middle-class families.  We must return to the fundamental American belief in fair pay for a hard day’s work and this legislation will help us get closer to achieving that.”

The Obama administration had recommended a salary level of $47,476 as well as for automatic updates.  A federal Judge in Texas enjoined the Obama rule, agreeing with business groups that the agency exceeded its authority by not considering, at all, the duties test in making this proposal.  The agency then, a few months ago, announced its target salary level at $35,308.

The proponents of the new (much higher) salary level argue that it will protect millions more employee in their “right” to receive overtime.  Another Congressional backer stated that “restoring overtime protections for workers reflects our commitment to creating an economy that works for everyone.  Unfortunately, rather than supporting the strong protections included in the Obama-era overtime rule, the Trump administration issued a new proposal that would leave 8.2 million workers behind.”

The Takeaway

This $51,000 level is going nowhere.

Simple as that…

The test for independent contractor is often a tough one to meet.  Especially in New Jersey which has (as do many other States), the famous (or infamous) A-B-C test.  The courts also support this test as is again evidenced by the NJ Supreme Court’s refusal to take a case challenging a ruling under that test.  That ruling found exotic dancers (i.e. strippers) to be employees under the state Unemployment Insurance law.  The case is entitled Dance Inc. v. New Jersey Department of Labor and Workforce Development, and had been submitted to the New Jersey Supreme Court, which denied certification.

The Appellate Division had ruled in 2017 that these dancers were employees.  A panel of two Judges rejected the contention they were independent contractors.  The appellate panel ruled that the club had made a “frivolous” argument by asserting that “the work of exotic dancers is marginal, rather than integral, to its business.”  The Court stated that this “contention is belied by petitioner’s corporate name, its website, and the description of the club’s operation.”

The DOL Commissioner had held that “the dancers were presumed to be employees because they worked for tips.”  Thus, they did not meet the stringent statutory test which mandates that the alleged independent contractors: 1) be free from control or direction over the services they render; 2) the services rendered must either be outside the usual course of the business or “performed outside of all the places of business of the enterprise;” and, 3) the individuals must be “customarily engaged in an independently established trade, occupation, profession or business.”  It is this last prong, the independent business prong, which makes most of these cases go south for the putative employer.

The business herein sought to demonstrate that the dancers were not employees by mandating that they execute a “stage rental/license agreement.”  That document stated that they were independent contractors and that they had to “rent” their use of the stage.  There was, however, no rental fee set forth in the agreement and it was in English.  Unfortunately, the dancers only spoke Spanish or Portuguese.

The Club claimed that it exercised no control by claiming the dancers took no direction from the owner or manager, the dancers came and went as they pleased and were not ordered to work any set schedules.  The actions of the club, however, belied this contention, as noted by the Judges.  In this regard, the website showed photos of “dozens of scantily-dressed women, under the web page heading ‘Our Girls.'”  The website also reflected the dancers’ schedules who danced every day at the club.

The Takeaway

The lesson here is to be very careful about if/when to classify someone as an independent contractor.  As this ABC test is one of the strictest, I submit that every employer in whatever jurisdiction it is situate and whatever particular statute it is dealing with, should test the putative contractor’s status against this stringent ABC test.  That way, if the contractor passes that smell test, the employer can feel better about the independent contractor status.